News Column

Failed Budget Talks Impacts Farm Bill, Food Stamps

Dec. 21, 2012

Georgina Gustin

Lawmakers have spent the last few weeks scrambling to get a five-year farm bill attached to a deal that would avert $500 billion in tax increases and spending cuts, dubbed the fiscal cliff.

But with negotiations breaking down in recent days, they are now saying they will renew efforts to get a bill passed in the new year or work toward a one-year extension.

For a year or more, lawmakers and farm groups have been wrangling over the $1 trillion bill, the sprawling piece of legislation that sets the nation's farm policy and covers food stamps. With a constrained federal budget, negotiations over the bill have been particularly thorny this year, although farm bills have been hamstrung before.

"More farm bills have delayed in recent years than not," said Craig Cox, an analyst with the Environmental Working Group, a Washington-based advocacy group that has called for farm subsidy reform. "In 1995, that was a very similar situation. That farm bill got tied up with much larger budget debates and clearly that's why this farm bill is having difficulties."

Earlier this year the Senate passed versions of the bill designed to curb spending, and the House Agriculture Committee followed. The Senate version cuts the deficit by nearly $24 billion, and the House bill cuts it by about $35 billion.

Both version cut direct payments, the $5 billion doled out by the federal government to farmers each year regardless of economic or crop conditions. Farm groups supported the elimination of these controversial payments, but only if new legislation called for more support for other revenue-guarantee products, including crop insurance that covers smaller losses. Direct payments were launched in the early 2000s at a temporary measure to help transition farmers from subsidies to insurance, but the payments were never stopped.

Lawmakers grappled over cuts to food stamps, with the Senate version calling for $4 billion in cuts and the House version calling for $16 billion. But in farm country the debate was over crop insurance, which producers have been relying on more heavily in recent years, particularly with flood and drought conditions.

A General Accountability Office report found that the cost of subsidizing these policies rose to $7.3 billion in 2011 from about $1 billion in 2001. One estimate puts the projected cost over the next five years at about $39 billion.

According to the U.S. Department of Agriculture's Risk Management agency, 86 percent of all planted farmland, about 281 million acres, was covered by crop insurance in 2011, up 2 percent from the previous year -- triple the amount from the late 1990s.

Many farmers say that volatility in the commodity markets means they simply could not stay in business without crop insurance.

"Crop insurance was the number one tool that farmers said they needed, that they rely on," said Sen. Debbie Stabenow, D-Mich., chair of the Senate Agriculture Committee, earlier this month. "As we look at eliminating direct payments, we think that it's very important that crop insurance be intact."

But critics of the existing legislation say that taxpayers shouldn't pay for increases to crop insurance subsidies, particularly when far incomes are at record highs.

Both versions of the bill contain provisions for increasing government contributions for "shallow loss" coverage, which indemnifies farmers for smaller losses.

Laurie Langstraat, of National Crop Insurance Services, said many farmers have policies covering only 70 or 75 percent of their crop.

"You have to lose a lot of your crop before your deductible is met," she explained. "A lot of farmers are saying they have those shallow losses year and year, and crop insurance doesn't kick in. There are farmers out there who need those protections."

But those protections will cost taxpayers more -- even more, some analysts say, that the direct payments they were designed to replace.

"They're using 72 percent of the savings from the old subsidies to gin up these new subsidies," Cox said. "So as a result they have to cut conservation programs and food stamps."

Cox also pointed out that the policies pay according to the price of the crop at harvest, rather than the projected price set when the crops are insured in the spring. That means, he explained, that because of the historic drought this year and the resulting rise in corn prices, farmers are taking in more in crop insurance payments than they would have if they'd harvested their entire crop and been paid what they expected to get in the spring.

"But," he said, "it will be a few more months before we know what the costs of the policies were this year."

Cox and others are urging a one-year extension of the bill, in part, so lawmakers can see those costs before hashing out a final bill.

Most farm groups believe that an extension is the most likely outcome. But, in the meantime, some protections have expired, mostly impacting livestock and dairy producers. Those protections would not be reinstated with an extension.

For most producers, however, the lack of a bill has not brought serious consequences.

"I don't know that anyone's life has been changed since it's expired," said Blake Hurst, head of the Missouri Farm Bureau. "But there's a real concern for dairy and livestock producers."

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