Southern sway: New Senate farm bill reflects Cochrans influence

May 10, 2013

WASHINGTON, May 9, 2013 - With Senator Thad Cochran now serving as the top Republican on the Senate Agriculture Committee, the south appears to be rising again.

But some of the changes in the “Agricultural Reform, Food and Jobs Act of 2013” are already generating criticism from those who think the Mississippi Republican and his fellow southerners went just a little bit too far for their own fiscally conservative tastes.

Of course, a lot of things can still change between now and the actual committee markup, scheduled for 10 a.m. on Tuesday, May 14. The Committee released a new 1,102 page farm bill draft last night, which largely mirrors last year’s versions, but with some changes in payment rates.

Senate Agriculture Committee Chairwoman Debbie Stabenow notes that, with key changes in this year’s mark, passing the Farm Bill will yield a total of $23 billion in cuts to agriculture programs – the same level as last year’s effort.

As expected, direct payments, the Average Crop Revenue Election Program and the Supplemental Revenue Assistance Program are all eliminated.

The Agriculture Risk Coverage (ARC) program, which was introduced in last year’s Senate mark, remains. But in order to trim costs, the price band is set at a slightly lower range of payment (88 percent instead of 89 percent) and prices will be calculated on a 12-month time frame, rather than the first five months of the marketing year.  The measure includes the Supplemental Coverage Option, whereby producers could purchase a policy on top of their individual crop insurance coverage to cover all or part of a producer's deductible.

However, her bill includes several new provisions – long sought by cotton, rice and peanut interests – who have maintained that some of the traditional forms of risk management don’t work for them like they do in the Midwest.

To download the entire 1,102 page document, click:

http://www.agri-pulse.com/uploaded/CommitteePrint1.docx

For example, in addition to a revenue coverage program that was the centerpiece of the Senate Ag Committee’s commodity title last year, the draft calls for a new “Adverse Market Payment” program based on making payments when prices drop below reference prices.

Basically, it’s a counter-cyclical program (CCP) with enhanced rates for rice and peanuts, while the target prices established in the 2008 farm bill remain the same for all other commodities.

The reference price for rice will be $13.30/cwt, up from the current target price of $10.50/cwt. And the peanut target price will be increased from $495/ton to $523.77/ton. Rice and peanut producers will be able to update their yields, generating potentially even more payments. Peanut producers will also be able to update their base acres.

Like last year, a new Stacked Income Protection Plan (STAX) for producers of upland cotton would be created, but when you combine the new program with changes in the cotton loan rate and the elimination of direct payments, these changes actually save $2.8 billion. And, as in previous farm bill, cotton users also will be getting some help. Economic adjustment assistance will be made to domestic users of upland cotton - regardless of the cotton’s origin – at a rate of 3 cents per pound. The program is retroactive to August 1, 2012.

“Economic adjustment assistance shall be made available only to domestic users of upland cotton that certify that the assistance shall be used only to acquire, construct, install, modernize, develop, convert, or expand land, plant, buildings, equipment, facilities, or machinery,” the document notes.

The Secretary is also directed to carry out “special competitive provisions for extra long staple cotton” to, among other things, “ensure that ELS cotton produced in the U.S. remains competitive in world markets- similar to language in last year’s bill.

While there are lots of differences to be worked out across the bill, the programs benefiting rice and peanuts have already generated a lot of closed-door discussions among Republicans – including several Midwesterners who hoped to move away from target price-based programs. They realize the importance of getting Southern votes on the floor if the bill is going to pass again this year, but may work to remove other commodities from the AMP program.

But even if AMP is reworked to eliminate some commodities, some type of price protection could return in conference. The House Agriculture Committee included a Price Loss Coverage (PLC) in their version of a farm bill last year.

However, the AMP and PLC actually differ in several ways. For example, the PLC pays on planted acres up to total base on the farm; it includes reference price increases and yield updates for all commodities. In the House version, corn and beans get a 38 percent increase over the 2008 levels. In addition, no special base acre accommodations need to be made in PLC because the existing total base on a farm simply serves as a cap on total payments.

In addition to the commodity title, the draft bill also includes several important enhancements for crop insurance and reform of the conservation program, combining 23 programs into 13. Producers who receive crop insurance would be required to meet new conservation requirements in five years.

Also, the 2013 chairman’s mark includes the same limitation on premium subsidy based on average adjusted gross income (AGI) as last year’s bill. Beginning with the 2014 reinsurance year, the provision would reduce the federal payment of the crop insurance premium by 15% for farm businesses with AGIs above $750,000.

However, the AGI limit will only go into effect after a study conducted by USDA and GAO determines that the limit does not significantly increase the premium amount paid by producers with an average adjusted gross income of less than $750,000, result in a decline in the crop insurance coverage available to producers, or increase the total cost of the Federal crop insurance program. A carefully crafted compromise to remove the AGI provision - reached by farm and environmental groups earlier this week - was not included but is expected to be offered as an amendment.

Other key provisions:

Enrollment in the Conservation Reserve Program (CRP) would be gradually reduced by establishing an acreage cap that declines from 30 million acres in 2014 to 25 million by 2018.

Eligibility in the Supplemental Nutrition Assistance Program (SNAP) was tightened, saving $4.1 billion.

Facing stiff opposition from beef, pork and other segments of the livestock industry, a controversial provision to create national standards for egg-laying hens - advocated by the United Egg Producers and the Humane Society of the United States - was dropped from the final draft language.

For more on the commodity title from Sen. John Thune: http://www.agri-pulse.com/Thune-expects-to-preserve-commodity-title-reforms-05092013.asp

For more reaction to the farm bill draft, go to:
http://www.agri-pulse.com/Ag-groups-give-mixed-reviews-to-Senate-farm-bill-draft-05092013.asp

For more news, go to www.Agri-Pulse.com

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Southern sway: New Senate farm bill reflects Cochrans influence

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