Farm Bill News & Political Update

Farm Bill
DTN reported yesterday that, “High world cotton prices have led to a big drop in government payments to cotton farmers, but that decrease in subsidies will make it difficult for Congress to make changes to resolve the World Trade Organization cotton case against the United States that Brazil won, House Agriculture Committee Chairman Collin Peterson said in a recent interview.
“‘There will be no baseline for cotton,’ said Peterson, D-Minn., referring to the congressional calculation of how much has been spent on specific government programs. Peterson has said that if he remains chairman, each farm sector will have to stick within its current budget if farmers are seeking changes in programs for specific crops. Depending on how the Congressional Budget Office views future cotton prices and whether they would go low enough to trigger countercyclical and marketing loan payments, Peterson’s statement could be an exaggeration, but it is likely that the baseline will be much lower.”

Mr. Hagstrom indicated that, “The direct payments that cotton growers still get whether prices are high or low could be tapped to finance a new cotton program, Peterson said. But he also noted that cotton farmers are some of the strongest defenders of the direct payments. When Peterson recently traveled to South Carolina, he noted, ‘Every cotton farmer that came up said leave [the cotton program] exactly as it is.’

“Cotton prices climbed to $1.14 per pound this month compared with 65.9 cents per pound in 2009 and a range of 30 cents to 65 cents between 1997 and 2009, according to the USDA Economic Research Service. When other commodity prices began rising several years ago, cotton prices remained relatively low, and cotton farmers were getting the bulk of the price-triggered subsidies.

“In an August report, ERS forecast that countercyclical payments would decrease by 79 percent from $1.17 billion in 2009 to $243 million in 2010 because cotton prices were high and projected that marketing loan benefits — including loan deficiency payments, marketing loan gains, and certificate exchange gains — would be $163 million in 2010, down 97 percent from 2009 levels because upland cotton producers had gotten almost 91 percent of those benefits in previous years.Government payments might be even lower than those August projections because cotton prices have continued to rise, an ERS analyst said today.”

In other budget related news, a Congressional Research Report from September 29 by Jim Monke titled, “Previewing the Next Farm Bill: Unfunded and Early-Expiring Provisions,” stated that, “The Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) authorizes most federal farm and food policies. It also provides the mandatory funding for many farm bill programs, including the farm commodity programs and some nutrition, conservation, research, bioenergy, and rural development programs. Funding to write the next farm bill will be based on the baseline projection of the cost of these farm bill programs by the Congressional Budget Office (CBO), and on varying budgetary assumptions about whether programs will continue.

“Some farm bill programs have baseline beyond the end of the 2008 farm bill, while others do not. Thirty-seven programs that received mandatory funds during the 2008 farm bill are not assumed to continue from a budgetary perspective because they do not have a budgetary baseline beyond FY2012. If policymakers want to continue these programs in the next farm bill, they will need to pay for the programs with other offsets. Depending on the approach used to estimate a cost to extend the 37 programs for five years, $9 billion or $10 billion of offsets from other sources may be needed. This is about 4% of the $283 billion five-year total cost of the 2008 farm bill when it was enacted, or 11% of the approximately $100 billion five-year cost if the nutrition title is excluded. Finding this level of offsets may be a difficult task in a tight budget environment, especially when many observers believe that the next farm bill might be written within the confines of the existing baseline.

“The 37 provisions without baseline beyond FY2012 are spread among 12 of the 2008 farm bill’s 15 titles. The title with the most such provisions is the energy title (8), followed by conservation (5), nutrition (5), and horticulture and organic agriculture (5). Just three provisions—the agricultural disaster assistance program, the Wetlands Reserve Program, and the Biomass Crop Assistance Program, each with uncertainty about its future cost—account for nearly 75% of the $9 billion or $10 billion total.”

The CRS report added that, “The amount of mandatory funds that might be needed to extend these 37 programs is estimated here to be about $9 billion or $10 billion over a five-year period, depending on the approach to estimate costs.”

A footnote associated with this assessment indicated that, “Estimates are derived under two different approaches discussed in the next section: (1) the CBO cost at the time of enactment in 2008, and (2) the most recent CBO baseline of program costs. Separately, a $9 billion cost to continue programs without baseline has been suggested by the chief economist of the House Agriculture Committee. See Craig Jagger, ‘Federal Budget Issues & the Next Farm Bill,’ at the Farm Foundation Forum, ‘Budget Implications for the Next Farm Bill,’ September 14, 2010, slide 45, at

Some associated comments from the Farm Foundation event regarding a baseline Farm Bill can be found on pages 13 and 14 of this unofficial transcript of the meeting.

Meanwhile, a news release yesterday from USDA stated that, “Agriculture Secretary Tom Vilsack today announced that during this month, USDA will distribute approximately $1.6 billion in annual Conservation Reserve Program (CRP) rental payments and$3.8 billion in final 2010 direct payments to America’s farmers and ranchers.”
Political Notes
Jonathan Martin reported yesterday at Politico that, “Once-despondent Democrats now believe that they may be able to avert a total midterm wipeout, as several important states now appear to be trending in their direction or growing more competitive.

“The bad news: In a sign of how hostile the election environment remains for the party, the cautious optimism is largely due to the view that the impending political hurricane could be downgraded from category 5 to category 4.”

Michael O’Brien reported yesterday at The Hill Online that, “Senate Republicans expressed confidence Monday they’d pick up at least six seats this fall, but were more careful in predicting results for seven other races that will determine the Senate majority.”

“Separately, House Minority Whip Eric Cantor (R-Va.) predicted the race for control of the lower chamber would tighten and warned his party not to become complacent after weeks of polls suggesting House Republicans could win back the majority. Republicans need to pick up 39 seats to win a majority in the House.”

Dan Balz and Jon Cohen reported today at The Washington Post Online that, “Less than a month before the midterm elections, the political landscape remains strongly tilted toward Republicans, although Democrats have made modest improvements with voters since their late-summer low point, according to a new Washington Post-ABC News poll.”

And an update posted yesterday at Rasmussen Reports Online stated that, “Republican challenger John Boozman continues to lead incumbent Democrat Blanche Lincoln by nearly 20 points in Arkansas’ U.S. Senate race.”

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