FarmPolicy

February 22, 2019

As Senate Debate Approaches, Farm Bill Ideas Scrutinized

Categories: Farm Bill

Jerry Hagstrom, in an article posted today at AgWeek.com, reported that, “In an Oct. 11 interview, Conrad [Senate Budget Committee Chairman Kent Conrad, D-N.D.] said that he emphasized to the business leaders the importance of the [farm] bill to the overall economy in North Dakota and that he was pleased by the business leaders’ reaction to the Senate Finance Committee’s recent approval of a tax package that would create a fund to aid farmers when there are weather-related agricultural disasters.”

The article indicated that, “The Senate Agriculture Committee is expected to take up the farm bill the week of Oct. 22. The Senate Finance Committee on which Conrad also sits voted Oct. 4 on a tax package that created the disaster aid program and also would provide conservation, energy and rural development bonds and tax breaks and an additional $3 billion for the agriculture committee. The 17 to 4 [vote] in the finance committee in favor of the bill ‘should send a very powerful signal’ to the White House of the level of support for the farm bill, Conrad said, but added he still is worried about the Bush administration’s opposition to the bill.”

However, Mr. Hagstrom added that, “The Senate Agriculture Committee still needs to shift another $1 billion from current farm bill programs to conservation, nutrition, energy and specialty crop programs to get the bill passed by the committee, Conrad said. Conrad said that even though Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, has found close to $6 billion in savings within the $280 billion five-year baseline and the Senate Finance Committee has provided an additional $3 billion, ‘We do have about a $1 billion hole.’ Conrad added, ‘Under any of the formulations, there is going to have to be some savings device.’

“Conrad said that that no decision has been reached on how to come up with the $1 billion, but that the most likely way to find the money is to cut the direct payments program either by cutting payments when the individual commodity prices on which the direct payments are based are ‘well over the cost of production or some across the board haircut of 2 (percent) or 3 percent.’ He added, ‘We would prefer not to be in that situation, but we are. I hope everybody is prepared to live with the reality. We can curse the darkness or light a candle.’ The baseline for the direct payments program is $26 billion over five years.”

Associated Press writer Mary Clare Jalonick provided additional analysis regarding the disaster aid proposal contained in the Senate Finance Committee’s tax package in an article from Sunday.

The AP article stated that, “The chairman of the Senate Finance Committee, Sen. Max Baucus of Montana, wrote the disaster legislation. It was approved by his committee Oct. 4 to be part of the farm bill.

“Cook’s group [Ken Cook, head of the Environmental Working Group] recently released a study that reports the government spent $26 billion in emergency agricultural disaster aid between 1985 and 2005. According to the study, 66 percent of ‘chronic recipients’ –or farmers who have received disaster aid for 11 or more years –come from five states. Texas tops that list, followed by South Dakota, North Dakota, Oklahoma and Georgia.

“Sen. Kent Conrad, D-N.D., likens the study to ‘criticizing Katrina aid because it would go to a place that floods.’

“Conrad has spent much of his Senate career arguing for disaster aid, especially with an intense drought in the Dakotas in recent years. He says farmers need protection because their business is harsh and unpredictable.”

Ms. Jalonick also noted that, “The chairman of the Senate Agriculture Committee, Sen. Tom Harkin, has never really liked the idea of a permanent disaster fund. Harkin, D-Iowa, has said he would prefer to use extra money for other priorities.

“But he has conceded in recent weeks that the disaster program probably would be part of the farm bill.”

The article noted the potential of an additional hurdle on the disaster aid issue, “If the disaster money survives the Senate, it could face obstacles in negotiations with the House.

“The chairman of the House Agriculture Committee, Rep. Collin Peterson, D-Minn., decided not to include it in his version of the bill. Though Peterson supports disaster aid, he decided there was not enough money for it.”

Noelle Straub, writing on Saturday at the Independent Record Online (Montana), provided this succinct summary of the disaster aid package: “The House version of the farm bill — a five-year, $286 billion measure passed on July 27 — does not contain any funding for a permanent disaster relief fund. The Bush administration opposes it, as does the Democratic chairman of the Senate Agriculture Committee, Tom Harkin of Iowa. But because of the politics and workings of the Senate, the fund — a priority of Baucus and fellow Finance panelist Sen. Kent Conrad, D-N.D. — has been moving through Congress.”

The article also included this helpful explanatory background on funding issues, “The agriculture panels in the House and Senate both have enough funding already authorized to continue the programs approved in the last farm bill in 2002. But both wanted additional dollars to expand some programs or fund new priorities.

