2008 farm bill logoSince 1933, the US government has played a significant role in farm policy, agricultural markets, and public nutrition through the passage of successive farm bills.  The original Farm Bill of 1933 was controversial and the Farm Bill remains controversial today.  The current congress failed to reach a compromise between farm bills passed by the Senate and the House of Representatives, and the 2008 Farm Bill expired as of September 2013.  In the current climate of partisan political gridlock, passage of a compromise bill in the near term is highly unlikely.  One organization that works on behalf of family farmers sums up who will be impacted by the next Farm Bill this way: The Farm Bill affects everyone who eats, sells, buys or grows food. (http://www.farmaid.org/site/c.qlI5IhNVJsE/b.2739785/apps/s/content.asp?ct=3941443)

Given the deadlock in Congress over the Farm Bill, it is timely to examine what a failure to pass a farm bill means to various stakeholders.  This blog addresses the following questions related to the Farm Bill and our lack of a current one:

  • What are Farm Bills?
  • Why have Farm bills been politically divisive and controversial?
  • What groups will a new Farm Bill impact and how?

History of the Farm Bill

Congress passed the first farm bill in 1933 as one of the social safety net programs that Franklin Roosevelt’s New Deal created, (http://en.wikipedia.org/wiki/United_States_farm_bill)  During the Great Depression falling prices for crops were driving farmers to lose their family farms such that farm owners as well as tenants and sharecroppers were joining the growing ranks of the displaced and underemployed and, as a result of this suffering, causing considerable social unrest.  For the first time in US History, the 1933 bill called the Agriculture Adjustment Act (AAA) authorized the Department of Agriculture to do three things.  First, the AAA provided payments to farmers to reduce their existing acreage planted in specific crops.  Second, it authorized the government to buy excess grain from farmers to reduce surpluses and shore up demand to stabilize prices. Third, it created the precursor to food stamps to alleviate hunger among those in need. The money to fund these subsidies was to be generated through a tax on companies that processed farm products.  The full title of the 1933 Farm Bill was:

An Act to relieve the existing national economic emergency by increasing agricultural purchasing power, to raise revenue for extraordinary expenses incurred by reason of such emergency, to provide emergency relief with respect to agricultural indebtedness, to provide for the orderly liquidation of joint-stock land banks, and for other purposes. (http://en.wikipedia.org/wiki/Agricultural_Adjustment_Act)

Each Farm bill since 1933 has contained a requirement for revision and reauthorization of the components within the bill called “titles”, thus Farm Bills come up for reauthorization approximately every 5 years.  Farm Bills have evolved to set policy and regulations for all the USDA policies, funding programs related to supplemental nutrition, land payments, crop insurance, environmental practices, some international trade, and research.  Different elements of the Farm Bill programs have supporters and opponents, but the most contentious is probably what has grown to be the most costly of the titles, the Supplemental Nutrition Assistance Program (SNAP, formerly food stamp program).  SNAP funding accounted for 68% of the 2008 Farm Bill.   Under Obama’s 2009 Economic Recovery Act provisions, SNAP benefits were temporarily extended and funding increased such that 15% of Americans currently receives some SNAP benefits.

The Previous Farm bill, The Food, Conservation, and Energy Act of 2008 expired at the end of September of 2013.  Although the Senate and the House of Representatives each passed a version of a new Farm Bill, the two versions have significant differences, and the two chambers so far have failed to reach a compromise to resolve the differences.  At issue is how deep to cut Farm Bill Programs to help reduce the federal budget deficit.

Both versions propose cuts to SNAP over the coming 10 years.  However, the Senate’s version specifies a $4 billion cut while the House version specifies a much larger reduction of $39 billion.    (http://en.wikipedia.org/wiki/Agriculture_Reform, _Food, _and_Jobs_Act_of_2013_(S. _954; _113th_Congress)  It is interesting to note that the reduction proposed by the House would return SNAP benefits and costs to levels not seen since the reductions that were part of Welfare Reform and budget balancing in the late 1990s reached under the leadership of President Bill Clinton and the then Speaker of the House, Newt Gingrich.  (See Figure 1)

Figure 1:  Trends in the Cost of Food Stamps

Slide1:  Trends in the Cost of Food Stamps

Other than SNAP what else can’t Congress agree on?

The two chambers of Congress have narrowed their differences but critical issues remain unresolved.  Among these remaining differences is whether to base program support on whatever acres a farmer or landowner decides to plant in the future or on some historical base, or on some combination of the two.  How or whether this issue is resolved will have significant impact on continuing efforts to protect the environment and available natural resources as well as on world trade litigation.

