Insight Farm Bill Indecision: Affecting Both Producers and Consumers

In what seems to be a never-ending debate, the newest version of the farm bill, which includes within its scope national commodity crop, nutrition, conservation, and forestry policy, has yet to achieve any real level of bipartisan support in Washington. Both the Senate and House have proposed different solutions to the perceived injustice behind the backbone of the commodity title since 1996 – namely, the direct payment program based on base acreage wherefrom producers receive direct payments even if that acreage is not planted in the commodity crop for which payments are received. Further complicating the legislative landscape between both political parties is the nutritional title with the emotional, social economic, and political undertones behind debt reduction, food stamp abuse or fraud, and the growing welfare state of the nation.

The indecisiveness by Congress with regards to the commodity title and a dependable new program may have negative short and long-term consequences for producers and consumers.

The Proposals

The Senate Proposal, commonly referred to as Agricultural Risk Coverage, is tied to revenues and looks to provide a safety net for producers (payments made to farmers only when actual losses are experienced off of a market-based historical benchmark) without distorting actual planting decisions. The House has proposed a different scheme called Price Loss Coverage, which is aimed at being a function of a farmer’s real risks and needs, or tied to actual production cost and target reference prices and making up the difference to the producer. Each proposal has its own set of strengths and weaknesses. Both the Senate and the House seem only to agree to repeal the direct payment and counter-cyclical payment programs (as promulgated in the Food, Conservation, and Energy Act of 2008) currently in operation.

The Risks

For producers, the greatest risk lies in the unknown. What will the new program look like and how will it impact decisions like crop selection and rotation strategies, existing market conditions, and production stability? For consumers, non-action by the January 1 deadline will trigger a funding formula from the 1940s which will change the fundamental market landscape and many commentators believe will cause commodity crop prices for corn, soybeans, and wheat to spike. If these fears are realized, the net effect may be dramatic increases to the price of feed for livestock and basic ingredients to much of our food supply. Whether directly or indirectly, continued inaction in Washington with respect to the farm bill may negatively impact everyone.

For more information contact a member of our Business group or follow the ongoing debate by visiting the Senate Committee on Agriculture Nutrition & Forestry, or the House Committee on Agriculture.