FARM BILL UPDATE: The Complete Farm Bill Enacted Into Law
Posted by: Phillip Fraas
June 21, 2008

A little less than a month ago, on May 22, Congress overrode President Bush's veto and enacted into law a version of the farm bill that, due to clerical errors, did not include title III, which covers international agricultural programs and policies. That version had the bill number H.R. 2419, and was enacted as Public Law 110-234.

Congress vowed at the time to take action to correct this oversight; and it has. First, the House of Representatives in May, and then the Senate, on June 5, passed a new version that included title III (bill number H.R. 6124). Following that, after careful proof-reading, H.R. 6124 was sent to the President last Monday, June 16. He vetoed it, and on Wednesday, June 18, that bill--the full farm bill, including title III--was enacted into law when both the House and Senate overrode the President's veto. I have not been able to obtain the Public Law number on this bill yet. As to the effect of the second enactment, it will not have any, save for its title III provisions. Everything else in the new version will have already been the law of the land since May 22.

Legislative action on the 2008 farm bill is complete. Now, the focus shifts to USDA, which has the important task of writing regulations and taking other actions to implement the provisions of the farm bill.

 NOTES:

 --This blog now has a new topic area: REPORTS ON WHAT IS IN THE NEW FARM BILL. Over the next several months, postings will be made in this topic area describing what is in the fifteen titles of the farm bill. There is one entry already, on the loan and payment provisions of title I (commodity-specific price and income support). And, in a couple of days, I'll post another entry on the other provisions of title I.

 --I am starting a new blog: farm paymentlimitationslaw.com, which will focus on the complicated but important changes that the new farm bill makes in the rules limiting the amounts farmers can receive under the commodity payment programs and on the new adjusted gross income (AGI) limit. The new AGI limit excludes persons from (1) receiving any program payments if their non-farm AGI exceeds $500,000 or (2) receiving direct payments if their farm income exceeds $750,000. Look for that blog site to be up and running next week.

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FARM BILL UPDATE: After A Procedural Glitch, Most Of The Farm Bill Enacted Into Law
Posted by: Phillip Fraas
May 26, 2008

As expected, on Wednesday May 21, President Bush vetoed the farm bill. The bill went back to Congress the same day, where the House voted, by a margin of 316 to 108, to override the veto (two-thirds of the legislature, or 291 votes in the House and 67 in the Senate, must approve an override for it to be effective). The next day, the Senate followed suit and voted to override by a margin of 82 to 13. At that point, the bill became law.

Wednesday, however, a procedural glitch was discovered that sowed a lot of confusion about the effect of the veto and override votes. It was discovered that title III of the bill that the two houses had debated and voted on had accidentally been left out of the "engrossed" bill (the bill prepared by the clerks after the members of Congress complete their actions on it) signed by the Speaker of the House and Majority Leader of the Senate and sent to the President earlier in the week. Title III of the bill deals with international trade in agricultural commodities and foreign food aid.

By Thursday afternoon, just before Congress adjourned for a one-week recess, the Senate and House clerks had reviewed the precedents and concluded that the other fourteen titles of the bill included in the text sent to the President had become law when the President's veto of that document was overridden. Title III, however, is still not law. Congress will have to take additional action when it returns to session next week to re-enact title III.

Now, USDA will have to begin the daunting task of writing regulations and updating policies to put the new farm bill in effect. Because many of its provisions affect on-going programs or 2008 crops, the pressure will be on to move through the implementation process quickly.

In the meantime, I will start of new topic area for this blog to review the key provisions of the new farm bill. With fourteen titles, there is a lot in there to cover. I'll start out in a couple days with a summary of the the commodities price and income support title--the heart of any farm bill. 

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UPDATE: Senate Follows House And Passes Farm Bill By A Big Margin
Posted by: Phillip Fraas
May 15, 2008

Today, the Senate voted on the farm bill conference report, and approved it by a vote of 81 to 15, some 14 votes more than the 67 needed to override a veto by the President.

It has been reported that the President likely will get the bill next Tuesday, and is expected to veto it right away. That would give Congress more than adequate time to debate and vote on a veto override by the end of next week.

It would not be surprising to see one more short extenson of the current farm bill enacted in the next day or so, to allow the veto/override process a chance to play out. 

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FARM BILL UPDATE: Farm Bill Conference Report Passes House By Big Margin
Posted by: Phillip Fraas
May 14, 2008

This afternoon, the House voted overwhelmingly (318 to 106) to approve the conference report on the new farm bill. The "conference report" is the final version of the farm bill reflecting all the compromises and revisions to the legislation that Congress has made over the course of the past few months. It is the version of the farm bill that wii go to the President for his signature or veto.

What happens now is that the Senate will get the conference report from the House later today, debate it, and vote on it probably tomorrow. Should it pass the Senate--and most expect it will--within a few days, the conference report will be converted by the congressional clerks into an enrolled bill and sent to the President for action by him.

The President has stated several times (most recently yesterday) that he will veto the bill. If that happens, he will send a veto message back to Congress and both houses will have to cast votes on the legislation a second time. But, to override the veto and ensure that the bill becomes law, the required majority will be 2/3 the second time around ( a 2/3 vote in the House is 291 votes and in the Senate it is 67 votes). 

If both houses vote to override, the bill becomes law without the President's signature. If either body fails to override, the bill isdead in its current form; Congress would have to come up with an extension of current law or some other proposal acceptable to the President.

It is more likely than not that the bill won't get to the President for a veto and back to Congress for override votes before the end of this week. That means there is a chance that another one- or two-week extension of the current farm bill will be enacted later this week to give the veto/override vote scenario time to play out. 

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NOTE: Conference Report Bill Language Available
Posted by: Phillip Fraas
May 13, 2008

This morning, the House Committee on Agriculture posted on its web site the language of the proposed new farm bill, as agreed to by the conference committee. You can access the bill language by going to www.agriculture.house.gov and clicking on "Farm Bill Homepage" at the end of the first paragraph at the top of the home page (the paragraph that starts with the word "NEW" in red).

The Statement of Managers (the "managers" are the members of the conference committee) that usually accompanies the bill language in a conference report and explains how the conference committee resolved the differences between the House and Senate versions of the legislation is not yet available, but likely will be posted at the same place on the web site when available.

