Contours of new farm bill emerging

Paraphrasing the late Robert Frost, congressional lawmakers still have miles to go before putting finishing touches on the long-awaited farm bill.

In addition to reconciling the House and Senate versions of the bill in Conference Committee, lawmakers also must turn out a final bill that escapes President Bush’s veto pen.

All things considered, the two bills, each crafted by Democratic-controlled chambers, are not that different.

The House version of the bill contains a new fruit and vegetable title while the Senate version doesn’t.

Both bills also propose changes in farm payment limits, though the limits and timing of these payments vary.

The biggest difference between the House and Senate versions are reflected in commodity program payments, according to Jim Novak, an Alabama Cooperative Extension System economist and Auburn University professor of agricultural economics.

The House and Senate version both propose options that the producer can select in lieu of the current payment system, though the Senate version is considered more far-reaching, Novak says.

The new Average Crop Revenue (ACR) Program proposed by the Senate would combine both direct and counter-cyclical program payments. Farmers would have a choice between continuing to receive direct and counter-cyclical program payments or the ACR program. Under the ACR they would receive a guaranteed minimum $15 per base acre payment.

Moreover, during the 2010-12 crop years, a payment would be triggered if a crop’s statewide farm revenue falls below the state average.

Double dipping with the crop insurance program would not be allowed and the marketing loan program for these crops would be converted to a recourse loan, meaning that the loan must be paid back and the crop redeemed.

Under the House plan, known as the Revenue Counter-Cyclical Program, payments for a particular crop would be based on national revenue for a crop year between 2009 and 2012 during which revenue fell below 90 percent of national average revenue, which already has been set by law.

For a producer, payment would be based on 85 percent of the base acreage for eligible commodities. Under the House plan, direct payments and marketing loans would remain unaffected.

Would the House or Senate payment structure be more generous? That depends on how you look at it, Novak says.

While a revenue counter-cyclical program in general would be more generous than the current program, the Senate version of the ACR Program, which would be based on state revenue, could provide more risk protection. However, other considerations like the loan program and crop insurance would have to be factored into the picture, he says.

One thing is certain: Payment limitations proposed under both versions have re-energized debate about the future direction of farm policy.

Both bills eliminate payment limits on the marketing loan program, while retaining changes in direct and counter-cyclical program payment limits.

Currently, farmers with adjusted gross incomes of $2.5 million are eligible to receive commodity payments. However, under the Senate version of the farm bill, payment limitations eventually would be lowered to $1 million in 2009 and to $750,000 by 2010, except for growers for whom 67 percent of gross income is derived from farming.

The House version would impose a $1 million cap on adjusted gross income with no exceptions and a $500,000 cap unless more than 67 percent from of income was derived from farming.

Some evidence of Iowa Senator Tom Harkins intense lobbying for new conservation measures is reflected in the Senate version of the bill. However, based on his observations of the ensuing farm bill debate, Novak says the level of commitment reflected in the Senate version falls below what some lawmakers would have preferred, Novak says.

It’s still an open question what version eventually will emerge as the final bill.

A lot of this will depend on who makes up the Conference Committee, Novak says.

But even after a consensus bill emerges, there is no guarantee it will pass muster with President Bush.

“The big issue, I believe, with the Bush administration involves payment limits and a tax provision, which they may or may not be able to live with after the final version is drafted,” Novak says.

Budgetary considerations currently are governed by a pay-as-you-go system whereby authorizations to spend money must meet budget baseline limits.

To support the legislation, some lawmakers hoped to raise additional funds by imposing taxes on foreign corporations that previously do not pay taxes — a measure Bush vowed to oppose with a farm bill veto.

In the end, this tax proposal may be rescinded, Novak says. But this may also force lawmakers to forego funding for new conservation provisions and other measures outlined in the two bills.

Curiously, the long-running World Trade Organization dispute with Brazil and five West African nations over cotton subsidies was not addressed in the bill, although this issue ultimately could have far-reaching effects on U.S. farm policy.

“The prevailing view among lawmakers seems to be that we shouldn’t do anything and use what we currently have as a bargaining chip in future negotiations,” Novak says.

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