Beware! Farm Bill Changes Ahead

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It's said legislators debate laws on the floor, but write them behind closed doors. Even though both the House and Senate have passed a farm bill, the versions are very different going into conference committee. House members don't return until Jan. 15 to begin work and Senators not until Jan. 22, but behind the scenes work is already ongoing on compromise legislation. As of yet, no official word on conferees for the final bill.

Pre-conference negotiations started the week immediately following Senate passage of the farm bill. In fact, the four principals -- Sens. Tom Harkin, D-Iowa, Saxby Chambliss, R-Ga., Reps. Collin Peterson, D-Minn., and Bob Goodlatte, R-Va. -- met the week of Dec. 17 to lay the ground work for the staff work now going on.

Several key issues need to be resolved on the pending legislation. Here is a glance at a few.

Funding: Both houses have different ways of paying for increased spending. The White House claims each bill uses "budget gimmicks" but neither has laid out ways to reign in spending. In the end, it's unlikely either of the previously approved funding mechanisms will make it into the final bill, mostly due to the adamant veto threats from White House officials.

Remember, the White House laid out increased funding in its farm bill proposal without raising taxes. Most of its savings were found in lowering payment limits. Acting Secretary of Agriculture Mike Conner has said potential savings could be found in restructuring crop insurance payments. Crop insurance companies have made windfall profits with recent high commodity prices.

Revenue assurance: House Ag Committee Chairman Peterson said earlier this week that the revenue assurance option may not even make its way into the final version, despite the fact that both chambers have a version in their bill. As passed by the Senate, the average crop revenue program should not complicate the administration of either the crop insurance program or disaster assistance, mainly because the payments are not linked.  However, conferees will need to determine whether there would be an unacceptable duplication of support, which is not much different than traditional farm program payments.

Carl Zulauf, ag economist from Ohio State University, has written a new three-page paper, titled, "Comparison: Average Crop Revenue's (ACR) Variable Payment Program with Revenue Counter-Cyclical Program (RCCP)."

ACR's variable payment program and RCCP are optional revenue (price times yield) programs in the Senate and House Farm Bills, respectively. However, they are very different revenue programs.

ACR addresses the systemic risk that state revenue at harvest is below state revenue expected at planting. Its revenue target changes with prices, which allows ACR to provide assistance if prices decline from their current high levels.

In contrast, RCCP addresses the systemic risk that U.S. revenue is low. Its revenue target is fixed. Because low price and revenue frequently coincide at the national level, RCCP overlaps considerably with the price counter-cyclical program.

Time will tell whether the conference can settle difference among these two major points in the bill. Conner's staff has already held at least 5 meetings with Congressional staffers and progress is being made on an acceptable bill.

Talks are circulating though that conferees will release a bill that would be vetoed quickly once convening, to use as election ammunition and then spend longer on redrafting a passable bill.

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