FarmPolicy.com

Farm Bill Developments

As the Senate and House Budget Committees move forward with budget resolution proposals over the next couple of weeks, the Agriculture Committees will sharpen their focus and consider just exactly how to spend their designated allotment. Issues to watch include new emphasis on what the U.S. Department of Agriculture calls specialty crops, as well as federal farm conservation measures.

I. Budget Issues
II. Policy Priorities
III. Des Moines Register Highlights Ethanol

I. Budget Issues

Jerry Hasgtsrom, in an article posted this morning at the AgWeek webpage, reported that, “Senate Budget Committee Chairman Kent Conrad, D-N.D., included $15 billion in additional funding for agriculture from 2008 to 2012 in his proposed budget released last week, but the money would have to be found either by cutting other government programs or by raising taxes.

“The new money most likely would be spent on conservation and biofuels research and development.

“In writing what is known as the ‘chairman’s mark’ for debate by the Senate Budget Committee and Congress, Conrad provided for continuation of current programs and a $15 billion ‘deficit-neutral reserve fund’ for expanding such agricultural programs as research in renewable energy. If the full Congress adopts the budget with the $15 billion for additional agriculture spending it, that means that members of Congress cannot raise a budget point of order against it. Under the pay-as-you-go rules, Congress still has to say where the money would come from for additional programs.”

The “Washington Insider” section of DTN reported on Friday (link requires subscription) that, “The Senate Budget Committee has released its initial suggestions for spending limits on agricultural programs, and, as expected, it calls for additional funds above ‘initial baseline’ spending requirements. Committee Chairman Kent Conrad, D-N.D., indicates that the panel is calling for ‘a deficit-neutral’ reserve fund for the reauthorization of agricultural programs — an additional $15 billion in mandatory agriculture funding between fiscal years 2007 and 2012, if offset.

“In layman’s terms, this means that his committee is proposing a farm bill spending cap that begins with the current CBO spending estimates for current policy — a new estimate that updates CBO’s January preliminary estimate — and then adds $15 billion.

“The new wrinkle is that the additional $15 billion would have to be offset — that the additional spending it authorizes would be covered by cuts somewhere else.”

The DTN item also indicated that, “As the farm bill reauthorization fight enters its initial stages, producers should watch two key aspects. The first is the success the new groups have in actually mobilizing support — or opposition. These include environmentalists, food program supporters, specialty crop producers, opponents of meat packer ownership of livestock, proponents of country of origin labeling, and others. And, this time around, they also include very powerful livestock groups who usually sit out most farm bill issues, but who may become heavily involved, especially on energy issues. However, once involved, they could take part in other fights, as well.

“The second aspect to watch carefully is the administration and its commitment to reform. There is new talk this week of an additional U.S. Doha offer. If such an offer materializes, and if it includes and extends the reforms in the administration’s Jan. 31 farm bill proposal, the president could choose to make both agricultural policy and trade policy key issues in the debate. If that happens, the presidential veto threat could be brought into play and could have important implications for the debate, Washington Insider believes.”

A news release issued on Friday from the National Association of Wheat Growers explained that, “An additional $15 billion above the Congressional Budget Office baseline will be available for spending in the 2007 Farm Bill, according to a FY2008 budget resolution passed by the Senate Budget Committee this week. The catch? That money will have to be offset.

“The money provided by the resolution would be put into a ‘reserve fund’ for the Farm Bill. However, money in these types of reserve funds is typically available to committees for use only under certain conditions.

“The conditions for the $15 billion are unclear at this point, but one would likely be an available offset, either with decreased spending or increased revenue from somewhere else in the agriculture or general budgets.

“This development is further indication of how tight the 2007 Farm Bill budget is likely to be. With adjustments needed in Title I and additional funding desired by many for conservation, renewable fuels and specialty crop provisions, Senate Agriculture Chairman Tom Harkin (D-Iowa) reportedly had asked for $20 billion over the baseline.”

Friday’s edition of the Kiplinger Agriculture Letter (link requires subscription) also highlighted the federal budget and farm spending, and noted that, “Congress is about to set funding levels for the new farm bill. Crop subsidies will be pared to $8 billion or so per year for the next five years vs. $10 billion to $20 billion in recent years.

“Among programs that will see modest increases: Conservation. Specialty crop research. Long-term disaster aid. Rural development.

“The farm bill’s big money gainer: Alternative fuels. Lawmakers will pour big bucks into research and development of cellulosic ethanol, biodiesel, methane biodigesters, etc. To pay for the boost, ag committees have dibs on revenue from upcoming cuts in tax breaks for oil companies.”

This week, the House Budget Committee will begin marking up its budget resolution. With respect to this process, Jerry Hagstrom noted that, “On the House side, [House Agriculture Committee Chairman Collin Peterson, D-Minn.] said, House Budget Chairman John Spratt, D-S.C., has delivered ‘mixed signals’ on the chances for additional funding.

“Peterson said offsets are required. He doesn’t see a ‘lot of potential’ for shifting money from one section of the farm bill to another. Increased funding for programs outside the commodity title, he said, will depend on whether programs such as conservation and food stamps prove to be ‘so politically popular we can withstand a pay-go order,’ Peterson said.”

In other spending news, the House Appropriations — Subcommittee on Agriculture will hold hearings on Tuesday and Thursday this week to discuss fiscal 2008 appropriations on agriculture research and economics, as well as rural development.

And with respect to federal farm disaster payments, Michael Doyle reported in Friday’s Sacramento Bee that, “California farmers would get millions of dollars under a controversial Iraq war funding bill approved Thursday by a key committee.

