FarmPolicy

August 21, 2017

“Analysis from Washington”- By Dan Morgan- Farm Bill

Farm Bill

By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.

The House and Senate batted farm bill proposals back and forth last week, squabbling over such familiar sticking points as payment limits, disaster aid and faster depreciation for farm equipment.

The quarreling, though, seems increasingly detached from the monumental changes that are sweeping through American agriculture—from corn replacing cotton in parts of Mississippi, spring wheat contracts hitting $20 a bushel on the Minneapolis Grain Exchange, and empty grain elevators in the Dakotas.

It isn’t entirely the lawmakers’ fault that their labor has been overtaken by events. When they began work on a new farm bill two years ago, the problems were the traditional ones: stagnant commodity prices and flat farm income. Key farm state lawmakers girded themselves for a traditional battle defending traditional subsidies. They’re still waging that fight, but everything has changed, creating a new set of issues and choices.

What’s the best policy for a world in which food and fuel are competing for acres? With corn prices at or near $6 a bushel, should the U.S. be subsidizing both the ethanol industry and corn growers? Does it make sense for Congress to allocate 85 percent of the U.S. sugar market to beet and cane growers when those acres may be needed for corn and wheat? Is it possible to meet global demands for crops without sacrificing habitat, soil and even the climate?

These are big questions, but they haven’t much entered the farm bill debate, now mired in parochial battling.

The impasse has led some to suggest the unthinkable: This could be the last farm bill of its kind, and perhaps even the last farm bill.

That possibility was advanced privately last week by several serious policy analysts and former senior government officials attending Informa Economics, Inc.’s annual conference on food and agriculture policy in Arlington, Va.

Imagine, they suggested, that the current high prices are not just a blip but a permanent new condition, much like high oil prices. In that case, the commodity title of the farm bill will look increasingly irrelevant. Government price guarantees will no longer be operative at their current levels, and the billions of dollars in direct payments to farmers will become politically unsupportable. In place of the 70-year old system of supports and guarantees, Congress will impose a new safety net operated by private crop insurance companies, though still subsidized by the government.

The House Agriculture Committee’s new farm bill version unveiled last week includes an optional program for farmers providing for scaled-back government payments and other benefits, in return for insurance against both low prices and bad weather. Though backed by corn grower organizations, it gets little respect from farm bloc members.

Committee Chairman Collin Peterson told reporters last week he couldn’t imagine why many farmers would sign up for it.

Still, this year’s impasse over the farm bill may be a sign that fundamental change can’t be postponed much longer.

The agriculture committees are beginning to lose control of the debate. By refusing to consider shifting some $50 billion in direct farm payments to other priorities, the agriculture committees have had to beg money from Congress’s powerful tax and revenue committees in order to fund other priorities. Those committees are now extracting their pound of flesh.

House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) wants a $9 billion increase in food stamp spending as a condition of his help. Senate Finance Committee Chairman Max Baucus (D-Mont.) is unyielding in his demand for a $4.1 billion disaster program. He is also proposing a tax change that would give his committee jurisdiction over the nation’s principal soil and habitat conservation program.

The “aggies” may yet get the money, but only at the price of relinquishing some power.

Already, energy, environmental and agriculture policy are merging, so that the agriculture committees alone no longer control the destiny of American farmers. The newly-enacted energy bill gives the administrator of the Environmental Protection Agency huge new sway over the farm economy, including authority to waive biofuel requirements deemed to be hurting the environment or consumers.

In the new crops-for-energy economy of the Midwest, oil prices are as significant as wheat futures. And EPA’s global climate model, now in the works, could determine whether future ethanol and biodiesel plants qualify for tax credits and loan guarantees.

At the same time, the environmental policies the government chooses over the next months may have more of an impact on farm revenues than the fate of direct payments and traditional subsidies.

Pressure is increasing from many sides to fight shortages and food inflation by plowing virgin prairie and land now enrolled in the Conservation Reserve.

In the House, Congresswoman Stephanie Herseth Sandlin (D-S.D.) favors a “sod saver” program that would deny crop insurance for four years to farmers expanding into native prairie–prime habitat for pheasant and duck, and a natural grass bank for ranchers.

A bigger question is the fate of the 36 million acre Conservation Reserve, one of the premier environmental success stories of the last two decades.

Authorized acreage would shrink by more than 10 percent under Peterson’s proposal, and could fall even more unless the government raises payments to participating landowners to compete with the rents they can now get from farmers.

Pressure is mounting – from farmers, the baking industry, and agribusiness groups – to allow early withdrawal of land from the Reserve. Agriculture Secretary Ed Schaefer says he sees no need for such drastic action. But contracts on 4.5 million acres will expire next year, and many landowners are expected to return the land to commercial farming without higher payments from the government. (About a quarter of the land in the reserve now was formerly used to grow wheat, and prices of wheat are now at record levels.)

The public is entitled to a debate on the implications of the sweeping changes underway in U.S. and world agriculture. At this point, it looks as if it will have to wait.

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Clarification: An earlier version of Dan’s article reported that the “sod saver” provision favored by Congresswoman Herseth Sandlin was not included in the new farm bill outline offered last week by Rep. Peterson. A committee spokeswoman said Monday that sod saver had been included in both the House and Senate versions of the legislation and Peterson’s proposal “makes no policy assumptions.” She added that the chairman’s “framework document contains a level of savings that presumes savings that would be achieved by the inclusion of a sod saver provision in the final conference agreement.”

Dan Morgan