New policy: Economist analyzes trends, looks to upcoming farm billWritten by Natasha Wheeler
Montana State University Economics Professor Vince Smith expects the next Farm Bill to be released in 2019, although it is scheduled for 2018.
“We have not had a farm bill at its scheduled time since 2002,” he noted, adding, “2018 is also an election year for congress, and in general, the House and Senate Agricultural Committees prefer to see bills passed in non-election years for a whole variety of reasons.”
Smith discussed current programs and addressed possible discussion for future farm bill legislation in an April 19 webinar hosted by Ag in Uncertain Times.
He believes that the 2014 Farm Bill continues a 25-year shift in subsidies toward crop insurance and other farm safety net programs. There has been almost a complete shift away from traditional price support subsidy programs at the same time.
“Over the past 15 years, U.S. farm lobbyists, particular USDA administrators and congressional Agriculture Committee members, have increasingly chosen to describe Title I and Title XI programs as risk management and farm safety net programs. While those programs increase farm incomes and reduce participating farm’s risk of going out of business, they do anything but reduce overall risk taken by the farm sector,” he explained.
The programs incentivize risk, he noted, and they transfer the consequence of risk away from the individual farm or ranch and onto the taxpayer.
From 1996 through the current farm bill, traditional payment programs have decreased, conservation spending has increased, and crop insurance programs have increased significantly.
Addressing expected points of discussion for the upcoming farm bill, Smith said, “Budget will always be an issue, and the baseline will be the initial focus of the discussion. The baseline for the farm bill is close to $100 billion a year, of which the majority is allocated to nutrition programs.”
Despite the Republican push to separate nutrition from the farm bill, Smith does not expect the issue to be a subject of debate for 2018.
“Another issue concerns Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC). Those programs were put in place to replace direct payments, which were roughly $5 billion a year. The claim was that the programs would cost roughly $2 billion less,” he remarked.
Current indications suggest that ARC and PLC could cost nearly $1.5 billion more than direct payments, and that figure will likely be a point of concern in discussions regarding the next farm bill.
“ARC and PLC are likely to cost about 90 percent more than what was claimed by the House and Senate Ag Committees prior to the passage of the 2014 Farm Bill. That has not gone unnoticed by interest groups critical of farm spending, some of whom are influential,” he said.
Although they are sometimes referred to as crop insurance programs, Smith also noted that ARC and PLC programs do not include premiums, and payments are not associated with production.
“Those programs raise World Trade Organization (WTO) issues that are far more severe than those associated with the now defunct direct payments program, which they essentially replaced,” he said.
Smith also noted, “The ARC-PLC choice has been widely viewed as overly complicated by many farmers, and the structure of the program may be revisited.”
Crop insurance continues to be the largest budget item, and interest groups from both the left and right have criticized the Harvest Price Option revenue contract, claiming it to be an expensive waste of money.
“Farmers don’t have that view because it suddenly pays out nicely for them on a net basis, but it has been identified on the left and right as an essentially heavily subsidized call program,” he stated.
The Obama Administration has argued over the last several years that the Harvest Price Option should no longer be subsidized, and it appears that the message is resonating in some areas of congress.
“Conservation programs may also be revisited,” Smith predicted.
Commodity prices that remain at current or more moderate levels may encourage farm groups to push for a more expansive Conservation Reserve Program (CRP), and Smith guesses the money could be transferred from the Conservation Stewardship Program (CSP).
“Beyond the farm sector, CSP is being criticized as a subsidy program targeted at states like Iowa,” he commented, adding that the original proposer of the program was a congressman from Iowa. “We could see a reallocation of funds between the CRP and CSP.”
Lastly, Smith mentioned that environmental issues will also be included in farm bill policy discussions progressing toward 2018, as environmentalists and farm groups talk about expansion and production in potentially fragile areas of land.