New Year Means New Farm Bill

USDA will continue holding back on any effort to implement permanent law with expectations that Congress will move over the next few weeks to complete work on a farm bill.

Agriculture Secretary Tom Vilsack told DTN earlier this week he has high hopes Congress will follow through on conference negotiations between the House and Senate. Such efforts allow USDA to avoid buying milk products at twice the market price because of provisions in permanent law, the secretary said.

"I honestly think right now what we are seeing are positive signs from the leadership of the conference committee on the House and the Senate side and some indication from the House and Senate leadership that there is a desire and interest to get this done," Vilsack said.

The Senate returns to session Monday while the House returns Tuesday. Though no meeting time has been set, the House and Senate conferees on the farm bill could schedule a meeting later next week to vote on some contentious issues the principal negotiators have not been able to resolve in private talks.

"So at this point in time, our focus is on providing technical assistance, ideas and creative thought so whatever differences exist between the House and Senate can be resolved quickly and when they get back in a week or so they can finish up the conference report, have the conference committee vote on whatever issues divide them and present a conference report and hopefully get it passed," Vilsack said.

A new political complication for the farm bill involves a push by Democratic lawmakers to extend unemployment insurance for people whose benefits expired at the end of 2013. Some House Democratic leaders want to use savings from the farm bill to offset the costs of re-establishing those jobless benefits. A one-year extension of unemployment benefits for roughly 1.3 million people would cost about $25 billion, roughly about the same as the 10-year savings would be on the farm bill.

If talks break down and party leaders go to their separate corners, USDA will do the work necessary to trigger permanent law, but Vilsack said he remains confident that won't have to happen.

The secretary said he has not seen actual language on a plan to cut $8 billion over 10 years out of the Supplemental Nutrition Assistance Program. The proposal would require a family receiving at least $20 in heating assistance to become eligible for a boost in monthly SNAP aid. Under the agreement, no one is actually removed from the SNAP program.

"I haven't seen specifically the SNAP proposal," Vilsack said. "I have seen people opine on what the proposal would be. I will continue to say what I have said before, which is if you get the policy right, you are going to get a number that works. I think the key here is to get the policy right. I am confident at the end of the day that we will get the policy right. We won't get it right if people are insistent on a $40 billion cut or a $20 billion cut. We have already seen $11 billion cut out of this program, so people have to be reasonable about it."

SNAP's long-term costs were trimmed by $11 billion because Congress did not extend increased benefits boosted from the 2009 stimulus bill. The House voted to cut $39 billion from the program, as well as cull nutrition programs from the overall farm bill. Coming back next week, the critical element will be exactly how House conservatives react to the final product.

There were multiple reasons for getting a farm bill done quickly, particularly the need to get disaster aid to livestock producers in the Dakotas hit by an October snowstorm. Other livestock producers hit by drought have been waiting longer for aid. There also is the need to put rules together for 2014 crops. Export programs need to be restarted and USDA needs to go about the work of streamlining conservation enrollment and programs.

The consequences of inaction revolve around the risk of permanent law as well as concerns over what Brazil will do over the $147 million in payments over the cotton case that the Obama administration stopped paying in October. Brazil could impose retaliatory tariffs on U.S. agricultural products being sent to Brazil.

"It seems to us we need to get these folks (Congress) the information they need to finish what they are doing to raise the expectation, frankly, and raise it quite high that Congress is finally going to do what they should have done a year or two ago and finally get a farm bill passed," Vilsack said.

Crafting rules for new programs would depend on when the bill is passed. USDA Deputy Secretary Krysta Harden is leading the effort to coordinate rulemaking and prioritize how agencies would implement the new farm bill. USDA also has to examine what kind of barriers would delay quick action. Vilsack noted there would be an emphasis, for instance, on getting rules out quickly for livestock disaster aid. That could happen quickly because it is simply a resumption of a program rather than a new one.

"We know there is a lot of need for that assistance as quickly as possible," Vilsack said.

The loan rates for commodities need to be established, but USDA also will have to move on issues such as readjusting adjusted gross income levels or tying conservation compliance to crop insurance premium subsidies if those provisions are adopted as part of the law. The Risk Management Agency will have to implement rules for new supplemental insurance policies and a new cotton insurance program.

"We know there are things that can be done, should be done and need to be done," he said. "We're prepared to move as quickly as possible and get as many of these key rules done, but we need to do them right, we need to do them thoughtfully and with appropriate input," he said.

If talks on the farm bill break down, Vilsack said USDA would be forced to start the process of buying milk at around $38 per cwt. The Obama administration estimated in November that permanent law would lead to about $12 billion in federal buying of milk commodities over a full year.

"We would end up in the buying business and we would be paying significantly more for commodities than the market is currently paying."

The spike in U.S. prices also would likely lead to a loss of exports, Vilsack noted. Other exporters would be able to undercut prices offered by U.S. exporters. "It may be that it puts us at a competitive disadvantage from an export perspective," he said. "If we're in the business of buying up milk products at $38 per hundredweight and the market is paying $18 to $19 per hundredweight, that puts us at a competitive disadvantage, I assume."

Also, there could be shortages. Producers would be in a bind because they would not know how long such a price spike would continue. "That's why getting back to the main theme here, all of this gets resolved by Congress doing its work, doing its job and getting this resolved as quickly as possible," he said. "They have gone so far down the road that it would be extraordinarily disheartening to producers and rural America, and to all of America, if we don't get this done."