If both houses of Congress accept the conference report and (if the President vetoes the bill) override the veto, the language you see on the web site today will become law.

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FARM BILL UPDATE: Congress Completes Work On The Bill; A Showdown With The Administration Looms
Posted by: Phillip Fraas
May 10, 2008

Early this week, congressional negotiators on the new farm bill completed their work; and on Wednesday, May 7, the leadership of the House and Senate agriculture committees held a press conference to unveil the legislation. The Secretary of Agriculture quickly followed that with an announcement that President Bush would veto the bill. These developments set the stage for a showdown on the farm bill next week.

What is the fight about? After a couple of months of wrestling with budget issues, dealing with objections raised by the Bush Administration, and hammering out compromises on the many differences between the Senate and House versions of the 2008 farm bill, Congress has come up with a farm bill that is not remarkably different than what the two bodies started out negotiations with. At the end of the process, there will be the payment limitation reforms and and new adjusted gross income (AGI) caps, the increased funding for nutrition and conservation programs, and the new permanent disaster program that the conference committee convened to resolve the Senate-House differences began with, although with some changes in the specifics (too numerous to review in this posting. Should the bill become law, the remainder of the entries in this blog will spell out the details of various key provisions.)

 In hewing closely to what the two bodies passed originally, Congress rejected Administration demands for more farm program reforms--such as a lower the AGI cap and revision of  the so-called benificial interest rule (having to do with when farmers can lock in program benefits)--and for a smaller increase in farm bill spending. The bill also includes sugar program provisions and upward adjustment of commodity loan and payment rates that the Administration opposes.  

What happens next? It is reported that the House and Senate will vote on the final package next Wednesday or Thursday, and it is widely believed that it will easily pass. Then, the clerks likely will enroll the massive bill (it will run many hundreds of pages long) and send it to the White House quickly--keeping in mind that the current extension of the old farm bill runs out on Friday.

Then? Scretary of Agriculture Schafer, at a press conference yesterday, suggested that the President won't waste a lot of time in vetoing the measure. If so, it is possible that Congress could get a veto message back from the President before the end of the week.

What happens after that is just conjecture at this point. If Congress votes to override the veto, that's it; the bill becomes law. If Congress can't muster the votes for an override, some action is necessary to keep existing programs covered by the old farm bill from shutting down. Secretary Schafer, at the press conference, indicated his preference for Congress just stripping out of the legislation the provisions the Administration finds most egregious and sending it back to the President for signing. The other option is a simple extension of the old farm bill. My sense is that recently people have lost interest in that option. What the new bill does that the Administration does not object to is pump an additional $10 billion into nutrition programs. At a time of a weakened economy and high food prices, just about everyone working on the bill would like to see that increased nutrition spending become law.

What are the chances Congress will override the veto? 

A week ago, not so good. After all, President Bush has a strong record in having his vetoes sustained.

Now, a lot higher. For one, the ranking Republicans on the agriculture committees, Sen. Chambliss and Cong. Goodlatte, both indicated on Wednesday strong support for the package. Also, word is that President Bush has let it be known that members of Congress can "vote their districts." that is, he will not expect a member to support the Administration position if it is contrary to what the voters in the member's district want. Also, USDA has indicated that the veto override challenge will be an "up-hill battle." 

It is too early, though, to take book on a veto override. The final language of the bill won't be released, and the final budget scoring won't come out, until early next week. And, I haven't seen any reports of what the Whip counts are. The real tip-off won't come until the two bodies vote on passage in mid-week. It will no doubt be very comforting to the floor managers of the bill if the final votes in support of the bill are well above the 291 House votes and 67 Senate votes needed to override.    

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BRIEF UPDATE: Current Law Has Been Extended Again But The End Game Might Be In In Sight
Posted by: Phillip Fraas
May 05, 2008

Late last week, Congress passed, and the President signed, another extension of current farm bill programs. This time, it was a two-week extension to May 16. Enactment of the extension followed a flurry of activity earlier in the week: the President on Tuesday strongly criticized the direction Congress was headed on the farm bill, immediately raisingconcerns of a possible veto of the bill; soon thereafter, the leaders of the congressional conference committee on the farm bill met with Secretary of Agriculture Schafer for an extended session to discuss Administration concerns; and then the conferees met late into the night Thursday to work through House and Senate differences.

It remains to be seen whether the Schafer meeting and the Thursday work narrowed the differences between Congress and the Administration sufficiently to avoid a veto. On the plus side (i.e., no veto), at least Schafer and congressional leaders are talking, the President was amenable to giving the process two more weeks to play out, and what Congress is putting together appears to have the support of many Republicans as well as the majority Democrats (if it looks there are enough votes to override a possible veto, the President might draw back from a veto threat). On the other hand, both sides seem to be getting increasingly entrenched in their positions and preparing for a veto showdown.

Among the current sticking points: The Administration wants support to farmers to be the form of direct payments, which are made whether commodity prices are high or low, while Congress favors support via countercyclical payments, which are only made when prices are low. Also, the two sides are still wrestling with the adjusted gross income (AGI) limits. The Administration wants a new rule that keeps anyone with an AGI of over $200,000 out of the support programs (the current AGI limit is $2,5 million), while Congress is looking at setting a new AGI limit somewhat north of $500,000. A third open issue for the Administration is  funding--it wants increases over the base line for new farm bill spending scaled back some more.

As to what is next, one likely scenario making the rounds has Congress going ahead and passing a bill this week that the Administration can't live with and the President quickly vetoing it. Then, Congress would have the opportunity next week (until the new extension runs out on Friday, the 16th) to count votes and either override the veto or make sufficient changes to mollify the Administration. Whatever the scenario, one senses that the die will be cast on the new farm bill in the next couple of week. I will keep you posted. 

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BRIEF UPDATE: Current Farm Bill Gets Extended and Work on the New Bill Continues
Posted by: Phillip Fraas
April 28, 2008

Late last week, Congress  passed and the President signed another one-week extension (to May 2) of the current farm bill; and throughout the week, the farm bill conferees continued work to resolve their differences on farm bill funding. Conferees are scheduled to begin work again later today.

