Posted by: Phillip Fraas
July 23, 2007
Topic: REPORTS ON FARM BILL STATUS--Second Half of 2007

Last Thursday, July 19, the House Committee on Agriculture successfully completed a three-day mark-up of the 2007 farm bill by ordering the draft legislation reported to the full House of Representatives for its consideration this week. The House committee bill is massive--790 pages--and comprehensive--it covers farm price and income support, soil and water conservation, alternative energy development, nutrition programs, agricultural trade, farm credit, research and extension, forestry, rural development, horticulture, organic agriculture, crop insurance, food labeling, and meat and poultry inspection.

The bill's chances on the House floor look reasonably good (considering that the body is dominated by congressmen from urban districts) because it has the blessings of the House leadership and support from farm state Republicans. And, it sweetens the pot for members who might otherwise oppose it, by providing extra money for nutrition programs, the fruit and vegetable industries, and an alternative energy initiative.

In the past, however, there have been some very close House votes on key elements of the farm programs, and there is no reason to expect the floor debate this week to be any different. There remain a number of House members who would like to see deeper cuts in the farm programs or more of a shake-up in how those programs operate; and on the floor they will have an opportunity to take their shots at the committee-reported bill.

Following are comments on just a few of the more significant aspects of the committee's farm bill:

--The extra money for nutrition programs and alternative energy development will not come from sources directly available to the Committee on Agriculture. Rather, the nutrition funds ($4 billion) are to be raised by the Committee on Ways and Means through changes in the tax code or decreases in spending under its jurisdiction, and the energy money ($2.5 billion) is to be derived from energy-related tax measures approved by the House earlier this year. It appears that, at some point during the House floor debate, the legislation needed to pay for the new nutrition and alternative energy spending will be "married" to the agriculture committee's farm bill. This is a delicate maneuver, and until it is actually done, no doubt the Agriculture Committee will be keeping its fingers crossed.

--The bill includes reforms to the "payment limitation" rules that put caps on how much farmers can receive in direct support payments. The committee's proposals are scored as saving $522 million over ten years. Among the major proposed reforms, the "three entity" rule (under which an indvidual can share in payments in up to three entities in which he or she has an ownership interest) would be repealed, and the "AGI limit" would be lowered from $2,500,000 to $1,000,000. AGI stands for adjusted gross income, and under the committee's proposal, a farmer with an AGI of over $1,000,000 could not receive any farm program payments. While the committee's reforms don't go as far as USDA's payment limitation recommendations, they are substantial enough to enable the committee to argue against further payment limitation changes that might cause farm groups to withdraw their support of the legislation. And, if the farm bill becomes law with just these changes intact, it could lead to a rash of restructurings by farms bumping up against the new caps.

--The bill will give farmers the option to receive revenue-based countercyclical payments. These payments are now made when farm prices are low, and are intended to make up the difference between low market prices and a higher target price set at a level more closely aligned with the cost of production. Many, including USDA, have recommended the shift to revenue-based payments, which would be made when farm income is low, the argument being that those payments would better meet the needs of farmers hard-pressed financially by market reverses. The committee bill's proposal takes a first step in the direction of this new approach.

--The committee's bill, while not short-changing conservation programs, doesn't provide full funding for all conservation programs. Also, congressmen from peanut-producing areas have expressed concern about the peanut provisions in the bill. Conservation is one of the highest priorities of the Democratic Chairman of the Senate Committee on Agriculture, Tom Harkin of Iowa; and the ranking Republican on the Senate committee, Saxby Chambliss, comes from one of the largest peanut-producing states. Thus, it might be expected that the Senate Agriculture Committee will be looking very closely at these particular provisions of the bill should the House pass it this week and send it to the Senate in the form reported by the committee.

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