“Sweetening the pot for rural lawmakers, Democratic leaders packed some $4 billion in emergency aid for farmers into the Iraq bill. There is money for spinach growers, dairy farmers, the San Joaquin Valley citrus industry and West Coast salmon fishermen, among others.

“But while the money may relieve farmers, it roils Republican skeptics. It could also put Valley lawmakers in a bind.

“‘What does a bailout for spinach producers … have to do with the global war on terror?’ Rep. Jerry Lewis of Redlands asked Thursday morning.”

II. Policy Priorities

After the Budget Committees complete their work and determine the Farm Bill spending parameters for the House and Senate Agriculture Committees, the Ag Committees will sharpen their focus and debate just exactly how to spend their designated allotment.

Stephen J. Hedges reported in Friday’s Chicago Tribune that, “It might seem strange to most Americans, but the building congressional debate over the Bush administration’s proposed 2007 farm bill involves something unusual: actual food.

“This bill puts new emphasis on what the U.S. Department of Agriculture calls specialty crops: fruits, vegetables and nuts from trees. They make up a third of the nation’s cash crop receipts–50 percent of receipts if floriculture and greenhouse plant sales are counted–and, until now, they haven’t drawn much federal money or attention.

“Expanded competition from overseas, as well as a change in the government’s nutrition pyramid in 2005, new concerns about nutrition in the federally funded school meals program and the growing organic foods market have all helped to elevate specialty crops in the agriculture funding debate.”

The Tribune article went on to explain that, “Past farm funding measures have been dominated by the needs of what the agriculture industry calls ‘program crops’ or, more informally, ‘the big five’–corn, wheat, soybeans, rice and cotton. Those crops are variously used not just to feed people, but also for products that range from corn syrup sweeteners and animal feed to fabrics and ethanol.

“Now that emphasis is changing. In 2003, fruit and vegetable growers pushed a Specialty Crop Competitiveness Act through Congress, elevating their industry’s profile and the need to fund crop research and market expansion. But that funding is just a fraction of the $12 billion the Congressional Budget Office estimates will be spent annually until 2016 under USDA programs to pay farmers for failed crops, land set-asides and disaster relief.

“Nearly two years ago, the produce growers formed an alliance to promote their agenda in Congress. And the new Democratic-controlled House in January established a subcommittee on horticulture and organic agriculture, in addition to an existing subcommittee on specialty crops.”

Meanwhile, Jerry Hagstrom reported on Friday at DTNAg.com that, “House Agriculture Chairman Collin Peterson, D.-Minn., said Thursday he would favor a conservation program proposal for the 2007 farm bill that has been developed by state fish and wildlife departments along with conservation, hunting and fishing groups [overview, complete report] rather than a competing proposal that was developed by Environmental Defense and other environmental groups.

“Rep. Ron Kind, D-Wis., who led an effort to shift funding from commodity subsidies to conservation and other programs in the 2002 farm bill, held a news conference Thursday to introduce the ‘Healthy Farms, Foods and Fuels Act,’ a bill that Environmental Defense was heavily involved in drafting.”

Mr. Hagstrom added that, “Peterson went on to say he was much more interested in the proposal issued Feb. 21 by the Theodore Roosevelt Conservation Partnership [TRCP], whose membership includes Pheasants Forever, Ducks Unlimited, Trout Unlimited and the building trades division of the AFL-CIO.

“‘These are the folks that are on the ground, that make things happen out there,’ Peterson said. Environmental Defense is based in New York City. Kind had 74 cosponsors for his bill, but they are mostly on the coasts rather than in the Farm Belt.”

One analysis indicated that the two proposals do have some significant differences:

* Environmental Quality Incentives Program (EQIP) — the TRCP proposal does not expand EQIP; the Healthy Farms bill increases EQIP to $2 billion a year.  

* Conservation Reserve Program (CRP) – the TRCP proposal expands CRP to 45 million acres; the Healthy Farms bill does not expand CRP.  

* Grassland Reserve Program (GRP) — the TRCP proposal enrolls 2 million acres into the GRP; the Healthy Farms bill expands GRP to 10 million acres.

* Wetland Reserve Program (WRP) — the TRCP proposal increases WRP to 300,000 acres a year; the Healthy Farms bill enrolls an average of 330,000 acres a year and lifts the cap to 5 million acres.

III. Des Moines Register Highlights Ethanol

Renewable energy in general, and ethanol in particular has already had an important impact on the 2007 Farm Bill. As implied in the above discussion on the budget process, as market prices for some program crops have risen in response to increased use for ethanol production, price-triggered farm payments are projected to decrease in the years to come. The sustainability of these higher market prices is an issue that deserves attention as the Farm Bill debate unfolds; correspondingly, focus on market developments in ethanol production should also be watched closely.

The Des Moines Register has provided several interesting articles and interactive features on the webpage regarding ethanol recently- here is a brief summary.

* “Emmetsburg hosts birth of biomass.” Philip Brasher. 3.18

* “Cellulose would reduce emissions by 90%, experts say.” Philip Brasher. 3.18.

* “In-demand switchgrass costs nearly twice as much as corn.” Philip Brasher. 3.18.

* “GRAPHIC: How stover becomes ethanol.”

* “GRAPHIC: How biodiesel is made.”

* “GRAPHICS: Current technology no match for Bush goal.”

* “INTERACTIVE: Biofuels in other states.”

* “Q&A on the future of ethanol.” Philip Brasher. 3.18.

-Keith Good