Farm Bill

By Dan Morgan- Dan is a special correspondent of The Washington Post and a Transatlantic Fellow at the German Marshall Fund of the United States. “Analysis from Washington” is posted exclusively at FarmPolicy.com.

The House and Senate batted farm bill proposals back and forth last week, squabbling over such familiar sticking points as payment limits, disaster aid and faster depreciation for farm equipment.

The quarreling, though, seems increasingly detached from the monumental changes that are sweeping through American agriculture—from corn replacing cotton in parts of Mississippi, spring wheat contracts hitting $20 a bushel on the Minneapolis Grain Exchange, and empty grain elevators in the Dakotas.

It isn’t entirely the lawmakers’ fault that their labor has been overtaken by events. When they began work on a new farm bill two years ago, the problems were the traditional ones: stagnant commodity prices and flat farm income. Key farm state lawmakers girded themselves for a traditional battle defending traditional subsidies. They’re still waging that fight, but everything has changed, creating a new set of issues and choices.

What’s the best policy for a world in which food and fuel are competing for acres? With corn prices at or near $6 a bushel, should the U.S. be subsidizing both the ethanol industry and corn growers? Does it make sense for Congress to allocate 85 percent of the U.S. sugar market to beet and cane growers when those acres may be needed for corn and wheat? Is it possible to meet global demands for crops without sacrificing habitat, soil and even the climate?

These are big questions, but they haven’t much entered the farm bill debate, now mired in parochial battling.

The impasse has led some to suggest the unthinkable: This could be the last farm bill of its kind, and perhaps even the last farm bill.

That possibility was advanced privately last week by several serious policy analysts and former senior government officials attending Informa Economics, Inc.’s annual conference on food and agriculture policy in Arlington, Va.

Imagine, they suggested, that the current high prices are not just a blip but a permanent new condition, much like high oil prices. In that case, the commodity title of the farm bill will look increasingly irrelevant. Government price guarantees will no longer be operative at their current levels, and the billions of dollars in direct payments to farmers will become politically unsupportable. In place of the 70-year old system of supports and guarantees, Congress will impose a new safety net operated by private crop insurance companies, though still subsidized by the government.

The House Agriculture Committee’s new farm bill version unveiled last week includes an optional program for farmers providing for scaled-back government payments and other benefits, in return for insurance against both low prices and bad weather. Though backed by corn grower organizations, it gets little respect from farm bloc members.

Committee Chairman Collin Peterson told reporters last week he couldn’timagine why many farmers would sign up for it.

Still, this year’s impasse over the farm bill may be a sign that fundamental change can’t be postponed much longer.

The agriculture committees are beginning to lose control of the debate. By refusing to consider shifting some $50 billion in direct farm payments to other priorities, the agriculture committees have had to beg money from Congress’s powerful tax and revenue committees in order to fund other priorities. Those committees are now extracting their pound of flesh.

House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) wants a $9 billion increase in food stamp spending as a condition of his help. Senate Finance Committee Chairman Max Baucus (D-Mont.) is unyielding in his demand for a $4.1 billion disaster program. He is also proposing a tax change that would give his committee jurisdiction over the nation’s principal soil and habitat conservation program.

The “aggies” may yet get the money, but only at the price of relinquishing some power.

Already, energy, environmental and agriculture policy are merging, so that the agriculture committees alone no longer control the destiny of American farmers. The newly-enacted energy bill gives the administrator of the Environmental Protection Agency huge new sway over the farm economy, including authority to waive biofuel requirements deemed to be hurting the environment or consumers.

In the new crops-for-energy economy of the Midwest, oil prices are as significant as wheat futures. And EPA’s global climate model, now in the works, could determine whether future ethanol and biodiesel plants qualify for tax credits and loan guarantees.

At the same time, the environmental policies the government chooses over the next months may have more of an impact on farm revenues than the fate of direct payments and traditional subsidies.

Pressure is increasing from many sides to fight shortages and food inflation by plowing virgin prairie and land now enrolled in the Conservation Reserve.

In the House, Congresswoman Stephanie Herseth Sandlin (D-S.D.) favors a “sod saver” program that would deny crop insurance for four years to farmers expanding into native prairie–prime habitat for pheasant and duck, and a natural grass bank for ranchers.

A bigger question is the fate of the 36 million acre Conservation Reserve, one of the premier environmental success stories of the last two decades.