It appears that the conferees are nearly at agreement on increasing farm bill spending above the base line by about $10 billion. The added funds will be used for a new disaster program and increased spending for nutrition programs, among others,

One senses that the conferees resolved a lot of differences last week and are close to finishing their work on the bill. Perhaps, this new extension will be long enough to get the work done, though the chairman of the conference, Sen. Tom Harkin of Iowa, had asked for a two-year extension to begin with..

I havn't seen any statements out of the Bush administration on the developing conference package. While the President's willingness to sign the extension is an indication that they want and hope to get a new farm bill the President can sign, that should not be read as an implicit endorsement for what the conferees are coming up with. Look for the Administration to weigh in on things this week.  

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FARM BILL UPDATE: Conferees Make Some Progress But Disaster, Nutrition, Tax Credits, And Funding Issues Remain
Posted by: Phillip Fraas
April 19, 2008

The House and Senate conferees on the farm bill met several times this week and completed work on the credit, research, trade, and forestry titles. However, they remain at odds on the critical issues of how much added funding to put into nutrition programs, whether to include a permanent disaster assistance program in the bill, whether to accept the Senate package of tax credits, and how to fund increases in spending over the farm bill base line.

Congress also approved, and the President signed, a one-week extension of the current farm programs--to next Friday, April 25. This gives Congess a little extra time to wrap things up in their farm bill negotiations.

ONE-WEEK EXTENSION: Many farm programs are annual in nature because only one crop of a commodity is produced in a year. For these programs, it is not critical whether the new farm bill is approved on April 18 or April 25.

For example, the cotton program under the current farm bill was effective through the 2007 crops. The new farm bill, then, needs to cover the 2008 and succeeding crops. However, farmers won't harvest their 2008 cotton for another five or six months, so they don't need to worry about 2008 price support loans until they actually harvest a crop to put under loan. The same is true for many other core farm programs, those for wheat, corn, other feed grains, oilseeds, cotton, rice, sugar, peanuts, and pulses.

In contrast, throughout the Nation dairy cows are producing milk every day of the year, and so the price support program operates on a day-to-day basis. And, without the short-term extension, as of this morning, the current farm bill dairy program would have ceased operation and processors would no longer have been able to sell butter and milk powder to the government under the program. Similarly, the nutrition programs, credit programs, research and extension operations, and other farm bill programs operate every day of the year, so that the one-week extension of current farm bill programs to April 25 was critical.

CONFERENCE WORK: It is safe to say that most of the work on the new farm bill is finished, witness the conferees' approval of several titles this week. And, there are not a lot of stumbling blocks preventing final passage.

These include nutrition program funding. Both the Senate and House versions of the farm bill proposed increases in funding for nutrition programs, a timely move given upward pressure on food prices this year. Recently, however, the House leadership proposed a larger increase than had been agreed to so far in conference. According to the most recent reports, the conferees are willing to accomodate that desire by adding $500 million more to nutrition programs.

The Senate has been pushing for a new farm permanent disaster assistance program that would cost about $5 billion. This week, it appears, both sides gave ground on this, with the House conferees offering to accept a $2 billion program and the Senate reducing its proposal to $4 billion; but, needless to say, that means they are still far apart.

The Senate tax credit initiative would add a package of $2.5 billion in credits to the farm bill. So far, the House is only willing to go for $1 billion in credits, and as of yesterday was questioning whether what the Senate had proposed would cost $10 billion not $2.5 billion.

The final big open issue is how to fund farm bill increases. Both houses of Congress want to ensure that any new farm bill spending doesn't add to the Federal budget deficit; so a number of "offsets" have been proposed for inclusion in the farm bill. The offsets would either increase Federal revenues or decrease spending in some other Federal programs. Too many have been proposed to list them all here, but the point to be made is that the House and Senate have yet to settle on a list of ones that they can agree on and that the Administration is comfortable with as well.

As the new week dawns, then, the open question is: Will the seven days of additional time the short-term extension bought enable Congress to come to a meeting of the minds on these difficult issues?  

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BRIEF UPDATE PART II--House Conferees Named, Meeting Scheduled
Posted by: Phillip Fraas
April 10, 2008

After weeks of delay due to problems in finding funds to pay for increases in farm bill spending, the House of Representatives last night named conferees to the farm bill conference. The Senate had named its conferees earlier. The first meeting of the conference (which is an ad hoc committee convened to negotiate compromises on differences between the Senate and House-passed farm bills) will be this morning.

There are a total of 49 House conferees, 33 of which are members of House committees other than the Committee on Agriculture who are conferees only on limited parts of the bill that touch matters beyond the jurisdiction of the Agriculture Committee. You can view the entire list of conferees by going to the House Agriculture Committee web site, www.agriculture.house.gov.

The Senate conferees, all from the Committee on Agriculture, are Democrats Harkin (Iowa, committee chairman), Leahy (Vermont), Conrad (North Dakota), Baucus (Montana, also Chairman of the Senate Committe on Finance), Lincoln (Arkansas), and Stabenow (Michigan), and Republicans Chambliss (Georgia, ranking Republican), Lugar (Indiana), Cochran (Mississippi), Roberts (Kansas), and Grassley (Iowa).

While the problems with funding haven't been resolved, in conjunction with the naming of conferees, the House leadership, it is reported, has put forward a funding proposal (details not public yet) that would provide $5.5 billion in new farm bill spending above the budget base line. The "base line" is the amount of spending that would occur over the next five years to be covered by the new farm bill if current farm programs were just extended without any changes.

This latest proposal is $4.5 billion less than the farm bill budget contained in the "framework" put forward by the Chairman of the House Committee on Agriculture, Collin Peterson of Minnesota in March. This substantial reduction from $10 billion in increased spending proposed earlier might be a difficult sell for the Senate conferees who have been supportive of the $10 billion increase, but it is an amount that will be much easier to find new funding for.

 With the clock ticking away--some current farm bill programs expire next Friday, April 18--the conferees will have their hands full in resolving the many differences between the House and Senate farm bills and coming up with a package that the Bush Administration will find acceptable. Look for more postings in coming days on how they are progressing. 

