Make way for the 2014 farm bill
It is hard to believe, but the next farm bill may be less than 10 days away from becoming law, even though only four and maybe only two lawmakers know what really is in it. In what has been the strangest approach ever to writing farm policy, many of the details could be revealed within hours, if the House-Senate Conference Committee members are given a copy of what they will be voting on Thursday, or more likely on Friday. Actually, the delivery of the copies of the proposed farm bill to the members could be under guard with directions to not share the information until the committee leaders have the opportunity to reveal their handiwork.
What has gotten us to this point? That is answered by University of Illinois ag economist Nick Paulsen, and colleague Jonathan Coppess, who managed the farm bill construction in the Senate Agriculture Committee until it was approved last fall. Paulsen and Coppess, now at the U of IL, say the legislation was driven by the need to cut spending from the 2008 farm bill. They say, “Both versions are credited with achieving savings relative to existing programs via changes to the Commodity, Nutrition, and Conservation, and Crop Insurance Titles. These proposed changes suggest a shift in farm program focus from income supports to risk management where the federal crop insurance program serves as the main safety net for crop producers.”
Alternatives needing to be compromised:
Coppess, an insider when it comes to the Senate’s farm bill efforts, says there are major differences in the versions that have now been merged into the Conference Committee Report that will be voted on this week:
- Existing commodity programs – direct and counter-cyclical, ACRE, and SURE – are eliminated in both farm bill proposals.
- The Senate version replaces these programs with the combination of both price supports and a shallow-loss revenue program.
- The House version would offer producers the choice between price supports with updated target prices for eligible commodities, or a county-level shallow-loss revenue program.
- In addition, a new crop insurance program – the Supplemental Coverage Option - is created in both versions.
- The price support programs in the Senate and House farm bills differ along two important dimensions.
- The Senate price support program bases payments on historical base acreage and sets the reference price levels equal to a percentage of the rolling average of national marketing year average prices. Thus, reference prices would adjust with the market.
- In contrast, the House price support program would continue to use fixed price support levels and base payments on planted acreage. Thus, price support payments would be tied to, or “coupled” with, farmers’ production decisions.
- The shallow loss revenue programs base their guarantees on Olympic averages of recent yields and national cash prices, and have payment limits and eligibility rules based on adjusted gross income.
- In contrast, supplemental insurance coverage bases its guarantee on insurance (futures) prices and trend yields and will not be subject to payment limitations, but will require the producer to pay a subsidized portion of the premium.
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