U.S. farm policy could soon revert to 1949 rules

Mired in a debate to keep the government’s lights on, Congressional inaction on agricultural policy could lead to real pain for farmers and consumers.

While leaders in Congress push towards an Oct. 1 deadline to fund the federal government, it appears that date will also signal another problematic issue involving federal farm policy.

The Farm Bill will technically expire on Oct. 1 and with Washington, D.C. focused on overall spending and the looming debt limit, there is little to no hope that agricultural interests will become a top action item on the agenda any time soon.

Agriculture is a $16 billion industry in Arkansas and accounts for nearly 25% of the state’s economy. One out of every six jobs in Arkansas is tied, either directly or indirectly, to agriculture.

Earlier this year, the Senate passed a comprehensive Farm Bill that had the backing of the state’s major agricultural interests, but the House went a different route. After a failed vote on a comprehensive bill, the House split the Food Stamp program out of the larger Farm Bill and eventually passed both measures on sharply divided party line votes.

The contentious issue involving the Food Stamp program, also known as the Supplemental Nutrition Assistance Program or SNAP, has been the subject of heated debate. The House wants to cut $40 billion from the program over the next 10 years, while the Senate has passed legislation to slice $4.5 billion in a much shorter time period.

With the House separating out the food stamp portion of the Farm Bill for the first time in decades, it now has two bills that must be considered in tandem with a comprehensive Senate counterpart.

The U.S. Senate has appointed conferrees to deal with the Farm Bill reconciliation; however, the House has yet to take a similar action. With the deadline pending on Tuesday, even if House leadership were to quickly appoint conferees, there is little chance that an agreement could be worked out with the current time constraints and other major issues at the center of debate.

THE 1949 WAY
So what will be the immediate and longer-term implications of an expired Farm Bill?

American farm policy is set to revert to a 1949 law, which has always acted as an incentive for Congress to produce new five-year farm bills or extensions of existing policy.

For instance, there was no policy for soybeans in the 1949 law, which means there would be no governance of this commodity if a new Farm Bill isn’t installed. The 1949 law was created without direct or counter-cyclical payments for commodities, so those programs which subsidize farmers would go away. Also, the 1949 law has extremely high loan rates for certain crops, such as wheat, corn and cotton. The effect could be much higher prices for those commodities and the eventual products in which they appear as ingredients or raw materials.

Despite these concerns over spiking commodity prices, most observers believe it would take a quarter or longer before those effects would filter into the markets. Therefore, it may be the first of the year before bread prices would create sticker shock or milk prices might skyrocket.

By some estimates, the cost of dairy price supports could eventually double – a notion often referred to as “the dairy cliff” – which raises the possibility that milk prices could increase to $8 a gallon.

Ironically, the Food Stamp program will automatically be extended with or without a Farm Bill or a continuing resolution to keep the government running. When SNAP was created, it was defined as an entitlement – like Social Security or Medicare – and maintains its funding due to its status.

The U.S. Department of Agriculture has been tight-lipped about its plans for how the lack of a Farm Bill could impact its reach, which includes funding for county extension offices and other local support services.

Certain conservation programs are expected to shut down without a new Farm Bill with respect to any new enrollments. So will agricultural export programs that include credit guarantees, market promotion and specialty crop marketing. Finally, authority to replenish the Bill Emerson Humanitarian Trust, a backstop used to meet unanticipated humanitarian food aid needs, will end on Oct. 1.

OPTIONS FOR A SOLUTION
According to this Reuters report, analysts see four possible outcomes for farm bill negotiations: legislative success, budgetary cherry-picking, more temporizing, or a statutory train wreck. Any of them could occur, say analysts. For now, however, the next move remains a mystery.

Arkansas will have some players in a Farm Bill solution. U.S. Sen. Mark Pryor, D-Ark., chairs the Agriculture Appropriations Committee. He’s expressed frustration with the lack of bipartisanship in the House to resolve the issue, but with his status in the appropriations process Pryor will likely hold sway with the eventual outcome.

U.S. Sen. John Boozman, R-Ark.,, sits on the Senate Agriculture Committee, and has been appointed as a conferree when the House names its appointments.

U.S. Rep. Rick Crawford, R-Jonesboro, who sits on the House Agriculture Committee, has said the split-bill approach is not his “first choice.” He’s angling to be a conferree when House leadership makes its appointments to a conference committee to negotiate a compromise.

U.S. Rep. Tom Cotton, R-Dardanelle, – who led the charge to split the House bills between the commodity portion and the SNAP portion – is expected to have some influence in the debate over moving a Farm Bill forward, especially with his high-profile role among a rebellious wing in the House Republican caucus.

He was the only Arkansas Congressional member to vote against the original House Farm Bill that failed and was very active in media outlets expressing his viewpoint on the need for reforms to long-standing agricultural policy.