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BRIEF UPDATE: Farm Bill In Limbo
Posted by: Phillip Fraas
April 09, 2008

The farm bill appears to be in limbo right now. For the past couple of weeks, the main Senate and House negotiators, and the Administration, have been waiting for the House Ways and Means Committee and the Senate Finance Committee (they are the tax/revenue committees of Congress) to come up with additional funds to cover increased spending proposed for the new farm bill. Right now, these two revenue committee chairman are at loggerheads on how to raise the extra money and related issues. Until they resolve their differences, the congressional leadership won't let the farm bill move forward.

Hard to predict what happens next, except that if we get to April 18 with the farm bill still in limbo, odds increase dramatically that Congress will abandon for now efforts to write a new farm bill and will just extend the current farm bill for one or two years. 

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FARM BILL UPDATE: Things Could Get Busy Quick
Posted by: Phillip Fraas
March 31, 2008

Since the last posting on this blog two weeks ago, there has been no official word from Congress on the status of the farm bill. However, there was an unofficial report this weekend that the House of Representatives will appoint farm bill conferees today.

If that is the case, it could signal that enough progress has been made behind the scenes by congressional leaders on getting the funding roadblocks resolved that it is time to convene the conference committee for the substantive negotiations to craft a farm bill policy that will make up the new farm bill.

The conventional wisdom making the rounds the past month or so is that Speaker Pelosi would not name House farm bill conferees until the funding issues--how much to increase farm bill spending, how to pay for the increase, and how will farm bill spending be allocated among competing farm interests, including price support programs, nutrition programs, conservation programs, disaster assistance efforts, among others--were resolved. The names of the proposed Senate conferees were released in early February.

 If the resolution of the funding issues are sufficiently advanced that conferees can be named as early as today, look for the conference committee to officially convene within a day or so. The reason for the speed is clear--the current USDA farm bill programs that operate on a day-to-day basis, like the dairy program (which makes price support purchases of milk every day), expire on April 18. It will be a Herculean task, at best, to complete conference on the hundreds of differences between the Senate and House versions of the farm bill, and then have congressional staff put conference agreements into acceptable statutory language, in just 18 days. It can be done, but it won't be easy.

Of course, the weekend report might turn out to be unfounded. Look for a follow-up posting on where things stand within a couple of days.

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FARM BILL UPDATE: A Little Progress But Funding Issue Still Unresolved
Posted by: Phillip Fraas
March 19, 2008

Since my last posting of March 2, there hasn't been much in the way of significant developments to report. That is for a couple of reasons.

First, back on March 2, the House and Senate Agriculture Committee leaders were looking to the Senate Finance and House Ways and Means Committee leaders to find revenue sources to cover the roughly $10 billion that the ag leaders seek for increased spending in the new farm bill. It is perceived necessary to have this money available before the farm bill negotiators can work out their differences on substantive issues, such as the levels of price support, nutrition spending, and so on.

As of today, they are still looking. Reports are that, so far, Finance and Ways and Means have only come up with about $5 to 6 billion for increased spending.

Second, on March 14, Congress adjourned two weeks for its Easter recess. During recesses that long, most members return to their home districts and work on constituent issues; and it is hard to get things done when they are out of town and focused on other matters. Of course, during the recess, the agriculture committee staffers are working very hard to wrap up the noncontroversial parts of the farm bill, but no important decisions can get made until the members return. 

 Nonetheless, I haven't detected any whiff of defeatism about the prospect of getting a farm bill soon, either on Capitol Hill or within the Bush Administration.

Just before it left town, Congress passed another short-term extension of the current farm bill to April 18, 2008; and the President quickly signed it into law. This legislation buys time for the farm bill negotiators to complete their work. Congress recovnenes on March 31, and thus will have almost three weeks to see if they can push the farm bill over the top. 

For its part, the Administration has taken steps to facilitate a farm bill agreement. The Department of Agriculture has signaled that the Administration could live with an increase in spending of $10 billion if the details are right, and with an adjusted gross income cap (AGI) of $500,000. As to the latter, the Administration has threatened a veto of any farm bill that doesn't include reform of the way farm programs work. One key element of that reform, to the Administration, is barring farm support payments to persons with adjusted gross income of over $200,000 a year. Many in Congress, however, are equally insistent on a AGI cap much closer to $1 million and with some exemptions. The Administration's willingnesss to consider a $500,000 cap opens the door to the possibility of a compromise on this very contentious issue.

Finally, there is a general feeling among just about everyone working on, or following, the farm bill that, once the budget issues are resolved, the other big differences that separate the negotiators can quickly be bridged. Whether that is so or not, until the money issue is resolved, nothing goes forward. So, we continue to play a waiting game for now.

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FARM BILL UPDATE: Negotiations Bogged Down Over Funding Mechanisms
Posted by: Phillip Fraas
March 02, 2008

About three weeks ago, final negotiations on a new farm bill got a big boost when the House Agriculture Committee tabled a proposal that the Administration supported to resolve the deadlock over how much to increase farm program spending. While members of the Senate Agriculture Committee opposed the House proposal as not providing sufficient new spending, it did serve a valuable purpose in spurring discussions that appear to have been successful in getting negotiators to agree, a little over a week ago, on a number for increased spending. Since then, however, we have seen no further progress as the search goes on for a funding mechanism to pay for this new farm program spending. When and whether that search is successful is up in the air; but Congress is facing a March 15 deadline to at least come to an agreement in principle.

The House proposal called for about $6 billion in new farm program spending over the next ten years, but didn't specify where the money would come from. That number was sufficiently close to the Bush Administration's farm bill proposal of $5 billion in increased program spending that, not surprisingly, the Administration quickly came out in support of the House initiative, even though it didn't have a funding mechanism to pay for the new spending.

The one thing that seems radioactive to the Administration in this regard is any funding proposal that could be viewed as "new taxes," that is, any proposal that would directly increase Federal revenues. The Administration has preferred, instead, to deal with increased farm program costs by taking offsetting reductions in other USDA spending.

Reports are that the Senate agricultural leadership believed strongly that the $6 billion was not enough of an increase to meet all legitimate needs that have surfaced as Congress considered what new farm programs and changes in current programs to include in the farm bill. After talks the week before last, they convinced their House counterparts and, by the end of that week, the negotiators appear to have arrived at $10 billion as the right number for the spending increase. And, significantly, the Administration did not quickly send out a message that it would recommend a veto if the farm bill included such an increase.