“The only way to do that was to have the tax-writing committees come up with ways to bring in more money to the government.”

Comparing how the House and Senate approached this dilemma differently, the article explained that, “In the House, the Democratic leadership had the Ways and Means Committee find extra dollars for farm bill priorities. The panel came up with a controversial measure, opposed by most Republicans, that would impose taxes on some U.S. subsidiaries of foreign companies.

“The House Agriculture panel had been working on the farm bill with the understanding that it would be able to add billions of dollars. In essence, the Ways and Means Committee turned over the sum of money to the Agriculture panel to decide how to spend it — which is on $4 billion for new food stamp and nutritional funding. But that’s not how it worked in the Senate.

“Baucus, who chairs the tax-writing Finance Committee, decided that rather than hand a set amount of funding to the Agriculture panel to decide how to spend it, he would craft his own tax package with his priorities.

“Establishing a permanent disaster relief fund was a top priority of Baucus and Conrad, who are both members of the Finance and Agriculture panels. Conrad also chairs the powerful Budget Committee.”

With respect the arguments that are made in support of the permanent disaster aid package, the article stated that, “When natural disasters cause crop failures, Congress can pass emergency aid bills. But the bills often take months to pass and additional months or even years to set up the programs. The permanent trust fund for disasters would replace that ad hoc system with a permanent program to offset farming income losses not covered by the crop insurance program. Farmers and ranchers would have to purchase crop insurance in order to qualify for the disaster aid.

“Baucus has described the current disaster relief system as ‘just deplorable’ and said farmers ‘have to beg’ and face uncertainty over when Congress is going to act. Because drought is not as sudden and dramatic, he said, farmers and ranchers in the West have to wait for hurricane relief bills and piggyback on them.”

However, recall a slight nuance on the statement, “The permanent trust fund for disasters would replace that ad hoc system with a permanent program to offset farming income losses not covered by the crop insurance program.” Note in particular the word “replace.”

Remember that Peter Shinn of Brownfield reported on October 3 that, “Tuesday afternoon [October 2], Acting U.S. Ag Secretary Chuck Conner said he didn’t think the proposed inclusion of a $5 billion permanent ag disaster aid package in the next farm bill is a good idea. Conner pointed out that only works out to a billion dollars a year over five years, and ag disaster aid packages are typically multi-billion dollar affairs.

“But Nebraska Senator Ben Nelson (D) told Brownfield Wednesday that Conner’s comments are ‘not on target.’ Nelson said spending $1 billion each year toward a $5 billion dollar permanent ag disaster aid fund would, at worst, be a good start.
“‘There’s no doubt that it might not be enough in any one particular year,’ Nelson said. ‘Well, if that’s the case then we can go for a supplemental, but at least we’ll have part of it funded.’”

It appears that if the permanent disaster aid package becomes law, there is still nothing to preclude legislators for seeking additional disaster aid in a “supplemental” beyond what may be allocated under a permanent program.

The Brownfield article also included a link to this audio summary, which included comments from Sen. Nelson– to listen, just click here (MP3- about one minute).

And with respect to the House passed version of the Farm Bill, the Congressional Budget Office (CBO) recently issued a report (October 5), containing a “Cost Estimate” for the House bill (H.R. 2419 Farm, Nutrition, and Bioenergy Act of 2007).

To download the CBO document, just click here— The 21 page report is well organized and contains a tremendous amount of budgetary statistics.

Meanwhile, other aspects of Farm Bill legislation, beyond funding issues and disaster relief, are also garnering attention.

Philip Brasher, writing in Sunday’s Des Moines Register, reported that, “Poor Kenyan farmers are learning to how to grow sunflowers, a crop suited to their relatively dry climate that they can sell for vegetable oil to provide for their families. But their biggest challenge isn’t necessarily the weather or insects.

“It could be a product of Iowa: soybean oil. Shipments of donated U.S. soybean oil could potentially make it harder for farmers there to find a market for their sunflower oil, according to CARE, an aid group that has been helping the farmers learn how to grow sunflowers.

“Why give vegetable oil to Kenya to compete with Kenyan farmers?”

Mr. Brasher explained that, “The Bush administration says it can speed up delivery of the food and make federal dollars go farther by purchasing some of the commodities closer to where they’re needed rather than exclusively buying U.S. products. [Bush admin. Farm Bill proposal, pages 81-82].

