The Farm Bill, a sweeping piece of legislation with vast influence over the nation’s food system, is up for renewal at a time when farm profits are robust and the federal government is looking to dramatically trim its deficit – putting agricultural subsidies squarely in the congressional cross hairs.
Throw in the fact that an important election is looming in November, lawmakers of all stripes, including rural conservatives who must balance their reduced-government philosophies with the wishes of their farming constituents, will have to make difficult decisions soon if the legislation is to be renewed in a timely manner.
The current Farm Bill from 2008 is set to expire in September. Economists and agricultural groups say failure to come to an agreement by then could pave the way for deeper cuts down the road.
The U.S. House Committee on Agriculture kicked off its Farm Bill hearings last week, while the Senate Committee on Agriculture, Nutrition and Forestry began hearings in February and plans to wrap them up this month. Some of the groundwork for the current negotiations was laid during last fall’s deficit-reduction committee talks, when House and Senate agriculture leaders agreed on a proposal to cut spending by $23 billion over 10 years.
Montana Democratic Sen. Max Baucus, a senior member of the Senate Agriculture Committee, said he is encouraged by signs of progress in the legislative discussions.
“Like any business, certainty is critical to successful agriculture, and between the weather and the market farmers and ranchers have enough volatility to worry about without uncertainty in Washington adding to the mix,” Baucus told the Beacon last week. “So the sooner we get a Farm Bill done, the better. But it’s just as important that we get it right.”
Based on early discussions, farmers are bracing for changes in federal subsidy programs on which they have come to rely over the years. It already seems inevitable that direct payments – a controversial subsidy – will be eliminated, though farming groups are bargaining for some sort of safety net program to take its place. Direct payments, in place since 1996, are paid out regardless of need, leading to criticism of the program as a handout.
Jake Cummins, executive vice president of the Montana Farm Bureau Federation, said “no question” cuts are on their way. Cummins said groups like his are willing to accept cutbacks in light of the economic times, but he believes the agricultural portion of the Farm Bill is preparing to take a disproportionate and unfair hit.
The vast majority of the Farm Bill funding – over 85 percent, Cummins said – is dedicated to nutrition programs, like food stamps and school lunch programs, while he said roughly 4 percent is directed to agriculture. Cummins maintains that the nutrition portion doesn’t receive the same scrutiny because it’s politically volatile to take money away from programs designed to give to the needy, even if, in his mind, the money doesn’t always end up in the hands of the needy.
Cummins is worried that continued erosion of the bill’s agricultural funding will undermine the national farming industry. He said federal funding helps ensure that the 2 percent of Americans who are producers can sufficiently and affordably provide food and fiber for the other 98 percent of the population.
“Are we just going to cut off agriculture entirely?” Cummins said, adding that the cuts may eventually lead to a greater reliance on food imports rather than domestically grown products.
“We’ll start spending a lot more money on food produced in other countries,” he added. “If you like what’s been going on with oil, you’ll love importing your food.”
But Dr. Vincent Smith, a professor of economics at Montana State University who specializes in agriculture, says the agricultural industry doesn’t need the subsidies and in fact would be better off if farmers used other tools to manage risk, rather than government guarantees.
In a research paper titled “American Boondoggle: Fixing the 2012 Farm Bill” that Smith completed with two other economists, the authors argue for the abolishment of commodity programs like direct payments and countercyclical payments, along with crop insurance subsidies and disaster aid subsidies.
“Most farm subsidies go to substantial and successful operations and provide little support for the farms they were once intended to benefit,” the paper concludes, adding that the subsidies “create barriers to more efficient agriculture.”
In an interview last week, Smith acknowledged the stir that he and his colleagues are causing: “The farm lobby folks from DC are well aware of what I’ve written and they’re well aware of what I’ve said in public.” But he maintains that his theories are based on well-researched empirical economics. For instance, his research shows that farmers’ debt-to-asset ratios are actually relatively low on average.
“When people like (fellow economist) Barry Goodwin say on average farm families are six times wealthier than the average household, he’s not making that up,” Smith said.
Smith said farmers have always known they face unpredictability and can figure out how to deal with it. Without government-sponsored safety nets, he said farmers would find ways to self-insure by carrying less debt and increasing cash reserves, in addition to tools like diversification. He added that subsidies decrease incentive for innovation and increase risk-taking among farmers.
“There are a myriad of private market tools that farmers have always had to manage risk,” he said.
In Montana, agricultural subsidies came into the limelight during the last legislative session when The Policy Institute, a left-leaning think tank in Helena, released a report called “Profiles in Hypocrisy.” The report detailed subsidy payments received by state legislators, including a number of Republicans who have derided big government and federal spending.
The report was a local illustration of the tricky balancing act for Republican lawmakers currently playing out at the federal level. Smith said tea party-backed lawmakers “concerned about re-electability” are in a difficult position with the proposed cuts and would likely rather address the situation after the election.
“Is there even going to be a Farm Bill in 2012?” Smith said. “The leadership in the House would definitively like to punt.”
Chris Christiaens, a project specialist and lobbyist for the Montana Farmers Union, acknowledged that “direct payments are going to be gone.” Christiaens attended the National Farmers Union convention in Omaha last week, where he said U.S. Agriculture Secretary Tom Vilsack emphasized the importance of renewing the Farm Bill this year.
There are 37 programs set to expire with the 2008 Farm Bill, Christiaens said, including some that already have. Failing to address the bill by September puts those programs in jeopardy, Christiaens said, and will necessitate a continuing resolution to maintain funding until a bill can be worked out.
Christiaens said the National Farmers Union is lobbying for mandatory funding for a renewable energy program, continued biomass crop assistance, a biorefinery assistance program and an insurance mechanism for beginning farmers. He said the group would also like to see a farmer reserve program in place of direct payments.
While Christiaens has heard “there are moves afoot to cut nutrition programs,” he doesn’t believe the cuts will be drastic because of the issue’s sensitivity. Cutting programs that feed kids is a tough sell.
“It’s kind of a catch-22,” he said. “Farmers produce the food and the kids need it.”
In February, President Barack Obama released a budget proposal for fiscal year 2013 that called for slashing $32 billion in farm payments, including cuts to direct payments, crop insurance subsidies and conservation programs. Conservation programs, along with nutrition and agricultural programs, are another major component of the Farm Bill.
Farmers acknowledge that 2011 was a record year for U.S. farm profits but note that markets are cyclical and say the current income levels won’t last. Cummins of the Montana Farm Bureau Federation hopes Farm Bill negotiators keep in mind the long-range ramifications of the legislation’s impact on food supply.
“The Farm Bureau has stepped forward and said we don’t want a handout,” he said. “We just want to ensure that there’s some mechanism to ensure in the future that we can continue to provide affordable food and fiber.”