Authorized acreage would shrink by more than 10 percent under Peterson’s proposal, and could fall even more unless the government raises payments to participating landowners to compete with the rents they can now get from farmers.

Pressure is mounting – from farmers, the baking industry, and agribusiness groups – to allow early withdrawal of land from the Reserve. Agriculture Secretary Ed Schaefer says he sees no need for such drastic action. But contracts on 4.5 million acres will expire next year, and many landowners are expected to return the land to commercial farming without higher payments from the government. (About a quarter of the land in the reserve now was formerly used to grow wheat, and prices of wheat are now at record levels.)

The public is entitled to a debate on the implications of the sweeping changes underway in U.S. and world agriculture. At this point, it looks as if it will have to wait.

***

Clarification: An earlier version of Dan’s article reported that the “sod saver” provision favored by Congresswoman Herseth Sandlin was not included in the new farm bill outline offered last week by Rep. Peterson. A committee spokeswoman said Monday that sod saver had been included in both the House and Senate versions of the legislation and Peterson’s proposal “makes no policy assumptions.” She added that the chairman’s “framework document contains a level of savings that presumes savings that would be achieved by the inclusion of a sod saver provision in the final conference agreement.”

Dan Morgan

Commodity / Food Prices in the News

A news release issued on Friday by the United Nations Food and Agriculture Organisation (FAO) stated that, “The cereal import bill of the world’s poorest countries is forecast to rise by 56 percent in 2007/2008. This comes after a significant increase of 37 percent in 2006/2007, FAO said today.

“For low-income food-deficit countries in Africa, the cereal bill is projected to increase by 74 percent, according to the UN agency’s latest Crop Prospects and Food Situation report. The increase is due to the sharp rise in international cereal prices, freight rates and oil prices.

“International cereal prices have continued to rise sharply over the past two months, reflecting steady demand and depleted world reserves, the report said. Prices of rice increased the most following the imposition of new export restrictions by major exporting countries. By the end of March prices of wheat and rice were about double their levels of a year earlier, while those of maize were more than one-third higher, according to the report.”

The FAO indicated that, “Foodriots have been reported in Egypt, Cameroon, Cote d’Ivoire, Senegal, Burkina Faso, Ethiopia, Indonesia, Madagascar, the Philippines and Haiti in the past month. In Pakistan and Thailand, army troops have been deployed to avoid seizing of food from the fields and from warehouses.”

To listen to an audio excerpt from FAO Director-General Jacques Diouf regarding food prices, just click here (MP3-2:18).

Reuters writer Robin Pomeroy reported on Friday that, “Food riots in developing countries will spread unless world leaders take major steps to reduce prices for the poor, the head of the United Nations Food and Agriculture Organisation (FAO) said on Friday.

Meanwhile, a Reuters news article from Thursday noted that, “Global investment funds and the weak dollar are largely to blame for high world food prices, a senior official of the United Nation’s Food and Agriculture Organization said on Thursday.

“‘The crisis is a speculative attack and it will last,’ said Jose Graziano, the UN food and farm organization’s regional representative for Latin America and the Caribbean.”

The article indictedthat, “Across the globe foods from bread to milk have become more expensive and in some countries helped fuel inflation. High prices for rice, beans and other food staples provoked food riots in Haiti this week.”

With respect to Haiti, New York Times writer Marc Lacey reported in Sunday’s paper that, “Responding to violent street protests against rising food prices that ground Haiti to a halt over the last week, President René Préval announced subsidies on Saturday that he said would cut the cost of rice by more than 15 percent… Mr. Préval, a former agronomist who is in his second term as president, met earlier in the day with food importers at the presidential palace and emerged to announce new measures that he said would knock the price of a 50-pound bag of rice from $51 to $43, a nearly 16 percent reduction. In the poorest country in the hemisphere, that discount could mean the difference between eating and going hungry for many destitute families.”

Other countries are also taking steps to address commodity and food price concerns; Roel Landingin, writing on Thursday at the Financial Times Online noted that, “The Philippines is mounting anambitious bid to achieve self-sufficiency in rice within three years as a policy of relying on imports to cover production shortfalls unravels amid tightening global supply and soaring world prices.

“The government is hoping the Philippines, the world’s biggest rice importer, will be able to halt imports by 2010 thanks to a spending spree on irrigation and farm support aimed at boosting production.”

