Dr. Jody CampicheAssistant Professor & Extension Economist
Agricultural PolicyOklahoma State University
November 8, 2011
Farm Bill Update
Larry D. Sanders
Jim Novak
“Ag policy has a very, very, long history. Current ag policy is driven by budget and politics. Reality and economic facts matter, but only in as far as it affects those who have political influence and can gain from reality and/or economics.”
J.L. Novak, Auburn University
Deficit Reduction Proposals
Farm Bill Negotiations
Conclusions
Outline
Deficit Reduction Proposals
Deficit Reduction Proposals
Budget…
Debt CommissionHouse BudgetBiden GroupGang of SixMcConnell Proposal
Simpson-Bowles President’s Deficit Commission (12/1/10)•Reduces deficits by $3.9 trillion over 9 years• $15 billion in cuts to mandatory ag programs with $10 billion to deficit reduction and $5 billion directed to extend the ag disaster relief fund
President Obama’s framework deficit reduction (4/13/11)• Framework for $4 trillion in deficit reduction over 12 years•Mentions cuts in mandatory program ag subsidies, but not specific programs or amounts
President’s 2012 Budget (CBO score released on 4/15/11)• Increases deficits by $2.8 trillion over 10 years•Cuts $2.5 billion in payments to “wealthy farmers”
Deficit Reduction Proposals
House (Ryan Budget) passed budget (4/15/11)•Reduces deficits by $1.6 trillion over 10 years•$48 billion in cuts to mandatory ag programs, with $12 billion from commodity programs, $18 billion from crop insurance, and $18 billion from conservation programs
RSC Budget Proposal (4/20/11)•Reduces mandatory spending by $1.9 trillion over 10 years•Eliminates direct payments, reduces premium subsidy for crop insurance, no new enrollment in CSP and CRP, eliminate MAP, and Wool and Mohair program
Deficit Reduction Proposals
House Democrat budget (5/25/11)• Reduces the deficit by $1.2 trillion more than the President’s
budget• $20 billion in cuts to mandatory ag programs
Biden Group (6/2011)• Farm subsidies mentioned frequently as target for cuts ranging
from $34 to $45 billion• Direct Payments and Crop Insurance will absorb most of the cuts
“Gang of Six” (7/2011)• Reduce deficits up to $4 trillion over 10 years • $11 billion in cuts to mandatory agriculture programs• No additional dollars directed to extend SURE• Ag committees to determine $11 billion in cuts • Protects SNAP
Deficit Reduction Proposals
Senator Conrad’s budget (7/20/11)•Reduces deficits by $4 trillion over 10 years•$11 billion in cuts to mandatory agriculture programs. Agriculture committees to determine $11 billion in cuts during Farm Bill
Reid Plan (7/2011)•Reduces deficits by $2.7 trillion over 10 years•$11 billion in cuts to mandatory agriculture programs by reducing the payment rate from 85% of base acres to 59% of base acres
Deficit Reduction Proposals
Farm Bill Negotiations
Farm Bill Process
Traditional process:
DC hearings, field hearings, move legislation in 2012
Not currently happening
Current Reality:
Expedited process under the context of the Budget Control Act of 2011 Changed the traditional approach to the farm bill
No time for problem framing, debate, or public input
37 Provisions/Programs in the 2008 Farm Bill No Baseline Funding after 2012
8 Energy 5 Conservation 5 Nutrition5 Hort. & Organic3 Rural Development3 Research2 Trade2 Misc.1 Farm Commodity1 Forestry1 Livestock1 Ag Disaster Assistance
FSA money to implement farm bill
WRP
GRP
Obamaproposes $33 billion in cuts to farm programs
Sen. Conrad (D-NE)Reform DCP, ACRE & disaster aid
NFUFarmer Owned Reserve
Peterson-Simpson Bipartisan Dairy bill
Lugar Farming Flexibility Act
Many Proposals . . .
