The Next Farm Bill – A Super Farm Bill from the Super Committee?

August 15, 2011Agricultural Extension Midwest Outlook Conference

Aleta Botts, University of Kentucky

Usual Timeline of a Farm Bill

The 2008 Food, Conservation, and Energy Act (Farm Bill) expires on September 30, 2012.

The last Farm Bill took two years to write. Field hearings held in 2010, are continuing now

under the current Congress and with the new leadership of the two Committees.

House and Senate typically on different tracks. Role of the Administration

Now Throw Out the Usual

Arguably the worst budgetary and fiscal environment ever to write a Farm Bill that provides income support

The Pending Doom…

Averting the Default – The Debt Limit Deal of August

Slight increase in debt limit ($900 billion) Immediate decrease in discretionary

spending ($917 billion) Further increase in debt limit awaits the

Super Committee finding at least $1.2 trillion by November OR Balanced Budget Amendment

If Super Committee does not succeed in work, automatic round of cuts occurs to both mandatory and discretionary programs.

The Super Committee

Membership

Motivation

Timeline Oct 14 Nov 23 Dec 23

Debt Discussions in the Past Year

Biden Group – $34 billion in agricultural cuts? Fiscal Commission December 2010 report -- $10

billion in cuts by modifying criteria for direct payments, limiting conservation programs and reducing the Market Access Program.

Bipartisan Debt Reduction Commission -- $30 billion in cuts through tighter payment limits, reductions in crop insurance A&O and premium subsidies, and reductions to conservation programs.

Leading up to the “Deal”: Senator Reid’s bill:

$11.1 billion in cuts by reducing acreage for direct payments from 85 percent to 59 percent

House Bill by Speaker Boehner: Silent on specific cuts, but expectations

were in the $30 billion range, set up Super Committee

What Does It Mean? Is this the Farm Bill vehicle?

Or is this the prequel to a Farm Bill vehicle written next year?

Further Context: Budget for the Farm Bill

The Congressional Budget Office issues estimates of what the spending would be if current law were extended. Those estimates form the baseline.

This baseline is the “starting point”. Any changes to programs are measured against that baseline.

Recent Historical Examples 2002 -- $73 billion was added to the

baseline. 2008 -- $10 billion was added to the

baseline, but the amount was paid for through tax provisions.

2012 – ???

So How Much Funding is Available? Moving target – Both due to changing

assumptions regarding prices and economy along with changes that Congress makes in the interim.

As of January 2011, $922 billion over ten years is the expected cost of the existing farm bill programs that have baseline for the period of 2012-2021.

Where Does the Money Go?

Nutrition Programs

Conservation Programs

Commodity Programs

Crop Insurance

Export Programs

Other

Where Does the Money Go? (Continued)10 year costs

Nutrition: $703 billion Crop Insurance: $79 billion Conservation Programs: $64 billion Commodity Programs: $60 billion Export Programs: $3.5 billion

Expectations for Commodity Programs Only two programs delivering support for crop

producers particularly have a large baseline – direct payments and crop insurance. As such, these are the programs attracting the most attention from budget cutters.

The countercyclical and marketing loan programs have attracted less attention since they are projected to pay out less due to the high commodity prices. However, changes to these programs are necessary to resolve the Brazil cotton case.

Important Distinction – Mandatory Vs. Discretionary

Aside from the Debt Debate – Other Signs… FY2011 Annual Agricultural Appropriations–

The “$40 billion cut” legislation. Cut discretionary ag. spending by $3 billion, 14

percent from FY2010 levels. Cut mandatory ag. Spending by $500+ million.

FY2012 Annual Agricultural Appropriations – Cuts $2.6 billion in discretionary ag. spending. Flake amendment limiting payments to Brazil Payment limit amendment

Higher Commodity Prices Feed the Story

Effect of Cuts on Farm Bill Baseline Any cuts to mandatory programs in this

year’s appropriations bill will affect the next ten years of available farm bill funds by reducing the baseline.

Possible Scenarios for Next Farm Bill Given the Budget Situation

Extension of current Farm Bill programs Complete rewrite to achieve cuts Partial rewrite to achieve cuts Impact of doing nothing?

Parting Food for Thought on Food Policy…

How do the 2012 elections factor into the outcome?

Do not forget Brazil. Where does biofuels policy fit?