Farm Bill Update
Debate over the 2007 Farm Bill continues among lawmakers, farm organizations, and other interested parties amidst the looming expiration of the 2002 Farm Bill on September 30, 2007. Two of the major driving forces of the debate are the current status of the farm economy and the budget situation. On the heals of higher grain prices, USDA recently boosted their 2007 U.S. net farm income estimate to $66.6 billion, up $6 billion from 2006, and $9 billion above the 1997-2006 average. This observation, coupled with the budget outlook is presenting a challenge to farm organizations in maintaining an "adequate" level of funding to support existing and proposed new farm bill programs. The dollars that will be available for the 2007 farm bill are affected considerably by the March 2007 Congressional Budget Office's (CBO's) budget baseline. This baseline is a projection of future program costs, assuming a continuation of current farm bill policies under expected market conditions. Higher grain prices anticipated throughout the period have significantly affected the March 2007 baseline and thus potential funding available for the 2007 farm bill. According to the baseline, government commodity payments for the FY2008-FY2013 period are projected to total $42.4 billion, which is $30.4 billion less than the actual spending for commodity programs over the previous six years. Conservation payments though are projected to increase by $8 billion for the next six years compared to the FY2002-FY 2007 period. In aggregate, USDA is projecting total direct government payments for agriculture (including both commodity and conservation payments) to total $12.4 billion in 2007, down from $16.3 billion in 2006 and nearly 25% below the 2002-2006 average.
The March 2007 baseline is a starting point in deliberating funds that will be available for the next farm bill. This level this can be adjusted up by any additional funds that are contained in the FY 2008 budget resolution less any cuts that are required in budget reconciliation. Farm groups have been active on Capitol Hill during the past couple of months attempting to convince the budget committees to boost the baseline spending for agriculture, given the unique circumstances that lead to the drastic reduction in baseline funding. The recently passed Senate budget resolution allocated up to an additional $15 billion for farm bill spending (assuming other budget offsets can be identified), while the House version provides up to $20 billion in additional farm spending. The Senate and House Ag Committees will ultimately determine where these additional funds (assuming budget offsets are found) will be utilized, which according to the American Farm Bureau, could be for new programs such as an expanded energy title, payments for fruits and vegetables producers or a disaster title.
The other issue that has received a lot of attention amidst the farm bill debate has been the ongoing WTO/Doha trade negotiations where many member countries are calling on the U.S. and other developed countries to significantly reduce funding for trade distorting farm policies. Initially, it was expected that an agreement would completed before the September 30, 2007 expiration of the 2002 farm bill and the July 1, 2007 expiration of the Trade Promotion Authority -- a process that expedites congressional action on trade agreements. However, a stalemate continues with no apparent agreement within site as some member countries claim that proposed U.S. farm program concessions have not gone far enough to secure an agreement. Thus, while the administration is continuing discussion with the EU and other members, it appears that farm bill legislation will be drafted without the presence of a Doha trade agreement.
Other farm bill issues that continue to receive attention are:
- Replacing the current safety net programs that are triggered by lower prices, with a revenue assurance based program – various variations of this approach are supported by the USDA, National Corn Growers Association, and American Farmland Trust
- The payment limitations debate – the USDA proposes to eliminate farm payments to individuals who exceed $200,000 of adjusted gross income. The Senate budget resolution also contained an amendment that was withdrawn to limit farm payments to a $250,000 annual level per person.
- The feed vs fuel debate amidst higher grain prices induced by the new and growing demand for corn and soybeans for renewable fuels.
- The role of specialty crops in the farm bill debate with most of the concern over whether or not producers who plant fruit and vegetables on program base acres will continue to receive farm bill benefits.
- The effects of livestock market concentration on producer prices.
Recently, Secretary Johanns indicated that congressional language for the administration's farm bill proposals is being drafted and will be offered as legislation in the coming weeks. A Congressional Research Service (CRS) review of USDA's and other current farm bill proposals/issues can be accessed online at: www.nationalaglawcenter.org/assets/crs/RL33934.pdf
One proposal that just surfaced this week was offered by the Cato Institute which calls for a buyout
of all farm programs. You can view this proposal,
Hearings will continue this spring and summer, with leadership attempting to draft the 2007 farm bill prior to the August 2007 recess, with full congressional approval prior to the end of September. It remains to be seen if Congress can move this quickly on this complicated and comprehensive legislation or simply pass some sort of extension prior to the September 30th deadline.
For More Information
For additional information about the 2007 Farm Bill from the University of Kentucky Agricultural Economics Department, please contact one of our Farm Bill Contacts.