FarmPolicy

April 18, 2014

“Analysis From Washington”- By Dan Morgan- Farm Bill Review

Farm Bill Review

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.

I lost count of the times lawmakers used the word “reform” during this week’s final debate on the farm bill in the House and Senate.

It took House Agriculture Committee Chairman Collin Peterson (D-Minn.)–a Midwesterner with a seemingly incurable tendency to speak the honest truth–to give away the game. Except for some “minor changes,” the new farm program is “very much like the current law that we have been operating under,” he told the House on Wednesday.

That’s disappointing to those who thought the time was ripe for a new kind of farm safety net more aligned with the realities of 21st century American agriculture. What emerged instead was a farm program that invites another storm of negative editorials. The new program, like the old one, will continue to automatically channel $5 billion a year to a few hundred thousand farm households even if prices stay at record level. Such a policy won’t win broad public support and probably isn’t sustainable politically in the long run.

Even so, buried deep in this monster bill are what could be the seeds of change. A new program with the earthy acronym ACRE (for Average Crop Revenue Election) could represent the wave of the future. Starting in 2009, farmers will have an option of relinquishing some of the automatic payments and other supports in return for guarantees from the government. If their income from growing certain crops falls below what could normally be expected (state yields time the average national price for the crop), the government will make up the difference.

The provision is a pale shadow of what had been proposed by the National Corn Growers Association. In a globalized economy in which American workers increasingly have to fend for themselves, the notion of giving one privileged group a guaranteed revenue may not be an easy sell.

But ACRE is a breakthrough in several respects. It is a real safety that provides risk protection (along with crop insurance) for people who are actually farming. The current system of automatic payments is not a safety net. The checks arrive twice a year, regardless of whether weather is good or prices are high.

Some believe ACRE could be the start of a farm program overhaul that would eventually transform the current balkanized system of supports, subsidized crop insurance, price guarantees and free money into a “single payer” insurance system tailored to helping farmers manage legitimate risks.

Farm state politicians don’t have much good to say about ACRE, probably because it represents a threat to the status quo. Peterson has repeatedly disparaged it, questioning why anyone would sign up for it. But on the House floor Wednesday, he gave it a surprising, grudging nod.

“That may be the new future direction of the farm bill, depending on how it works out,” he said.

His comment was a sign of just how much Peterson has been worn down by the hard line taken by farm organizations and a few powerful senators who fought against even token cuts in the automatic cash payments to farmers.

Farmers in Peterson’s own northwest Minnesota congressional district will take home nearly $691 million in direct payments during the course of the new farm bill, according to the Environmental Work Group. Yet amid all the celebrating about the new farm bill, Peterson issued a warning to the farm bloc: “These direct payments are not a good way to do a safety net. It’s very hard to explain to our urban colleagues.”

Another section of the bill, long championed by Sen. Tom Harkin (D-Iowa) points the way to a new kind of farm policy that links federal payments to environmental improvements. In Europe, “single farm payments” that are the equivalent of the direct payments here come with environmental strings attached. The newly-named Conservation Stewardship Program edges toward that.

It creates a sizable pool of federal money –$1.1 billion to be disbursed over 10 years—that working farms could use to adopt or improve environmental practices. Thousands of farms will qualify, not just those growing staple crops. By 2018, 115 million acres – nearly a third of all farming acres — will be enrolled.

Any farm would be eligible, not just those growing staple crops. The World Trade Organization has ruled that these conservation payments don’t count against a country’s subsidy limits and can’t be challenged by trading partners. But the biggest plus may be political: the American public will support paying farmers generously if the nation is getting an environmental return.

None of that is much solace right now to critics of the current farm program.

The reformers turned out to be no match for a few powerful senators and Peterson, who protected—and added to–the hugely controversial subsidy system that Congress approved and the president ratified in 2002.

Although three quarters of the $300 billion in the bill go to nutrition, conservation, and energy programs, the politics of writing the bill is still driven by the farm program.

Under House rules, the Agriculture panel is a “minor” committee that is not required to be geographically representative. (There are six members from North Carolina and Georgia, none from New England.) The result is a panel unified behind the interests of farmers growing staple crops that collect the bulk of subsidies. This year, dairy interests did particularly well, snagging an extra $410 million to help cover rising feed costs, and imposing a 7.5 cents a pound fee on all imported dairy products to help finance domestic dairy promotion activities. The poultry industry in Virginia and Georgia beat back an attempt to deny crop insurance to Prairie Pothole farmers who plow virgin prairie lands to plant corn.

