Thursday, September 27, 2012

Will The Expiring Of The 2012 Farm Bill Affect Food Prices?

Congress ended the current legislative session last week with no new farm bill and no extension of the 2008 Farm Bill, which expires on Sept. 30. Legislative analysts say most farmers who participate in farm programs will likely feel no impact until early 2013, but that dairy programs would be affected sooner.

Most programs in the 2008 Farm Bill will continue to operate without a new bill, including crop insurance, the majority of conservation programs and the Supplemental Nutrition Assistance Program, or food stamps. Commodity programs also will not be affected until early next year, when winter wheat is harvested, as the programs cover all 2012 crops, said Rayne Pegg, manager of the California Farm Bureau Federation Federal Policy Division.

She noted that a six-month continuing resolution passed by the House and the Senate will extend funding to some critical programs and keep the government running through March. That legislation puts all regular appropriations bills for fiscal year 2013 on hold but contains an $8 billion increase in overall government spending and raises the U.S. Department of Agriculture budget authority to nearly $20.3 billion.

"Even though the farm bill expires at the end of the month, because of the continuing resolution, government programs continue to be funded without the reforms proposed in both the Senate and House versions of the farm bill," she said.

The 2012 Farm Bill has passed the Senate but is stalled in the House. Congress will not be in session in October, as lawmakers head back to their home districts to focus on the Nov. 6 elections. They are scheduled to return Nov. 13 for a post-election "lame-duck" session, which runs through the end of the year.

One program that will suffer on Sept. 30 is the Milk Income Loss Contract program, which compensates dairy farmers during times of low milk prices, according to the American Farm Bureau Federation. Dairy price support and export incentives expire on Dec. 31. MILC already began providing coverage at a reduced level on Sept. 1. Currently, the program offers farmers coverage at 34 percent of the difference between the target price and the actual price instead of the previous 45 percent. Also, the volume cap declined to 2.4 million pounds per dairy farmer from nearly 3 million pounds.

The Senate-passed farm bill and the one passed by the House Agriculture Committee both eliminate MILC in favor of a new, voluntary margin insurance program. A one-year extension of the current farm bill would provide no payments for the rest of the year. Other programs that could be hurt in the absence of a new farm bill include those providing export credit guarantees, facilities credit guarantees, export market promotion, dairy export support and technical assistance for specialty crops, according to the Congressional Research Service.

While most rural development programs will not be affected by expiration of the farm bill, the Rural Microentrepreneur Assistance Program, Value-Added Product Development grants, Rural Energy for America Program and funding for pending rural development loan and grant applications will expire, the CRS said. Pegg said there is still hope that Congress will pick up where it left off and pass a farm bill during the lame-duck session. But lawmakers have much on their plate when they return after the election, including dealing with the looming "fiscal cliff" of expiring tax provisions, automatic spending cuts and extension of the debt ceiling.

Some Washington observers say passage of a five-year farm bill may be a long shot this year because the full House has yet to approve its version of the bill. Even after this hurdle, the Senate and House bills will still need to be reconciled in a conference committee before both houses can vote on the final version.

Pegg said how much Congress is willing to do during the lame-duck session will depend on who wins the election, but she thinks chances of passing a new farm bill could be greater because so many farmers are hurting from impacts of this year's drought and need a disaster relief program to help them. Drought assistance is included in both the House and Senate farm bills, she noted.

Although delays in passing a new farm bill are not uncommon, Pegg said it is rare for Congress to let one expire without an extension. She said the urgency in finalizing a new, comprehensive bill this year rather than extending the current one is because it will be much harder to achieve a five-year bill in 2013 with a new Congress and increasing budget uncertainties.

"We're going to have new members in Congress, some of whom don't even know what a farm bill does," Pegg said. "They're going to be starting from scratch and negotiating on some very complicated issues."

If no action is taken on a new farm bill or an extension of the 2008 law by next spring, crop and dairy price supports could revert to "permanent law" that dates back to provisions from 1938 and 1949, potentially limiting plantings and raising prices paid to farmers who participate in commodity programs. Support prices for dairy, for example, would be $38.63 per hundredweight and wheat would be $13.58 per bushel, according to the CRS.

"It adds to the argument for passing a bill this year," Pegg said, adding that such a scenario would cause confusion in agricultural markets. - Ching Lee, Ag Alert 

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