All well and good, but then the task turned to funding the $10 billion increase. Essentially, there are only two ways to do it--find revenue enhancers that pass the Administration's "no new taxes" test or reduce spending in other USDA programs to offset the increase. Negotiators have spent the last week exploring the former--to no avail so far.

This is not an insurmountable problem to solve, it's just a matter of how long it will take. But, some current farm bill programs expire on March 15. Beyond that, farmers all across the country are beginning work on their 2008 crops and need to know soon what the program rules will be. 

Thus, the farm bill--if it is to be effective for the 2008 crops--has to be signed into law this Spring. And, to deal with the more immediate March 15 deadline, the negotiators must at least reach agreement in principle on how to solve the funding problem by that date. If they do so, they can get through stop-gap legislation to extend the curent farm bill another few weeks beyond March 15 while they work on the non-money differences, and prepare the final draft of the new farm bill. In the mean time, those interested in getting a new farm bill passed will be biting their nails as the March 15 deadline approaches.  

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FARM BILL UPDATE: Deadlock In Negotiations Might Be Broken
Posted by: Phillip Fraas
February 18, 2008

For the past few weeks, it has seemed that farm bill negotiations were stalemated. The Bush administration strongly opposes two key elements of the bills that the House and Senate have drawn up: (1) their increases in farm bill spending and paying for the increases with revenue enhancements/new taxes, and (2) their failure to exclude from eligibility for farm program payments persons whose adjusted gross income exceeds $200,000 annually (the current AGI limit is $2,500,000). For its part, Congress seemed disinclined to give much on those two items.

But, a couple of weeks ago, a rumor surfaced that work was being done to develop a new farm bill proposal to get around the current deadlock. That rumor proved to be true as, early last week, the House agricultural leadership (Agriculture Committee Chairman Collin Peterson of Minnesota and the Committee's Ranking Republican, Bob Goodlatte of Virginia) unveiled a proposal they described as providing an example of a way to meet the Administration's concerns. They submitted this "Illustrative Outline" proposal to the Senate agricultural leadership for its consideration, which action has led to the initiation of serious talks between the House and Senate that might yet lead to a final farm bill package.

THE NEW PROPOSAL: What the House ag leadership proposed was to make the legislation a ten-year bill (the House and Senate-passed bills were five-year bills); limit the increase in farm bill spending to an amount that would be only $6 billion above baseline spending (baseline spending is the amount that would be spent if the current farm bill were extended without change, and even the Administration's farm bill proposal would have increased spending $5 billion over the baseline); and not include any revenue enhancers/new taxes in the bill. Beyond that, it would reduce the AGI cap to $900,000 for everyone, and to a lower level for persons who earn less than 2/3 of their income from farming. The lower level would be phased in, starting at $500,000 for 2009 and ending at $300,000 in 2013.

To get to the spending target it set, the proposal would essentially extend current farm price and income support programs and reduce the increases in spending for nutrition and fruit and vegetable farmers proposed in the earlier Senate and House measures. As an enticement for the Senate, the proposal would provide conservation spending and authorize a permanent disaster program.

Above all, the House agriculture leadership stressed that the proposal was not a proposed offer but merely suggestions to be used to begin negotiations. Further, they emphasized that it was a proposal drawn essentially with one thought in mind--to produce something that the Administration could live with.

REACTION SO FAR/WHAT TO EXPECT: The Administration quickly came out praising the House for its work on the proposal, and urging House and Senate farm bill conferees to use it as the basis of negotiations.

Reaction from farm and commodity groups has been generally negative because it would cut back on proposed farm bill spending and its AGI proposal would be too harsh. However, for the most part, these organizations were relatively temperate in the wording of their objections, suggesting that they thought putting something on the table to talk about was better than just doing nothing.

Reports are that the proposal wasn't at all well received on the Senate side, but it did spur the Senate Agriculture Committee Chairman Tom Harkin of Iowa and Ranking Republican Saxby Chambliss of Georgia to send a counterproposal to the House late last week, one that would increase spending over the baseline by $12.3 billion. Although the details of the Senate counter haven't been made public, the Administration quickly issued a statement opposing it. However, it is understood that the House is looking at it with great interest. That is where things stand now.

Even though Congress is in recess this coming week, the next few days could be make-or-break time for getting a farm bill done on time. The March 15 deadline for action on the farm bill is fast approaching (March 15 is when the current farm bill effectively expires), and the conferees have to move fast to go through and resolve the many hundreds of differences between their two versions of the farm bill in the next four weeks.

However, with the House and the Senate now with bipartisan compromise proposals on the table concerning the big issues--compromises that at least go some way toward addressing the Administration's concerns--there is reason to hope that, with some serious horse-trading in the next few days, the way will be cleared to get final passage of a new farm bill by March 15. I look for the horse-trading to get underway immediately, if it hasn't already started.

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FOCUS ON THE AGI CAP/PAYMENT LIMITATIONS: What The Debate Is About And What Is Being Proposed
Posted by: Phillip Fraas
February 10, 2008

Still no word on a breakthrough in the deadlock between the Administration and Congress that is holding up passage of the farm bill. Key issues separating the two sides are the farm bill budget and the AGI cap included in the bill's payment limitation provisions. Likely, if their differences can be resolved on the budget-how much above the baseline to go and how to pay for excess spending-a compromise on the AGI cap could come fairly quickly.

The budget debate is straightforward and doesn't take a lot of explaining; the AGI cap/payment limitation issues, on the other hand, have some history and technical twists that are worth exploring.

BACKGROUND: First of all, it is important to keep in mind that farm bill payments are not made on all crops, so the limitations are not an issue for many U.S. farmers. Payments are made to producers of wheat, corn, other feed grains, cotton, rice, oilseeds, peanuts, honey, wool, and mohair, but not to cattle, hog, or poultry producers, or to fruit and vegetable growers. Of course, the crops that do get payments are produced on tens of thousands of farms, so it is still safe to say that pay limits are a very important farm policy issue.

Farm program payment limits have been around since the 1970 farm bill. Earlier farm bills had not relied on direct payments to farmers to provide a safety net for farmers; rather they depended on controlling supplies to increase farmer's market prices. But, with the advent of direct payments, news reports began popping up about big operators receiving huge amounts of taxpayer money, including, if memory serves me right, the Queen of England, who had an interest in a Mississippi cotton plantation. Thus did Congress feel compelled to draw up the first limitation rules in 1970.

