Ag Policy UpdateB20 FEB 02        

(Sunup Program to be aired 21 FEB 02)

 

 

1.      The farm bill debate is moving to its final stage.  Can you give us an update?                                                                  

 

 

BOn Wednesday 13 Feb, the Senate passed its version of a new farm bill.

BWhile Congress is on break this week, the bill is being readied to be sent to the House.

BBoth the House and Senate will name reps to a farm bill conference committee that will likely begin work next week.

BIt will be their job to craft a single bill to report back to their respective bodies for passage and delivery to the President.

 

 

 

 

2.         Farmers want to know when we=ll see a new farm bill and what=s likely to be in it.  Let=s start with what we know about the final outcome.

 

BAll key conference parties on record as agreeing to:

Bthe amount of about  $170 billion over 10 years.

Bcontinue fixed payments similar to the current flex or AMTA payments.

Bintroduce a new counter-cyclical program of payment support that institutionalizes the ad hoc emergency payments paid to program participants when prices fall below certain levels.

Bmaintain or improve loan deficiency payments and marketing loan gains.

Bexpand conservation programs, including CRP and EQIP.

Bmaintain or expand other traditional programs in the areas of trade, nutrition, research and extension.

 

 

 

 

 

 

 

 

 

3.         Sounds like there=s not much to discuss.  Why has House Ag Chair Combest called the Senate bill an Aatrocity@, and what are the key uncertainties that will be hashed out in conference?

 

BWhile Combest may really believe that, politics is the motivator, especially with respect to his concern over some  amendments in the Senate bill.

BThey still will argue over

--who gets the support,

--how much support will be provided,

--how soon it will be distributed,

--how much of it comes through commodity programs,

-- how much through conservation programs,

--how much is left over for other new and traditional programs, and

Bhow long this new farm bill will last.

 

BThe Senate bill is a 5-year bill, where the House version is 10 years.

BThe Senate programs are more front-end loaded.

BFixed commodity program payments in the House are at a higher rate than the Senate.

BThe Senate wants to raise loan rates.

BCounter-cyclical payments rates in the House are again at a higher rate than the Senate.

BSenate conservation provisions are more expansive and offer more funding opportunities and to more producers than the House.

BThe Senate wants a major new set of programs for dairy.

 

 

 

4.      And perhaps the biggest key uncertainties that will be hashed out in conference relate to controversial amendments in the Senate bill?

 

 

BThe Johnson-Grassley amendment prohibits livestock owernership by packers 14 days before slaughter.

BThe intent is to slow the trend of concentration.

BThe amendment passed in December, was voted on again this week and won with even more votes.

BThere remains some concern about the definition of Acontrol@.

 

BThe Grassley-Dorgan amendment to reduce payment limitations is perhaps the most significant.

BSen. Grassley is proposing new payment limits of $225,000 ($275,000 for a husband and wife).

BThis compares to the current $460,000, or $500,000 in the Senate bill, or $550,000 a year in the House bill.

BThe amendment effectively eliminates the A3-entity rule@ in an attempt to close a legal loophole that has allowed some families get government checks much larger than the limits were intended to allow.

BIt also has a means test that prevents farms with $2.5 million in income from participating in program payments.

 

 

BAnother Senate provision that is a major issue for Western states and may set a precedent for other states, allows for the federal government to transfer or acquire water rights to protect endangered, threatened or sensitive species.

BFarm legislators in the Western states are very upset about this.

5.         What about opportunities missed?  Are they likely to revisit some issues that didn=t make it to the final stage?

 

BCongress and the President missed a real opportunity to engage in a meaningful debate about the distribution of support and how equitable it is.   Beyond a limited fight over payment limitations, that won=t happen.

BThey had an opportunity to explore market price structure and what accounts for the downward trend in longterm prices.  That won=t happen.

BThey had an opportunity to explore in an honest way  why a free market is so elusive and how that affects government involvement in the market. That won=t happen.

BThey had an opportunity to explore the trends of concentration, the erosion of profitability for small to mid-size farms, and the importance of these farms to many rural communities.  That won=t happen.

