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Ag economists chart possible farm bill paths
By MATTHEW D. ERNST
Missouri Correspondent

WEST LAFAYETTE, Ind. — As uncertainty persists over the path to a new farm bill, three veteran farm policy watchers explained differences between the U.S. House and Senate bills and charted where the legislation might go, in a webinar broadcast by Purdue University last week.

“I wouldn’t necessarily use the word ‘uncharted,’ but we’re certainly not in normal waters at this time, with no nutrition title, and certainly what’s going on with permanent law in the House bill,” said Carl Zulauf, agricultural economist from The Ohio State University.
He teamed up with Gary Schnitkey from the University of Illinois and Purdue University’s Michael Boehlje to provide analysis on the differences between the House and Senate bills and to forecast possible paths forward. Not only does the House farm bill lack a nutrition title, something Zulauf said he couldn’t recall happening since the 1970s, but the House version also replaces “permanent law.”

He explained each farm bill primarily amends the 1938 and 1949 Agricultural Acts; if a farm bill is not passed, farm policy reverts to the older legislation. Last year’s farm bill extension was passed to avoid reverting to the old laws, which do not provide for commodity programs.

Schnitkey said one of the questions he would pose to Congress, if given the opportunity, would be: “Do you really want to change permanent law?” Both he and Zulauf noted changing it would be a significant departure from past policy.

There are also significant differences in the commodity titles, with the Senate bill emphasizing revenue while the House bill emphasizes traditional price support programs.

“There is a major philosophical difference between the House and the Senate in how they are looking at the traditional, multiyear price support system – whether it should be oriented with the market, go up and down with market prices or whether it should be fixed by Congress at levels that vary among the commodities,” said Zulauf.

The panelists emphasized crop insurance is not dependent on the passage of a farm bill. “If there’s no farm bill, crop insurance programs stay the same. The same programs that existed in 2012-13 would exist in 2014,” said Schnitkey. “The bills that have passed House and Senate have not changed crop insurance subsidy levels that exist. All they’ve done is add Supplemental Coverage Options (SCOs).”

Those SCOs are another major difference in this year’s farm bill from past bills. “SCO is a big deal,” said Schnitkey. “My guess is, that if this product were available today, I would have had encouraged producers to at least consider, if not take, it.”
He said SCOs would have resulted in large payments from last year’s drought. “Farmers would pay an average of $10 per year for this policy. On average, it would make a $19 payment per year – obviously some years it won’t, others it will.”

Zulauf also explained the Senate and House versions differ sharply in dairy policy.

They originally had essentially the same provisions, but a provision for supply control was removed during House floor debate.
“This is a big philosophical difference, and it’s going to be a significant factor in whether or not (Congress) can reach agreement,” said Zulauf.

He and Schnitkey said there are four possible paths for Congress. The House and Senate could agree on a joint bill, but the Senate leadership and White House have indicated that bill must contain a nutrition title. Zulauf noted the challenge for passing such a bill in the House.

“It would take a very different coalition than what passed their farm bill. It would need to have a significant number of Democrats who would join with enough moderate Republicans to have a coalition that would pass such a farm bill. I would just simply raise the question, ‘Is that possible to happen?’” he asked.

The second and third paths involve the conference committee not coming to an agreement. In such a case, the current farm bill could be extended for another year. Or, as last year, the current farm bill could be modified and extended. Possible modifications, said the economists, could include reducing direct payments and adding a test for Adjusted Gross Income for subsidy recipients.

Finally, there remains the possibility that no farm bill could be passed and policy reverts to permanent law. “Neither Gary nor I think that has a very high probability of happening, but we also don’t think it is zero, given the situation that exists in terms of the difficulty of reaching agreement with respect to the legislation and the path that the farm bill has taken,” explained Zulauf.
Whatever path Congress takes, Boehlje noted, impacts on row crop producers and agricultural lenders will be real.

“These (commodity) alternatives are pretty darn complex,” he said.
“There’s going to be a lot of very, very, very complex decisions that are going to have to be made, and (producers and lenders) are going to have to allocate a fair amount of time to it.”
7/24/2013