In effect, the aggies held a clinic on how to use the power of the purse to silence opposition to current farm subsidies. They heaped new money on anti-hunger groups, certain conservation programs, the biofuels industry, West Coast salmon fishermen, and even a few hundred farmers in Alaska.

Of more than 500 grass roots and advocacy groups lining up behind the farm bill, a majority were anti-hunger groups and food banks thrilled with the $10.4 billion in new money for nutrition programs. When the Bush administration sought to split the agriculture community by urging that growers of fruits and vegetables get a larger share of the pie, farm state lawmakers countered with more than $1 billion in new funds for research and marketing. In effect, the administration inadvertently created yet another lobby for the farm bill.

The bill took care of key Democratic constituencies such as low-income families on food stamps and fruit and vegetable growers in the home state of Speaker Nancy Pelosi (D-Calif.).

Pelosi’s performance came with an eye to shoring up the party’s support in rural America before the congressional elections. She disappointed those who thought she could have done more to pare back subsidies at a time of soaring farm incomes and rising food prices.

But a larger share of the blame may go to the White House. For all the Bush administration’s rhetoric about the need for more subsidy reform, it insisted on keeping or expanding the biggest subsidy of all—the $5 billion in automatic payments. That stand cost it the high ground in the end game of negotiations over the farm bill.

Had the administration agreed to a significant cut in the automatic payments—say $1 billion a year—it might have come to the table with a farm bill that used those savings for all the things the nutrition, conservation and fruits and vegetables lobbies wanted.

It could have advanced an alternative farm bill that moved in the direction of serious structural reform and still offered the interest groups what they wanted. Such an alliance might have given pause to the farm bloc. Instead, the administration chose an approach little different from what Congress was advocating.

Once it became clear the administration’s call for “reform” was hollow, Congress felt free to follow its own instincts.

By Dan Morgan

Reader Comment-

By Ferd Hoefner, Policy Director at the Sustainable Agriculture Coalition, Washington D.C.

I enjoyed reading Dan’s piece this morning. I do have profound doubts about ACRE amounting to any kind of major transformation of commodity politics and policy, but I guess time will tell. I do very much agree with the point at the end that much blame for the lack of reform (notwithstanding lots of editorials and more than a few news articles) lies at the foot of the Administration, both because, as you point out, their proposal called for increasing direct payments and they refused to ever concede on that, but also because, having gained significant leverage to influence the outcome of the bill, they never used it. At every key point in the final months they refused to negotiate, hanging payment reformers out to dry.

I wanted to point out two factual problems on the CSP comments. First, the $1.1 billion is the net increase in CSP dollars over the next 10 years. The total CSP funding over that time period is just over $12 billion. Second, while 115 million acres is about a third of cropland acres, pasture and rangeland acres are also eligible for CSP. From that perspective, it is closer to an eighth rather than a third of all eligible acres which can be enrolled given current funding levels.

It is probably reasonable to assume a higher sign-up rate in percentage terms for cropland relative to pasture and range, but it won’t get close to a third. From our perspective that is not necessarily a bad thing. The environmental standards for CSP are much higher than for conservation programs historically and much higher than EQIP today. Over time, if standards stay high and the funding remains with the program, there will be a very strong, lasting signal for positive conservation improvement. But it needs to build steadily over time. If too many acres could get in from the get go, it would mean accepting lower environmental standards in order to fill out the card.

By the way, the criteria by which USDA will determine who gets into the program in any given year is specified in the statute. There are five factors:

1. The farmer’s current level of conservation achievement related to the priority resource concerns in the area;
2. The degree to which the farmer’s proposal calls increasing conservation performance with respect to those priority resource concerns;
3. The number of priority resource concerns the farmer is willing to address to meet or exceed high standards set by USDA;
4. The extent to which the farmer is willing to address other resource concerns, in addition to the priority concerns, to meet or exceed high standards set by USDA;
5. The extent to which all of these environmental benefits are provided at least cost relative to other similarly beneficial bids.

(Note: with respect to #3 – to be eligible, the farmer must already be meeting or exceeding the high standards set by USDA for one priority resource of concern and also must agree to address a second priority resource of concern to that high standard by the end of the first 5 year contract – however, ranking criteria #3 will tend to favor farmers doing comprehensive conservation, sometimes referred to as total resource management systems).

(Also note that the farmer must enroll the entire farming operation; there is no opportunity to “cherry pick” particular fields that may have fewer problems and therefore would be easier to qualify).

I have many thoughts about how CSP in combination with other commodity and conservation program changes (and WTO green box improvements) could yield a workable long-term green payments alternative to the current hodge-podge of program and market distortions, but that is for another time….

By Ferd Hoefner
Policy Director
Sustainable Agriculture Coalition
Washington, D.C.