BThey had an opportunity to explore new and innovative methods of environmental stewardship by farmland owners and producers.  Beyond some limited support for Harkin=s new conservation programs, that=s not likely to occur.

BThey had an opportunity to discuss the importance of risk management and how to encourage such skills as an alternative to government programs.  That won=t happen.

 

6.      So, how long is this conference going to take?

 

BBoth the Senate and House will designate reps to a conference committee that will be challenged to reconcile the differences and report a single bill.

BSenate conferees appear to be:

B 4 DemocratsBDaschle (SD), Harkin (IA), Leahy (VT), Conrad (ND)

B3 RepublicansBLugar (IN), Helms (NC), Cochran (MS)

BHouse conferees are likely:

B8 RepublicansBCombest (TX), Boehner (OH), Goodlatte (VA), Pombo (CA), Everett (AL), Lucas (OK), Chambliss (GA), Moran (KS)

B6 DemocratsBStenholm (TX), Condit (CA), Peterson (MN), Dooley (CA), Clayton (NC), Holden (PA)

BGiven the differences, especially the noted amendments, and the President=s concerns, this will not be an easy process.

 

BWhile the President was initially critical of the House version when it passed, he=s evidently been persuaded it is the best of the 2 choices; he=s not officially stated his preference, but his comments suggest he supports the House version.

 

BIn any event, Congress is off until 25 Feb

BThen, they will break again late March and early April.

 

 

 

 

 

 

BLook for tough talk, but eventual compromises:

BCurrent payment limits will likely be maintained

Ba study will be commissioned on reducing limits

Bthe Johnson amendment will likely fall; it may be replaced with a study as well.

Bthe peanut program may be phased in, rather than changed immediately.

BThe Senate will likely lose the higher loan rates, but may get some of their conservation provisions in.

BThe House fixed payment and counter-cyclical provisions are more likely to win out.

 

 

BIf we are surprised with a compromise bill by 22 Mar, it will be signed and quickly implemented with in 3-4 months.

BIf the conference stalls, there will be emergency aid for producers of 2002 crops, & there will be little incentive to have a new bill before October or November.

 

 

7.         Other than the farm bill, what are some other key issues affecting agriculture and ag policy?

 

A.     General economy

(1)         Latest reports indicate that the weakness in the manufacturing sector is lessening.  The index for industrial production fell only .1% last month.  Also, factory output was unchanged, the first time since mid-2001 it did not decline.

(2)         Producer Prices increased slightly, the first increase in several months, suggesting some slight inflation.

 

B.     Bush global warming policy

(1)         The President formalized his objections to the Kyoto Accords for Global Warming by annoucing his alternative plan to ease the intensity of production of greenhouse gases with respect to economic activity.

(2)         The move generally stamps the status quo as okay, with plans for voluntary reductions by industry and some federal funds to provide an incentive.

(3)         The plan was predictably hailed by industry, including agriculture, criticized by environmental groups and many scientists, and questioned by foreign governments.

 

C.     Bush foreign tour

(1)         The President=s tour of Japan and South Korea has included references to the need for those countries to improve their economies.

(2)         They are among our best customers of agricultural goods, and Japan=s economic woes have harmed our ag sector in recent years.  Anything they can do to strengthen their economies will likely improve our ag exports.

 

 

 

 

8.         Congress:

 

a.         Recent activity:

BSenate debate of farm bill with many amendments

 

b.         Current/upcoming:

BSeveral committees have initiated investigations of various aspects of the Enron scandal.

BHouse Ag Committee subcommittee reviews implementation of Ag Risk Protection Act (13 Feb).

BSenate Ag Committee postponed consideration of several USDA appointments (25 Feb?)

BHouse-Senate conference on farm bill begins after President=s Day break (reconvene 25 Feb)

 

c.         2002 Schedule:

BAs of Monday 25 Feb, there are 117 working weekdays in this session.

BTarget adjournment 4 Oct

 

d.         Key issues:

BTrade Promotion Authority

BNew farm bill

BBioterrorism & homeland defense

BHealthcare reform

BPrescription drug benefits

BCorporate & retirement plans reform/oversight

BCampaign Finance Reform

BMerger activities, especially in agriculture

BEconomic stimulus

 

 

 

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