In the 1985 farm bill, payment limitation rules were tightened to close loopholes and otherwise ensure that the limitation rules operated fairly and equitably. Then, in the 2002 farm bill, a new twist was added to keep payments targeted to traditional family farmers: participation in the farm payment programs was limited to operators whose adjusted gross income (AGI) was less than $2,500,000 annually (excluding persons who derived 75% or more of their income from farming, ranching, or forestry). Also, a payment limitation commission was established to look at further reforms and updating of the payment limitation rules.

ADMINISTRATION PROPOSAL: Piggybacking on the payment limitation commission's work, the Bush Administration last year proposed substantial changes in the AGI cap and payment limitation rules. It recommended slashing the AGI cap down to $200,000 annually and eliminating the 75% farm income exemption, arguing that these moves would hit less than 72,000 of the 2,000,000 plus taxpayers who file farm returns.

Also, the Administration proposed doing away with the so-called "three-entity" rule. Under current law, individuals or entities (corporations, limited liability companies, trusts, etc.) that receive payments (and thus are subject to payment limitations on them) can also own stock or otherwise have beneficial interests in two other entities engaged in farming and receiving payments but only if they don't have a majority ownership (51% or more) in them. Under the Administration's proposal, the business entities an individual is involved with will be ignored, and all payments to and through those entities will be directly attributed to the individual human beings who own them, and the limitations applied to those individual persons.

In addition, the Administration proposed tweaking the individual payment limitations, keeping the overall limit at $180,000 per person, but increasing the limit for direct program payments from $40,000 to 55,000 and reducing the counter-cyclical payment limit from $65,000 to $55,000 and the limit on marketing loan benefits from $75,000 to $70,000. Further, they would get rid of the separate payment limitation for peanuts, lumping that crop in with all the others subject to the general pay limits.

CONGRESSIONAL APPROACH: The House and Senate-passed farm bills make similar major changes in payment limitation rules, but don't go as far as the Administration did in reducing individual limitation levels or the AGI cap. Instead, it appears that Congress has heeded complaints of some that the Administration's pay limit proposals would adversely affect the large-scale operations that are needed to efficiently grow some crops like rice, and that the $200,000 AGI cap would be unfair to many commercial-sized operations.

While the Senate and House follow the Administration in proposing to repeal the three-entity rule and apply payment limitations through direct attribution, they would tweak the actual limitations differently. Both would actually do away with any limitations on marketing loan benefits. Then, the House bill would increase the limitation on direct payments to $60,000 annually but keep the $65,000 limitation on counter-cyclical payments. The Senate version would reduce the direct payment limit to $40,000 annually and the counter-cyclical limit to $60,000. Each would also keep peanut limitations separate from the general limits.

Both bodies propose a middle ground alternative on the AGI cap. The Senate would keep the current AGI cap for the first year of the new farm bill (2008), but reduce it to $1,000,000 in 2009 and to $750,000 thereafter; and it would exempt from the cap operators that derive more than 2/3 of their income from farming, ranching, and forestry. The House approach is to set the AGI cap at $1,000,000 for all operators, but apply a lower, $500,000 cap unless the operator derives more than 2/3 of income from farming, ranching, or forestry.

THE END RESULT? Once the budget fight is settled, the Administration and Congress will be under tremendous pressure from farmers and farm groups to wrap up negotiations on other issues and get a farm bill enacted right away. I expect the Administration will insist that the farm bill include a good portion of its payment limitation reforms, but both houses of Congress can say that they in fact have already done so. That would leave the most contentious pay limit issue-the AGI cap-to be resolved. There, I could see them settling their differences somewhere in the middle in an effort to speed passage of the legislation..

In any case, based on what is already in the House and Senate versions, it is clear that the new farm bill will include major changes in the payment limitation rules. Larger farmers should start thinking now about what the likely changes will mean for them, and what steps they might need to take to preserve as much as they can the cash flow they have come to expect from farm program payments.

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FARM BILL UPDATE: All Quiet On The Farm Bill Front
Posted by: Phillip Fraas
January 30, 2008

The caption for this posting is a play on the title of the famous movie about World War I, "All Quiet on the Western Front." And, the reference is made on purpose. Like the Allies and Germany fighting each other in that war, Congress and the Bush Administration are in sort of a war over the farm bill. But, as shown in the movie, fighting doesn't go on all the time in a war; there are quiet times as well. And, this past week or so has been such a period for the farm bill fight.

To push the analogy a little further, in the movie, World War I came to an end soon after the quiet period depicted in it; and there is every chance the farm bill fight will be resolved soon as well.

Why? Politics abhors a deadlock. The two sides will soon get tired of staring at each other across the table and decide to move forward one way or the other. There are couple of ways forward other than completing work on the new farm bill-let the current farm bill expire and revert to permanent price support law that has been suspended for many years, or enact a two-year extension of the current farm bill. Neither of these is close to being as attractive as completing work on the new farm bill. Permanent law is archaic and enacting a two-year extension would be to abandon literally hundreds of non-controversial and desirable provisions included in the new farm bill, which cumulatively have a huge base of supporters.

Further, time is running out. Farmers are already planning, or preparing their fields, for the 2008 crops. The current farm bill is effective only through the 2007 crops; a new program is needed very soon for this year's crops.

Finally, if history is any guide, Congress and the Administration will find a way to get the job done. In the six farm bill cycles I have followed prior to this one, there has never been a two-year extension in lieu of a new farm bill nor a reversion to permanent law. Some how, the new farm bill always got written, although in one instance not until some crops were already in the ground.

Having said all that, a little hedging is in order. The Administration appears entrenched in its insistence that the new farm bill not include any revenue-raisers (both the House and Senate bills have such provisions in order to keep the bill within the budget) and that payment eligibility rules be reformed so as to exclude persons with higher incomes. And, perhaps ominously, the President didn't have a word to say about the farm bill or agriculture in his state of the union address on Monday. Typically, these annual speeches include at least a passing reference to farming. Is this a signal that farm policy will not be a high priority for him in his last year of office? If so, the Administration might not push hard to find a compromise to get the farm bill process moving again.

