Sept. 30, 2013
Contact:
Eric Wailes, Agricultural Economics and Agribusiness
479-575-2278 / [email protected]
James Richardson, Texas A&M University Agricultural Food and Policy Center
979-845-5913 / [email protected]
Dave Edmark, Agricultural Communication Services
479-575-6940 / [email protected]
Stalled farm bill's effects reviewed by agricultural economists
FAYETTEVILLE, Ark. – As Congress continues to struggle over a farm bill to replace
the 2008 legislation due to expire Sept. 30, a farm policy analyst says there is probably a 5050 chance that a new bill will be finished this year. If a bill isn't ready before the end of
October, pressure will build to pass a temporary extension, said James Richardson, codirector of the Texas A&M University Agricultural Food and Policy Center.
Richardson and Eric Wailes, distinguished professor of agricultural economics in the
University of Arkansas System Division of Agriculture, provided their reviews of the
legislation's current status during an on-campus forum Friday, Sept. 27, hosted by the
department of agricultural economics and agribusiness.
Expiration of the farm legislation that was first passed in 2008 would result in a 1949
farm measure becoming the policy effectively governing federal agricultural policy. If the 1949
law remained in effect by the end of the year, milk price supports would have to be raised.
The House recently passed a farm bill without a provision for nutrition, which funds the
food stamp program, and made it a separate bill. The Senate kept fthe nutrition program in its
version of the farm bill.
“It's not a question of whether the farm bill will provide less support than the previous
farm bill in 2008,” Richardson said. “There's no doubt about it. Farmers are going to lose
direct payments. They're going to lose countercyclical payments.” He explained that the
Senate bill puts all commodities except cotton into an agricultural risk coverage program,
which would provide payments to farmers if their incomes drop. But it doesn't cover
everything and has gaps.
The Senate bill provides a deficiency payment if a commodity price drops below a
reference price for all crops except peanuts and rice, which have a fixed reference price,
Richardson said, which would be 55 percent of a five-year moving average. “If you take 55
percent of that, your support price is going to drop very rapidly,” he said. “Fifty-five percent is
a long way below where we have our target price today.”
Richardson said the current safety net for farmers is in danger because many groups
who oppose it prefer “a completely free market,” noting that high prices for commodities have
made it easier to oppose a safety net.
“It's very difficult to develop a farm bill with an effective safety net when prices are
high,” Richardson said. “When prices are low is when you want to negotiate a farm bill if
you're a farmer. If you're worried about saving the budget, you want to pass a farm bill when
prices are high when we can cut everything.”
Richardson predicted that crop insurance could come under attack later because it can
be addressed in legislation outside the farm bill at any time. He added that the nutrition
element of the farm bill might be restored to a final bill this year.
Wailes said the House bill appears to be the better option of the two current versions,
particularly as it affects commodities produced in Arkansas. The House bill has a higher
reference price for rice than the Senate bill does.
“Arkansas farmers are being hit now with the loss of direct payments, which have
become politically unacceptable even though from an economic perspective they are a more
efficient subsidy mechanism,” Wailes said. “We're going to lose those – $240 million to the
state of Arkansas. As for the shallow loss revenue and deficiency price payment programs,
there are differences and we'll see where the conferees wind up on that.”
Wailes said his research team's analysis of the farm bill's supplemental coverage
option for crop insurance found that it would be “a very attractive option because of the level
of subsidies for crop insurance buy-up.” Farmers who buy higher insurance coverage under
the supplemental coverage would be able to do so with higher subsidies than they would
receive for their regular crop insurance premium.
The House and Senate versions have significant differences in payment limits on
commodity support. “Payment limits are fairly important for Arkansas just because of the size
and scale of farms in the Delta,” Wailes said. “Payment limits on commodity support in the
Senate bill is $50,000 and on the House side $25,000. That will also be an interesting
discussion in conference to see where they end up.”