2012 Farm Bill? Don't Bet On It

2012 Farm Bill? Don't Bet On It

Farm groups are pushing Congress to get a new five-year farm bill passed yet this year, but it probably won't happen.

More and more observers are placing odds there won't be much, if any, work done on the new five-year farm bill in Congress this year. The heavy lifting will likely take place when Congress comes back into session in January. Even then, the farm bill might not get the attention of Congress right away.

NEEDED NOW: U.S. Secretary of Agriculture Tom Vilsack continues to express his frustration at Congress for not passing a farm bill. "Kicking the can down the road is a bad idea," he says. "We need a five-year bill so farmers can have some certainty."

Farm bills usually last for five years and the 2008 Farm Bill officially expired on September 30, 2012. Congress left Washington September 21 to go home to campaign without getting the new farm bill finished. They'll return after the Nov. 6 elections for a "lame duck" session. Farm groups are pushing to get the farm bill passed and on President Obama's desk so he can sign it into law before the end of 2012.

However, the "lame duck" session will be short, and Congress has a lot to get done in that brief period. The Senate will return for the week of November 15, break for the week of Thanksgiving and return again November 29 for a period yet to be determined. The House's schedule will likely be similar then it's only a couple weeks and they'll adjourn for Christmas.

Congress has a full plate awaiting them in "lame duck" session
The farm bill isn't the biggest concern facing Congress, points out Neil Harl, emeritus professor of economics and ag policy at Iowa State University and a long-time observer of farm bill battles over the years. Congress needs to come up with a new tax package, he notes. That's perhaps the biggest priority.

A number of income tax breaks expired at the end of 2011 and the lawmakers also need to address tax breaks that are scheduled to expire at the end of this year. In addition, they need to decide what to do about the estate tax, also scheduled to "sunset" (go back to 2001 levels) at the end of 2012.

"If Congress doesn't pass new tax legislation before the end of 2012 we will have a huge set of cuts coming which would really jolt the economy," says Harl. Another big concern that needs to be resolved is "sequestration." Sequestration means automatic cuts in federal spending if Congress and the administration can't agree on how to resolve their budget differences.

All these issues will likely take priority over the farm bill
Thus, come January, income taxes are set to go up when the Bush-era tax rates expire; automatic spending cuts totaling $109 billion set by August 2011's debt-ceiling deal between Congress and President Obama are due to kick in; and such things as payments to doctors under Medicare will be slashed unless Congress acts.

All of these issues will likely take priority over passing a new farm bill. Some farm organization leaders say it will likely be March or April before we see a new farm bill signed.

Another potential hang-up to consider is there are major differences in the two versions of the farm bill that need to be worked out, notes Harl. The Senate version would eliminate almost all traditional farm subsidies that compensate corn and soybean growers when revenue from a crop is from 11% to 21% below normal, with crop insurance covering other losses. Meanwhile, the House Ag Committee has approved a bill that boosts crop support prices by up to 40% and gives farmers the choice of traditional subsidies or a less-generous revenue protection plan.

Major differences exist between House and Senate farm bills
The House bill omits crop insurance reforms sought by the Senate. The Senate would require farmers to practice land stewardship to qualify for federally subsidized crop insurance and big operators would have to pay a larger share of the premium.

The Senate bill and the House bill will have to eventually go to a compromise committee to have major differences resolved before Congress can come up with a final bill and send it to the president. Even though it is called a farm bill, more than 80% of the money in the recently expired 2008 bill pays for food stamps and nutrition programs; less than 10% actually goes to farmers.

While agreeing on many points in the proposed farm bills, the Republican controlled House and Democrat-led Senate do disagree sharply on some key farm bill points. Chief among them is the size of cuts in food stamps -- $4 billion in the Senate version and $16 billion in the House version.

Budget issues, tax bill and farm bill are all demanding attention
These three things -- budget reconciliation, tax legislation and the farm bill -- are all demanding action. And there's little time left for action this year.

"I remember one year (1994) Congress actually passed some important bills pretty close to the end of the year," says Harl. "The key this year is how the November 6 election goes. If the election is won by candidates who are critical of the farm bill, who want lower taxes and bigger cuts in spending, there will be a tendency to run out the clock and do very little this year and postpone the work until sometime in 2013."

He notes there are people in Congress who believe they should wait on the farm bill because they will be able to get bigger cuts enacted in food stamps and commodity programs next year. That's a possibility if the election goes their way.

After the election, "we'll be able to see a little more clearly what the new Congress is going to look like and what they'll likely do when they convene in January," Harl adds, "and we'll know who will be in the White House after January 20, 2013."

Lack of a farm bill frustrates U.S. Ag Secretary Tom Vilsack
Speaking in Des Moines and Omaha this past week, U.S. Secretary of Agriculture Tom Vilsack noted that Republican leaders of the House have said "they didn't have time" to pass a farm bill before adjourning in September. "They did have time," says Vilsack. "In a year of historic drought that has brought its share of challenges to America's farmers and ranchers, the House Republicans have added new uncertainty to rural America."

Vilsack points out that bankers who make loans to farmers for seed, equipment, fertilizer and herbicides are also worried that a lack of action by Congress will be unsettling to agricultural production. Lenders want farmers to present risk management plans before extending credit, and crop insurance is a key risk management tool for most producers of corn, soybeans and wheat.

One of the immediate needs is farm bill assistance for livestock
One of the most immediate needs is assistance for dairy and livestock producers. Drought has driven up feed costs to extremely high levels. Many producers began culling and liquidating herds last summer. Livestock feed assistance was part of the 2008 Farm Bill, but that provision expired in September 2011. "Producers continue to tell me drought has made the need for a renewal of that program extremely urgent," says Vilsack.

Vilsack adds, "Farmers and ranchers across the country deserve the certainty that a 2012 Farm Bill would bring so they can continue to provide Americans and the world with abundant, affordable and safe food. Americans deserve a food, farm and jobs bill that reforms the financial safety net for producers in times of need, promotes the bio-based economy, conserves our natural resources, strengthens our communities, promotes job growth in rural areas, and supports food assistance to needy families. Without the certainty of a multiyear farm bill, rural communities are being asked to shoulder undue burdens."

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