The FT article stated that, “The Philippines ‘has realised now it has no other option. Grain prices, like oil, will continue to go up because production cost has also been increasing,’ says Jesus Paras, undersecretary for agriculture.

“President Gloria Macapagal Arroyo last week ordered a big increase in spending to boost rice production, allocating more than 40bn pesos ($960m) a year for construction and repair of irrigation systems, building of farm-to-market roads, distribution of special seeds and additional state lending to farmers.”

Meanwhile, Blaine Harden reported in Saturday’s Washington Post that, “More than anywhere else in Asia, the soaring price of rice has become a good-vs.-evil drama in the Philippines, one of the world’s largest importers of rice.

“Traders who fiddle with the price of the nation’s all-important staple now face life in prison. Police are raiding warehouses in search of hoarders. Soldiers and police have been mobilized to help sell government-subsidized rice to the poor.”

Also with respect to the Philippines, an AFP article from Thursday stated that, “A request to buy low-cost milled wheat from China has been turned down, Favila [Trade Secretary Peter Favila] said, forcing the government to turn to more expensive wheat from the United States.

“‘I am saddened that China did not grant our request and I have already received official communication to that effect. They did not give any reason. They just said the demand in China is also large,’ the secretary said.

“Even noodles, which come from imported wheat will likely be affected as well, he warned.”

Javier Blas, also writing on Thursday at the FT Online, indicated that, “For the past 40 years, consumers have had the upper-hand in the global rice market, which has witnessed a steady decline in prices, interrupted only by the brief spike in 1973-74 triggered by the first oil crisis.

“The structural decline in prices was the result of the Green Revolution, the agronomics movement that spread the use of irrigation, fertiliser and high-yielding varieties of rice in Asia in the late 1960s and led to bumper crops.”

The FT article explained that, “A combination of factors have led to prices rising. Consumption in Asia, the Middle East and West Africa is booming, thanks to rising per capita income (which allows more people to enjoy three meals a day instead of just one or two); poor supplies due to a reduction in acreage devoted to the crop; rising costs of fuel and fertilisers; and the exhaustion of technological advances that contributed to a surge in rice yields in the past.

“Water shortages in southeast Asia, Central America and West Africa have also contributed to a slowdown in production growth, while higher labour cost in countries such as Vietnam as more people move to cities have increased production cost significantly, experts say. Demand has outstripped production in six of the past eight years and global rice stocks have fallen to their lowest level since 1976.”

And, in a separate article posted on Thursday at the FT Online, Javier Blas reported that, “Governments are racing to strike secretive barter and bilateral agreements with food-exporting countries to secure scarce supplies as the price of agricultural commodities jump to record highs, diplomats and cereal traders say.

“The moves coincide with a significant tightening of the global food market as leading exporters of agricultural commodities ban foreign sales. The government-to-government contracts could bypass those restrictions, diplomats say.”

This FT article went on to report that, “Leading rice, wheat and soyabean exporters such as Argentina, Vietnam and Russia have restricted their foreign sales, triggering concerns among importing countries about food supply security.

“Cereals traders say India has held talks with Kazakhstan to secure a bilateral contract for wheat, after New Delhi was forced to import the grain in the past two years, but added that it was unclear if any deal had been signed.

“The move towards bilateral agriculture contracts marks a policy U-turn as such deals were gradually abandoned in the 1990s as countries started to rely on the international food market for their supplies, abandoning previous policies of self-sufficiency.

“Analysts say that while bilateral agreements could help secure supplies, prices are likely to be at market prices rather than discount levels. Diplomats say Russia, Ukraine and Kazakhstan have been particularly involved in striking bilateral agreements as a way to expand their market share.”

Louise Lucas reported at the FT Online on Friday that, “It is hard to over-estimate the impact of higher food prices in Asia. Food accounts for a far bigger portion of shopping baskets in the region’s largely developing economies than in the West. According to the Asian Development Bank, food comprises 59 per cent of the consumer price index weights in Bangladesh; 57 per cent in India; 55 per cent in the Philippines; 40 per cent in China and 42 per cent in Vietnam.

“Hence the shopping list of palliatives. Dealing with the root causes is harder in the short-term. Higher prices reflect supply constraints which are only partially explained by the weather.