On the other side of the fight, while congressional leaders haven't drawn any similar lines in the sand, they have shown no signs of caving in entirely on these issues.

In short, there doesn't appear at this moment any likely scenario for resolving the differences and getting the farm bill done. But there is no reason not to expect that, within a week or so, we'll see the outlines of a break-through compromise starting to form.

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FOCUS ON BIOENERGY: The Energy Bill's Renewable Fuel Standard, And the House And Senate Farm Bill Energy Provisions
Posted by: Phillip Fraas
January 23, 2008

THE RENEWABLE FUEL STANDARD: Congress recently passed, and the President signed into law, the Energy Independence and Security Act of 2007, which contains a provision of very direct and substantial effect on U.S. agriculture. It raised the standard for the production of renewable fuels (the "RFS") to 9 billion gallons for this year and gradually increases the standard after that so that, by 2022, the United States should be producing 36 billion gallons of renewable fuels annually. It also set a subsidiary standard that, in 2022, 21 billion gallons of the renewable fuels should consist of advanced biofuels, such as cellulosic alcohol.

To the extent that this RFS is vigorously implemented in future years, it will strengthen the corn market considerably, since corn now is the preferred feedstock in the United States for renewable fuels, and it will open up huge new markets for other agricultural or forest crops used in producing advanced biofuels such as cellulosic ethanol.

Some argue that, because it creates a large new demand for crops to be feed stocks for biofuels, the RFS is as meaningful or more meaningful for row crop producers as any price or income support provision in the farm bill Congress is working on now. It also is said that, of itself, the new RFS will be sufficient to encourage the development of bioenergy production without additional laws being passed for that purpose. However, others believe strongly that the government, through USDA, also must foster the growth of the bioenergy industry in the United States through specific grant, loan, and assistance programs. Both the House and Senate farm bills passed last year took the latter approach and included substantial energy titles designed to establish and fund bioenergy development programs.

THE FARM BILL PROVISIONS: The energy titles of the Senate and House-passed farm bills each run many dozens of pages. This short blog posting can't hope to describe every important provision of the energy titles. However, what I can do is review what each bill provides in the way of funding the farm bill's bioenergy development initiatives. So, a summary of those provisions follows.

First, it might be helpful to explain how the farm bill can fund programs without appropriations. Normally, when Congress passes legislation authorizing new programs, it doesn't appropriate funds for them in the same package. The funding issues are referred to the powerful appropriations committees of the Senate and House, and they pass annual spending measures providing money for the authorized programs.

Decades ago, however, Congress determined it expedient to create authority within the Department of Agriculture to fund some farm programs directly and without the need of advance appropriations. A government corporation, the Commodity Credit Corporation (the "CCC"), was created and given authority to take money directly from the U.S. Treasury for farm programs. All farm bills since then have funded spending under the price and income support programs through the CCC, rather than just authorizing the programs and leaving it to the appropriators to provide the funds. A good argument can be made for doing it this way: The country's commitment to a stable and healthy agricultural sector requires that farmers be assured that, once Congress establishes a program, the funds will be forthcoming in a timely manner, not delayed and contingent on a later appropriation bill being passed. (By the way, the CCC funding process doesn't leave the appropriators entirely out in the cold; at the end of each year, typically they appropriate whatever is needed to replenish the CCC fund so that it will be able to handle the next year's farm program demands.)

Thus, when describing the funding for the farm bill energy provisions below, I will be referring to this direct funding process, under which the money will become available for the bioenergy programs as soon as the farm bill becomes law.

In each case, I will start by describing the House provision, since the House passed the bill first and the Senate measure was a substitute amendment for the House bill.

Federal procurement: Currently, Federal agencies are required to purchase biobased products; and voluntary biobased labeling is authorized.

The House bill will double current CCC spending to promote such procurement to $2 million annually for the period 2008 to 2012, and expand the purposes for which the money can be used.

The Senate amendment will provide CCC funding of $3 million annually during the period 2008 to 2012.

Biorefinery loan guarantees: This program helps finance the construction of biorefineries and biofuel production plants to conduct demonstration projects on the viability of converting biomass to fuels or chemicals.

The House bill will make available up to $2 billion in loan guarantees for biorefineries through 2012, and allocate $800 million in CCC funds for all activities under the program during the period 2008 to 2012.

The Senate amendment will provide $300 million in CCC funding in 2008 for biorefineries and for repowering of facilities that use fossil fuels so that they can use biofuels, and an additional $245 million through 2012.

Biodiesel fuel education program: Awards competitive grants to projects that teach about the benefits of biofuel use.

The House bill will provide CCC funding for this program of $2 million annually during the period 2008 to 2012.

The Senate amendment will provide, to the maximum extent practicable, annual CCC funding of $2 million during the period 2008 to 2012. (The use of the phrase "to the maximum extent practicable" suggests that the instruction to the CCC to provide such funding won't be completely mandatory, that if the CCC resources are otherwise strained so that all or some of such funding isn't practicable, the CCC would not be obligated to provide the full funding.)

Renewable energy and energy efficiency improvements program: Provides loans, guarantees, and grants to farms and rural business to make renewable energy and energy efficiency improvements.

The House bill will provide $500 million in CCC funding for this program during the period 2008 to 2012.

The Senate amendment will provide $230 million in CCC funding for the program in 2008.

Biomass R & D: This program provides funding for research and development projects on biofuels and biobased-products. It is jointly administered by USDA and the Department of Energy.

The House bill will increase CCC funding for such research and development work from $14 million annually to a total of $420 million for the period 2008 to 2012, and authorize another $2 billion for the ten years ending in 2015.

The Senate amendment will provide, to the maximum extent practicable, $75 million of CCC funding for the period 2008 to 2010.

Bioenergy program: This program makes incentive payments to bioenergy producers, based on year-to-year increases in the quantity of bioenergy that they produce.

The House bill will provide CCC funding for the program of $1.4 billion for the 2008-2012 period.

The Senate amendment is described as investing $345 million into the program over the life of the farm bill, and it authorizes a grant program for entities providing technical assistance.

House biomass energy reserve program/Senate biomass crop transition assistance: These are programs to encourage the production of feedstocks for cellulosic ethanol.

The House bill will provide CCC funding for the biomass energy reserve, but no amount is specified in the bill.