A second issue requiring resolution is how high or low to set government “target” prices for various commodities.  Such targets determine when payments under certain commodity programs will be triggered.  A third issue is whether, given the myriad options that will be in the final bill, a farmer should be able to choose all options, and get paid whenever any of them trigger payments, or should be forced to choose a particular option and have access only to it over the next five years.  (http://beyondthefarmbill.org/, The Institute of Agriculture and Trade Policy)

Impacts on stakeholders: the poor

Both the expiration of the 2009 temporary extension and the failure of Congress to pass a Farm Bill have led to a reduction in SNAP payments to 47 M Americans, that began in November, 2013. (http://www.usatoday.com/story/news/nation/2013/11/01/food-stamps-snap-cuts-farm-bill/3346341)  It is sobering to consider the long-term impacts of more Americans going hungry more often.  Hungry people cause social unrest as experienced in the Great Depression and as seen outside Europe and the US more recently.  It remains to be seen whether the US will experience its own social unrest.

Impacts on stakeholders: farmers

Subsidies to farms growing commodity program crops (corn, cotton, wheat, rice and soybeans are heavily favored) have been funded through preceding farm bills.  Such subsidies represented the second highest funded title in the 2008 farm bill at approximately 12% of total spending.  Without a new Farm bill, many of the current Farm Bill programs revert back to 1949 permanent law as of January 1.  At that time, farmers weren’t supported with direct federal subsidies, but instead with several market tools that provided a price floor for many of the primary commodities.  Without a Farm Bill at all, government price supports will become even more confusing.  Some crops will no longer qualify, and commodity prices will become less stable than they currently are.

Many farm commodities are currently trading at higher-than-historical prices and the reversion to previous policies won’t impact these crops. The current price of corn is above the support price of $5.70. Wheat, on the other hand, is trading high, but is significantly below the pre-farm bill support price of $13.13. Permanent law would therefore require USDA to purchase U.S. wheat at $13.13, thereby keeping wheat prices at that high level.  Soybeans, as one example, weren’t grown much in the United States 60 years ago and were not considered a program crop. There will be no USDA support for soybeans without a Farm Bill.

Farmers will have an incentive to plant crops that receive price supports—wheat, rice, corn, sorghum, barley, oats and upland cotton, with particularly strong incentives for wheat and rice. Furthermore, three of the conditions that allowed price support policies to be effective in past decades—supply management, grain reserves and limited international trading of agricultural commodities—are no longer relevant.  At TerViva, we are working with farmers and agricultural companies to introduce a new oilseed tree crop, pongamia, on a commercially viable scale.  Public policies that add to farmers’ financial incentives to only plant a limited number of current commodities act as impediments to the adoption of new crops such as pongamia.

Impact on stakeholders:  consumers

Consumers will pay higher prices for various food products if federal agricultural stabilization policies disappear.  For example, the government will have to buy milk at higher than market prices, and thus milk prices to consumers could rise from $6/gal to $8/gal.  Disaster relief support for cattle ranchers has expired, therefore beef eaters could see higher beef prices following natural disasters such as droughts and unseasonal cold weather that kill herds.  (http://www.iatp.org/blog/201209/what-an-expiring-farm-bill-means-to-you)

Even though farm bill programs are focused on only a few commodities that people consume directly, the ripple effects are likely to cause many other food prices to increase.  Furthermore, high US prices will drive the food industry to seek global alternatives at lower prices. (http://www.iatp.org/blog/201209/what-an-expiring-farm-bill-means-to-you – sthash.JAsDIC3H.dpuf)

Impact on stakeholders: the environment

The adoption of conservation practices on private lands has been one of the quiet success stories of agricultural policy over the past 25 years.  Farmers have taken advantage of Farm Bill’s programs for conservation projects on farmland, particularly the Conservation Reserve Program (CRP). The CRP currently protects about 31 million acres of environmentally sensitive agricultural land. Without a Farm Bill, the USDA will no longer have authority and funding capacity to contract with farmers for conservation projects. (http://www.usnews.com/news/articles/2013/10/28/why-you-should-care-about-the-farm-bill) The absence of a farm bill is likely to result in greater soil erosion and poorer water quality.

Summary

A 1985 USDA study (http://naldc.nal.usda.gov/download/CAT85844031/PDF) on the impacts of a return to permanent law (i.e. when a Farm Bill expires) predicted an highly unstable agricultural economy.  Such unpredictability and fluctuations will hurt everyone who consumes, produces, or grows food and other agricultural products whether they live in cities or rural areas.  Informed citizens on both sides of the political spectrum agree that we the government’s role in agricultural policy requires significant attention.  However, given the current contentious political climate, it is unlikely we will achieve consensus in the foreseeable future. Congress might consider taking a lesson from early stage entrepreneurial companies like TerViva for whom doing nothing is often significantly worse than doing something that is flawed.  Flawed programs can be revised and improved.  No action at all is likely to lead to serious disruption of US agriculture.

For more information, see:

www.fas.org/sgp/crs/misc/R43076.pdf‎http://www.iatp.org/blog/201209/what-an-expiring-farm-bill-means-to-you

http://www.usnews.com/news/articles/2013/10/28/why-you-should-care-about-the-farm-bill

http://www.fns.usda.gov/pd/snapsummary.htm

US Farm Bill Void: Does it Matter?

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