“So far, Congress has rejected the administration’s proposal, but Sen. Tom Harkin plans to write into the next farm bill a pilot program that would allow some purchases of non-U.S. food for emergency needs.

“Farm groups and many aid organizations have vigorously opposed the Bush administration’s push to buy non-U.S. food. They argue that the food donations provide good public relations for the United States and that congressional support for food-aid programs will falter unless U.S. interests benefit from them.”

And, an opinion item written by George A. Jones, which appeared in Sunday’s Washington Post, noted that, “According to the U.S. Census, one in nine D.C. residents is at risk of or living with hunger. But there is hope in the House-approved farm bill moving through the Senate. This legislation calls for a $4 billion investment over five years to improve food stamp allocations and eligibility. It also would raise mandatory spending for commodity purchases under the Emergency Food Assistance Program (EFAP). These investments would represent real progress in addressing hunger in the United States. The Senate should make further improvements to strengthen the programs by increasing benefits, significantly raising outdated income limits (to avoid penalizing working poor families who manage to have some savings), and restoring benefits to more vulnerable groups left out, such as many legal immigrants.”

Trade issues are also being highlighted as part of the Farm Bill debate.

Dean Kleckner stated in an opinion item published in today’s New York Times that, “As Congress heads into final negotiations over the farm bill, let’s hope our elected officials are paying attention to the headlines: Brazil has scored yet another huge victory at the World Trade Organization over America’s cotton subsidies; Mexico is likely to file a complaint with the global body over how we subsidize rice farmers; Canada may do the same over corn payments.

“This is a troubling pattern, and there’s a good chance America will lose more and more cases unless Congress makes changes in the farm bill, which expired last month. Washington simply must stop subsidizing farmers the way it does or risk reversing course on a half-century of steadily expanding trade opportunities.”

The item added that, “Today, it’s obvious that we need to transform our public support for farmers. Many of our current subsidies inhibit trade because of their link to commodity prices. By promising to cover losses, the government insulates farmers from market signals that normally would encourage sensible, long-term decisions about what to grow and where to grow it. There’s something fundamentally perverse about a system that has farmers hoping for low prices at harvest time — it’s like praying for bad weather. But that’s precisely what happens, because those low prices mean bigger checks from Washington.

“Moreover, these practices hurt poor farmers in the developing world who find themselves struggling to compete. It’s one of the reasons that the World Trade Organization won’t let these practices stand.

“Now would be a particularly opportune time to change the system. Food commodity prices are high, so a transition away from subsidies will hurt farmers less. Today’s farmers enjoy much better marketing tools, crop protection and technology than they did only a decade ago.”

Also today, The Wall Street Journal editorial board focused on U.S. cotton subsidies; stating that, “In a June 2007 study on the effects of U.S. subsidies on West African cotton producers, University of California Davis economists Daniel Sumner and Julian Alston, and Henrich Brunke, formerly a research specialist at UC Davis, estimated that some 10 million Africans could see their incomes from cotton increase 8% to 20% if the U.S. reformed its subsidies and world supplies of cotton returned to market levels. ‘For farmers living on less than $1 a day, this means more money for food, medicines, school fees and fertilizer,’ write the authors. The paper’s research was supported by Oxfam America, the left-wing NGO.

“One reason the cotton program persists is that it has been made so arcane that it is fully understood only by the farmers who benefit and some gnomes at the Agriculture Department.”

The Journal also noted that, “Three years ago a WTO panel ruled against the U.S.’s ‘Step II’ cotton subsidy. This subsidy guaranteed cotton exporters the artificial domestic price of their crop and guaranteed that U.S. mills could buy cotton at the lower international price of cotton. This created a protected U.S. market and worsened the problem of too much U.S. cotton being dumped on world markets. The WTO also said the ‘price suppression’ caused by subsidies introduced ‘serious prejudice’ against Brazil.

“The U.S. has dropped the Step II program, but it has refused further change despite losing appeals on the other subsidies. A WTO compliance ruling is soon expected to give Brazil the right to retaliate to the tune of $4 billion. Brasilia could go after intellectual property, a genuine U.S. strength, rather than the traditional route of imposing tariffs on U.S. goods.

“With commodity prices at all time highs, environmental consciousness all the rage, the U.S. looking to open new markets and the 2002 farm bill expiring, the case for reducing subsidies has never been stronger. Much of this mess was the work of Republicans five years ago. With the Senate getting ready to debate its farm bill, Democrats have a chance to do something for the world’s poor and America’s taxpayers. If they don’t, it will be because they don’t want to.”

Keith Good

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