Down on the Farm Bill: A Drought-Like Legislative Outlook

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The congressional Farm Bill debate took place in earnest in late June through mid-July, up until both chambers recessed for the month of August. The full Senate passed its version, the Agriculture Reform, Food, and Jobs Act of 2012 (S. 3240) on Thursday, June 21, 2012 by a vote of 64-35. The House Agriculture Committee then took its turn and passed its version, the Federal Agriculture Reform and Risk Management (FARRM) Act of 2012 (H.R. 6083), on Thursday, July 12, 2012 by a vote of 35-11. Then the fun began.

The House of Representatives failed to bring the Farm Bill to the floor before recess, mainly because Speaker John Boehner (R-OH) and his leadership team felt they had an insufficient amount of votes to pass the measure. Some, if not most, of the opposition stems from the lawmakers in the more conservative wing of his party, who are demanding more cuts than the $16 billion the bill already makes to the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps. In the budget developed by Rep. Paul Ryan (R-WI), which passed the House earlier this year, SNAP received $33 billion in cuts. Conceivably, that set the bar for the expectations of the aforementioned Republicans who are refusing to settle for anything less. 

On the other hand, there are Democrats who are considered likely to vote against the Farm Bill, mainly due to their opposition to the $16 billion in SNAP cuts, which they feel are too high. Some of these same lawmakers are Democrats who may otherwise vote for the Farm Bill. SNAP benefits, for them, are the proverbial "carrot on the stick" in that they typically entice Democratic legislators, and those from non-rural districts, to support the legislation.

To use a presidential politics analogy, if the SNAP benefits debate were the contest in Ohio, then the debate over the farm safety net would be analogous to the Florida contest, especially fitting given that a large part of the debate over this portion of the Farm Bill is between Midwestern and Southern grower interests. 

The Senate's bill would enact some notable reforms, including eradicating the long-derided direct payments, countercyclical payments and Average Crop Revenue Election (ACRE) program. The Senate bill also creates the Agriculture Risk Coverage (ARC) program and the Supplemental Coverage Option (SCO). Only certain crops are covered by these new programs, including corn, soybeans, wheat, rice and cotton. This is partially where the regional disagreements come into play. Peanuts, grown mainly in the South, and specialty crops (fruits and vegetables) are not covered by ARC. Likewise, growers of what are generally considered southern crops, such as rice, depend more on direct payments than do those growing primarily Midwestern crops, such as corn.

ARC and SCO, along with crop insurance, compose a scheme for growers which resembles a series of bands that add up to maximum coverage for their crop. The first band is crop insurance, purchased on the open market and subsidized by the government, which provides coverage for anywhere from 50 to 85 percent of their crop. The second band of coverage is provided through the new SCO program, which covers the difference between the crop insurance coverage level the grower selected and the ARC coverage level.  For instance, if the grower has crop insurance coverage up to 65 percent, SCO would cover the gap from 65 to 79 percent, at which point the third band of coverage kicks in. The third band is the ARC program, often referred to as a "shallow loss program." This margin-based coverage program would provide coverage between 79 and 89 percent of the grower's risk for eligible crops.  The 89-100 percent band of risk—a "shallow loss"—is the producer's alone, although there are some buy-up crop insurance policies that provide coverage. 

The House bill, seen as more sensitive to Southern concerns, allows producers to choose between a modified revenue-based program and price-based programs.  The bill creates the Price Loss Coverage (PLC) program that maintains target prices and countercyclical payments, which are generally beneficial to Southern growers. Under this scenario, the government sets target prices for a list of commodities, and if the average price of that commodity, or Market-Year Average (MYA), were lower than the target price, the producer would receive a payment in the amount of the difference between the target and the MYA. If the MYA were above the target, the producer would receive no payment. Also included in the House bill is a modified version of the SCO, called the Revenue Loss Coverage (RLC) program, which would provide revenue support to a producer after a loss of 15 percent or more.  The SCO in the Senate bill kicks in at an 11 percent loss.

Prior to recess, the House members passed stand-alone disaster assistance legislation—what they referred to as drought aid—and then left for their districts for the month of August. Senate Democratic leadership, including Agriculture Committee Chair Debbie Stabenow (R-MI), claims that the best way to provide disaster assistance to those affected by this year's devastating drought would be to pass the Farm Bill. Thus, the Senate has not considered the drought aid measure and likely will not address it when Congress returns on September 10. 

Despite the fact that numerous lawmakers have heard from their constituents during the recess that a new Farm Bill must be passed, it is unlikely that Congress returns from recess and passes an extension of the current Farm Bill prior to its expiration on September 30, 2012. Despite the chances for the bill's lapse, Congress could get away with not acting on the legislation at all until after the November election, because programs and agencies don't necessarily shut down when the Farm Bill expires. The working days in September and October in which both chambers are in session are few, making passage of a temporary extension or reauthorization during the lame-duck session increasingly likely.