The Senate amendment will provide $230 million in CCC funding in 2008, and $10 million in each of 2009, 2010, and 2011.

Forest bioenergy research: This program, included in the House bill, will provide competitive grants and agreements for the conduct of research and development to encourage new forest-to-energy technologies. The House bill will provide funding of $15 million annually for such research in each year of the period 2008 to 2012.

Regional crop research: This is a new program, created by the Senate amendment, for research on side-by-side bioenergy crop experiments at ten dispersed land-grant institutions. The Senate provision will provide $40 million in CCC funding for the period 2008 to 2010.

Sun grant program: Another Senate amendment-only provision, it will authorize the establishment of six sun grant centers in association with land-grant schools to promote biobased energy technology. The Senate amendment will provide $25 million in CCC funding for the period 2008 to 2010.

All in all, the two bills have much the same focus and, in many instance, roughly comparable funding provisions. It can be anticipated, then, that the conference debate to resolve the Houser-Senate differences on the energy title of the farm bill should not be a heavy lift and that, looking further down the line, the new farm  bill will have a substantial impact on the move away from fossil fuels and toward increased reliance on renewable energy.

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FARM BILL UPDATE: Behnd-The-Scene Discussions/Negotiations; Conferees Still To Be Named
Posted by: Phillip Fraas
January 12, 2008

While official Washington was quiet this week, with Congress still in adjournment and the President in the Middle East, there was plenty of work going on behind the scenes to prepare for the House-Senate conference to resolve the differences between those two bodies' versions of the farm bill.  This is so even though farm bill conferees haven't been named yet, and can't be until Congress begins the new session later this month.

DISCUSSIONS/NEGOTIATIONS: There have been no official negotiations on the farm bill yet, but in public statements and speeches, the Administration and Congress are doing plenty of sparring over their serious differences on the legislation. Beyond that, reports are that the congressional agricultural leaders are in serious discussions among themselves and with the Administration on how to resolve their disagreements, which seem to be focused on funding the farm bill and the scope of benefits or access to benefits under the farm bill programs.

Meanwhile, House and Senate staff are meeting to develop proposals for resolution of their hundreds of smaller differences between the House and Senate, proposals that they can then take to their bosses for ratification without additional debate.

Look for the behind-the-scenes work to continue for another week or longer, until conferees are named and public conference meetings scheduled.

CONFEREES: Typically in farm bill conferences, the Senate names a small number of conferees--the seven to nine most senior members of the Agriculture Committee--and they are conferees for the entire package. This time around, because the Senate bill includes substantial revenue-raising provisions and many other sections developed by the Senate Finance Committee that were tacked on to the Agriculture Committee-reported bill during floor debate, look also for several senior Finance Committee members to be additional conferees on at least that part of the bill.

The naming of conferees in the House of Representatives is handled much differently. First of all, more members of the Agriculture Committee are named general conferees--around 13 to 15 or more, again the most senior members. In addition, the House leadership usually includes on the House side of the conference representatives of every committee with jurisdiction over a substantive portion of the farm bill, at least for purposes of debate on that portion. Since this farm bill is so big, there are numerous provisions that, while relating to agriculture, food, or rural America, are within the jurisdiction of other committees. Thus, it can be expected that the House side will include perhaps dozens of additional non-general conferees from other committees.

The earliest that conferees can be named is when Congress returns next week; but I wouldn't be surprised if it might be a week or longer before they actually get named. Right now, negotiations are limited to the key agricultural members of Congress and it is perceived that this small leadership group can get a lot more done on framing the issues and developing options than the larger group of all conferees. So, there is no rush to name conferees while this preliminary work is on-going.

TIMING: In talking to people in the know, one hears that optimistically the agricultural leadership would like to get the farm bill done in less than a couple of weeks after the conferees are named. So, if the naming of conferees is delayed for a while as suggested above, that optimism is translated into a target date around the middle of February.

However, given the strong differences of opinion between the Administration and Congress on the legislation, that target date easily could slip. In that regard, it is rumored that the congressional leadership is looking to get the farm bill completed by the first of March. 

Finally, there is sort of a "drop dead" completion date of March 15, when the Congressional Budget Office will adjust its estimate of the budget base line for the farm bill programs. The base line is the projected cost of the programs in the farm bill over the next five or ten years assuming current programs are extended without change. That amount, roughly $50-60 billion annually, is the amount that Congress has to work with in crafting this new farm bill without running afoul of rules designed to prevent increases in the federal deficit. To the extent that the new farm bill will spend over the base line, it also must include offsetting reductions in other programs or measures that will raise additional revenue to cover the increased spending.

Because farm commodity prices have strengthened greatly since the prior CBO cost estimate done last year, it is believed that the new mid-March base line for the farm bill will decline substantially and hinder  Congress's ability to craft new programs. This is because, as a general rule, when market prices go up, the need for federal support under the current programs goes down and estimates of future federal spending on the programs are thus reduced. 

Right now, it is difficult to predict a finish date for the conference; it simply is too early in the conference phase to get a sense of where things are heading. It can be said with some confidence, however, that if the farm bill conference doesn't finish in March, the pressure will increase dramatically to just extend the current farm bill for a couple of years.

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FARM BILL UPDATE: How things Look Very Early In The Year
Posted by: Phillip Fraas
January 04, 2008

As of this writing (January 5, 2008), It is anticipated that the farm bill conferees will be named and the conference will convene in the week of January 21 or soon thereafter and push to complete its work as soon as practicable. In that regard, reports are that Senate and House agriculture committee staffers have been hard at work recently analyzing the differences between the two bills and looking for possible compromises on the less controversional diffferences to speed up the process.

With this ground work being laid, the conference could move to a conclusion as quickly as early February if all the stars are in the proper allignment. However, we know going into 2008 that some differences between the two versions don't look amenable to quick resolution (e.g., price support levels and payment limitation rules), and the Admnistration is strongly opposed to portions of both versions. So, the conference might take many weeks before completion. And even then, the President can still veto the conference report if he doesn't like it and send the legislation back to Congress for additional work.

Follow-up postings (under the topic heading "REPORTS ON 2008 FARM BILL STATUS--January 2008 To Enactment") will shoot to keep you abreast of conference developments and give you a sense of where things are headed as we near the end of the process. Look for the next posting early next week.

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