FAYETTEVILLE, Ark. – Unless Congress passes a new farm bill, America’s farmers will find themselves working with a law passed in 1949.

The current law, the 2008 farm bill, expires Sept. 30, and with it:
• Initiatives for agricultural research and extension
• Nutrition programs
• Price and income supports to production agriculture and the nutrition programs
• Assistance to rural communities
• Conservation programs
• Marketing and trade of U.S. farm products
• Financing for farmers, agribusinesses, and communities.

It’s the latest in a line of temporary bills passed since the last permanent farm bill, the Agricultural Act of 1949 (See: http://bit.ly/12Wi6VO).

A product of a much different social and economic landscape, the 1949 law would, among other things, give the secretary of agriculture the power to set price controls and production limits for farmers.

“If no new legislation is passed, then the default legislation would be the 1949 farm bill with budget busting-levels of support, something that neither taxpayers nor consumers would tolerate,” said Eric Wailes, who holds the L.C. Carter Chair for Agricultural Economics and Agribusiness for the University of Arkansas System Division of Agriculture.

Two chambers, two approaches

Early last month, the Senate passed its version of the Farm Bill – a nearly $1 trillion package that includes $89 billion for crop insurance and $41.3 billion for commodity programs, calculated over 10 years. The lion’s share, $760.5 billion is marked for food stamps and nutrition programs.

The House version, HR1947, was defeated June 20. On Tuesday, House leaders voted to separate the farm and nutrition components of the legislation according to “CQ Roll Call.”

“The primary concern with this approach is that there are not enough representatives in either the House or the Senate who come from farming districts or states to pass needed farm program legislation,” he said, which could leave “the farm sector more vulnerable to even larger budget cuts or even worse, result in the elimination of any safety net.

“A second consideration is that the Senate already has a unified bill ready for conference, and it would be unclear how the House would proceed to reconcile with the Senate if they had two separate pieces of legislation,” he said.

Both bills shift in favor of risk management and greater reliance on the market and crop insurance, he said, adding that “the price and revenue safety nets provided by either bill would provide support if prices of Arkansas crops should fall below cost of production.”

Legislation which provides a safety net and stability to Arkansas agriculture is critically important. This sector contributes $16 billion in value added annually to the state economy and accounts for approximately one of every six jobs in the state. (See: http://bit.ly/12VLgUN)

Reduced payments

Federal spending on price and income support for U.S. farmers in 2010 and 2011 averaged $5.8 billion under the 2008 farm bill. Annual safety net support for Arkansas farmers averaged $246 million for the same period, 4.2 percent of the national support. The safety net provisions of the 2008 legislation, including direct payments, counter-cyclical payments, and Average Crop Revenue Election will be eliminated in both the House and Senate’s proposed legislation.

An analysis by Wailes estimates that under the proposed legislation:
• Farmer payments would be triggered only when prices or the moving average returns fall below threshold levels.
• Federal support for 2014-2018 would decline by $7.4 billion in the Senate proposal, $7.9 billion under House proposal, according to CBO analysis.
• For Arkansas, the safety net would decline from $246 million (2010-11 average) to an estimated annual average of $95 million under HR 1947 and $81 million under Senate 954. Actual support levels will depend on future prices and crop revenues.

Arkansas crop producers traditionally have not purchased crop insurance in large part because much of the cropped area is irrigated, resulting in relatively stable yields. However, with less certain and lower levels of price and income support, participation in crop insurance will become increasingly important to manage the risks.

“The bottom line, is that there is a clear drop-off in terms of the level and certainty of support for crop agriculture in both bills compared to the 2008 farm bill,” Wailes said. “However, when prices fall below triggers under either proposed 2013 farm bills, the support is still relatively good, better under H.R.1947, however S. 954 has improved greatly since last year with an Adverse Market Payment program now available for rice.”

‘Wild West shootout’

Separating out the Supplemental Nutritional Assistance Program, formerly known as Food Stamps, “could have long-term consequences. In particular, it could ultimately lessen the political clout of the agriculture committees in both chambers,” said Harrison Pittman, director of the National Agricultural Law Center, a unit of the University of Arkansas System Division of Agriculture. This comes at a time when agriculture’s influence in Washington has been questioned. “We’re in a Wild West shootout right now on that one.”

The marriage between the food and nutrition component and farming end of the farm bill dates back to the early 1960s when “Farm Bloc” and food assistance advocates traded votes to enable food stamps, as well as wheat and cotton support programs to be adopted.

“There’s nervousness in the lending community,” Pittman said. “If more farmers have to pick up crop insurance to effectively manage risk, the farmers have money going out the door for crop insurance, and not nearly as much coming in through the safety net. And, crop insurance does not pay out every year, or even in most years. Lenders have got to be antsy about this in terms of collateralization of farm loans.”