National Sustainable Ag Coalition preserve conservation and hunger programs, proportional cuts
in farm programs, ending direct payments
Organic producers increase mandatory spending for organics, including research
& data collection
Rural development proponents preserve/strengthen rural programs
American Farmland Trust Strategic conservation initiatives, consolidate conservation
programs, subsidies only for a loss
Many Proposals…
Obama’s Economic Growth and Deficit Reduction Plan
$33 billion in cuts to agriculture
Eliminate Direct Payments
Crop Insurance Cut another $200 million/year from insurance companies Farmer premium subsidies for the 50% catastrophic level
would not change Subsidies on higher levels of coverage would be reduced
Conservation Cut by $200 million a year
Better targeting conservation funding to the most cost-effective and environmentally beneficial programs and practices
National Corn Growers Association ADAP
• Replace ACRE, CCP, and Direct Payments
Brown-Thune-Durbin-LugarAggregate Risk & Revenue Management
Program ARRM Replace ACRE, DCP, and SURE
No direct payments, CCP payments, or SURE
Use of harvest price instead of national avg marketing year price Payments could be made earlier
Less restrictive signature requirements Only owner signature required
Eligibility trigger by CRD instead of state
Payment not limited to base acres
Can opt in/out each year
Expecting a significant reduction in direct payments and possibly CCP payments
New revenue based insurance program to replace payment-based farm bill provisionsArea-wide revenue product delivered through crop
insurance Protect against shallow lossesRide on top of existing crop insurance
Modified marketing loan to satisfy Brazil WTO case
National Cotton Council Stacked Income Protection Plan
STAX
Farm Bill Process – Main Ideas Save/strengthen crop insurance / risk management options
Marketing Loan ( keep or eliminate)
Stronger CCP or no CCP
Direct Payments (reduced or eliminate)
Eliminate CSP along with WRP and GRP conservation programs
Reform ACRE
SURE (keep or eliminate)
Farm Bill Process – Main Ideas
Direct Payments repeatedly offered up for reductions
• Most WTO compliant and have a differential impact by crop, region, and generation
• Integrated with other program components
• simply eliminating Direct Payments has significant drawbacks, but they are likely gone…
Leading contender: modification of ACRE
May or may not replace CCP totally
May also be coupled with reduced DP (if DP not totally eliminated)
Several proposals for changing the ACRE program under the 2012 bill
Farm Bill Process – Main Ideas
Paid on a state-level trigger
Based on state and farm revenue shortfall using national average marketing year price
• If both are not triggered the producer will not get paid
Producers enrolling in ACRE receive:• No CCP payments• Direct payments reduced by 20%• Marketing loans reduced by 30%
ACRE Refresher
Payment made on planted acres (up the # of base acres)
Producer may not get a payment even if state eligible
State ACRE payment guarantee can’t increase/decrease by more than 10% from previous year
Payment made at end of marketing year
ACRE Refresher
Shallow Loss Revenue ProgramRecognize diversity in operations across the
stateDifferent buy up levels of crop insuranceDifferent risk profiles for different crops
Issues with the loss thresholdCorn and soybeans have more shallow losses
This can trigger payments often on many acresEats up the baseline
Can’t design one program to benefit everyone
Farm Bill Process – Main Ideas
Farm Bill Process – Main Ideas
With extreme drought and flooding, crop insurance is as important as ever
ACRE is too complicatedThe Supplemental Revenue Assistance
Payments (SURE) Program, along with 36 other programs, does not have baseline going forwardSURE likely gone
AGI limits are a major issue
Cotton payment program is also a major issueHesitant to have a separate program for cotton, but
it is being considered…
STAX is still on the tableMay not solve WTO issuesPayments from this program are mostly from RMA
Get around payment limits and AGI thresholdPrograms for other crops are subject to this
Farm Bill Process – Main Ideas
Crop Insurance seems to be safe for now
Other disaster programs (LFP, LIP, etc…) will probably be continued to the drought issue
Conservation will see reductionsFighting to protect EQIPReductions in CSPReductions in CRP (lower acreage cap)
Nutrition will be cut but will not really take as much of a hit as commodity programs…
Farm Bill Process – Main Ideas
Main Goal of Chairman Lucas for the 2012 Farm Bill
Wants producers to have a choice to best address their risk needs
Currently working on a package but many details need to be worked out…
Commodity Program Options
1) Revenue Guarantee Program (modification of ACRE)
2) Counter-Cyclical Program - increase current target pricesa. Basic program – free participationb. Expanded program - option to purchase additional area
based deductible coverage (similar to GRIP)
3) Possibly a cotton program
Producers would be able to enroll by crop (instead of by farm)
2012 Farm Bill – Latest Developments
May be close to finalizing a farm bill proposal to send to the super committee
$23 billion cut in agriculture programs over 10 years as part of the effort to cut the federal deficit Ag committee leaders told the super committee
that such a cut would required rewriting farm programs
Planned to send detailed proposal by Nov. 1 Missed this deadline
2012 Farm Bill – Latest Developments
Coalition of 27 House members has sent the super committee leaders a letter urging them not to consider the proposal
Goes beyond its mandate of deficit reduction and authorizes new, complicated agriculture programs that have not been the subject to congressional review
Super Committee should find efficiencies within existing programs
If the ag committees believe that these cuts will require a fundamental redesign of ag programs, those committees can and should move legislation through regular order
2012 Farm Bill – Latest Developments
Conclusions
Conclusions
2012 Farm bill is coming together
Risk management is a key priority
Still have many details to work out…
We still don’t know what the super committee will decide…
Jody CampicheAssistant Professor & Extension Economist
Ag Policy528 Ag Hall
Stillwater, [email protected]
405-744-9811
Questions?