“Instead, supply shortages result from smaller tracts of arable land. That is partly to do with urbanisation, as well as the global trend to replace food crops with those used for biofuels. In Asia’s case, more land has also been given to live-stock to meet the emerging middle classes’ desire for more meat at mealtimes.”

With respect to issues associated with biofuels, the Associated Press reported on Thursday that, “Brazil’s president insisted Thursday that crops used for ethanol are not responsible for driving up food prices, and said Haiti - where food riots have erupted recently - could benefit from a biofuel industry.

“Luiz Inacio Lula da Silva was speaking after meeting Dutch Prime Minister Jan Peter Balkenende at the start of a two-day state visit during which he hopes to boost Dutch investment in Brazil’s biofuel industry.

“Ministers from both countries were signing an agreement to intensify cooperation on biofuels Friday.”

The AP article indicated that, “Ethanol production ‘can be the hope for a development model for many countries, particularly in Africa, Latin America and Asia,’ Silva told reporters.

“‘Just look at Haiti today. We can see how many benefits we can take to Haiti if rich and emerging countries like Brazil can make partnerships to invest in third countries and produce (biofuels) there,’ he said.

“Brazil, which claims to be the world’s main producer of ethanol from sugar cane, wants ethanol included in a U.S.-EU plan within the World Trade Organization to cut import taxes on climate-friendly products such as solar panels and wind turbines.”

Later, the AP article noted that, “Silva said food prices are rising because more of the world’s poor are earning enough to buy more and better food, and because people are living longer.

“‘There is … no relation with biofuels,’ he said.”

Doha Link

In a related article from Friday regarding food prices (“What will Doha really do for world food prices?”), Reuters writer Missy Ryan reported that, “A new world trade deal, more than six years in the making, finally appears to be within reach, but it may not ease raging global food costs that have protesters pouring into the streets from Egypt to Haiti.

“On the contrary, many experts expect a new global pact would actually lift food prices slightly, at least at first.”

Later, the article indicated that, “Arguing a deal may ease the price crunch is a novel approach for advocates of the Doha round. For years, they said freer trade would help developing nations boost prices for farm exports, in part by cutting price-depressing subsidies in wealthy nations.”

Ms. Ryan stated that, “Economists have long predicted that a new world trade deal would lift commodity and food prices by a small increment — a couple of percentage points globally for most products, and a bit more for milk, oilseeds or paddy rice.

“Yet they also caution that the benefits of a Doha deal depend on where you sit. It’s good for net exporters of food commodities, like Brazil, Vietnam, or the United States, and bad for those that rely on food imports.”

The article reported that, “A recent paper by World Bank economists showed that rising food prices from 2005 to 2007, while differing from place to place, generally deepened poverty in developing countries.

“Hardest hit were countries like Nicaragua, where large urban populations saw incomes eaten away at by higher costs.

“‘There was always concern about net food importing countries,’ said David Orden, an agricultural economist at the International Food Policy Research Institute.”

Ms. Ryan noted that, “Many Doha supporters say booming prices may make it easier for wealthy nations like the United States to cut farm subsidies and help negotiators win passage for a deal.

“‘It’s so painless,’ said Charlotte Hebebrand, chief executive of the International Food and Agricultural Trade Policy Council in Washington.

“‘All of these commitments are so much simpler than they were a few years ago. Let’s get it done,’ Hebebrand chided.

“But U.S. negotiators, who must answer to Congress and, in turn, a powerful agriculture lobby, may be reluctant to commit to cuts that would stick if prices weaken.

“As the U.S. Congress has been negotiating a new farm law, many farm-state lawmakers been unwilling to accept major cuts to crop supports, saying their constituents need a safety net in case the current boom evaporate.”

Concluding, the Reuters article stated that, “‘Today’s prices are another warning call that we need a good, open agricultural trading system that gets food produced efficiently and distributed efficiently,’ Orden [David Orden, an agricultural economist at the International Food Policy Research Institute said.”

U.S. Food Prices

A Congressional Research Service Report from Thursday (“Food Price Inflation: Causes and Impacts”- by Tom Capehart and Joe Richardson) stated that, “U.S. food prices rose 4% in 2007 and are expected to gain 3.5% to 4.5% in 2008. Higher farm commodity prices and energy costs are the leading factors behind higher food prices. Farm commodity prices have surged because (1) demand for corn for ethanol is competing with food and feed for acreage; (2) global food grain and oilseed supplies are low due to poor harvests; (3) the weak dollar has increased U.S. exports; (4) rising incomes in large, rapidly emerging economies have changed eating habits; and (5) input costs have increased. Higher energy costs increase transportation, processing, and retail costs.

“Although the cost of commodities such as corn or wheat are a small part of the final retail price of most food products, they have risen enough to have an impact on retail prices. Generally, price changes at the farm level have a diminished impact on retail prices, especially for highly processed products.

“The impact of higher food prices on U.S. households varies according to income. Lower-income households spend a greater portion of their income on food and feel price hikes more acutely than high-income families. Higher food costs impact domestic food assistance efforts in numerous ways depending on whether benefits are indexed, enrollments are limited, or additional funds are made available. Higher food and transportation costs also reduce the impact of U.S. contributions of food aid under current budget constraints.”

“Harvesting Cash” Revisited

An update posted on Friday at The Washington Post Online stated that: “The Post’s investigation into farm subsidies, a series of stories that ran in 2006 and 2007, is the focus of a PBS documentary airing tonight. The program, ‘Expose: America’s Investigative Reports,’ follows the Post’s Sarah Cohen, Gilbert M. Gaul and Dan Morgan, who explain how they found more than $15 billion in wasteful, unnecessary spending.

“The program will air as part of Bill Moyers Journal and will look specifically at two elements of the Post’s stories, the finding that $1.3 billion was paid in farm subsidies to land owners who had grown nothing and $635 million in drought payments to farmers who had experienced moderate or no drought.

“The program can also be viewed on the website for ‘Expose: America’s Investigative Reports.’”

Keith Good

For a better perspective on current Farm Bill negotiations regarding funding issues, a brief and very general snapshot overview of how lawmakers have moved over the past two months into the current circumstances is provided below.

At the conclusion of the funding background is a summary of more recent developments.

Farm Bill Funding Background

* February 12- David Rogers reported at Politico.com that, “Trying to salvage stalled farm bill negotiations, House Agriculture Committee Chairman Collin Peterson outlined a 10-year-plan that would impose tighter payment limits on crop subsidies and pare back demands for added revenues to meet the cost of the legislation.

“Peterson, who caucused with Republicans and Democrats on his panel Tuesday night, said later he would set a revenue target of about $6 billion or roughly half the $11 billion to $12 billion level still being sought by senators.”

* February 13- Congressional Quarterly reported that, “In an effort to win White House support for a new version of the farm bill, House lawmakers are proposing to reduce the measure’s agriculture subsidies as well as the tax revenue designed to pay for them.

“The changes are outlined in a new plan drafted by Collin C. Peterson, D-Minn., the Agriculture Committee chairman, and Robert W. Goodlatte of Virginia, the panel’s ranking Republican.”

The CQ article noted that, “Most of the money saved under the bill — about $6.5 billion — would come from changes to commodity-crop programs.

“Specifically, farmers would not get direct payments, which are paid annually based on what they grow and their total acreage, during the ninth year of the bill’s 10-year projections. The move would result in about $5.2 billion less in spending, according to the draft bill.”

* February 14- The Peterson-Goodlatte framework proposal was made available; and, Reuters writer Charles Abbott reported that, “The Bush administration says it can accept a spending increase of $6 billion over 10 years. Leaders of the House Agriculture Committee assembled a farm bill ‘framework’ to show that good policy can be written at that level, which is sharply less of an increase than Congress has proposed.”

DTN writer Chris Clayton reported (2.14) that, “Major commodity and agriculture groups banded together Thursday to argue that a spending plan for the farm bill takes too much money away from farmers and shifts those dollars to other parts of the farm bill.

“A letter to the chairmen and ranking members of the House and Senate Agriculture Committees said a new plan offered Wednesday by the House Agriculture Committee was ‘seriously under-funded’ and proposed cuts to the commodity programs were ‘excessive.’”

* February 15- DTN Political Correspondent Jerry Hagstrom reported that, “Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, and ranking member Saxby Chambliss, R-Ga., today sent the House Agriculture Committee a farm bill conference proposal for a five-year bill that would spend $12.3 billion over the current baseline over a 10-year period.”

(Note: related press release available here; letter from Senators Harkin and Chambliss to Ag Committee Chairman Collin Peterson (D-Minn.) and Ranking Member Robert Goodlatte (R-Virginia) is available here.)

“On Tuesday the House Agriculture Committee, after consultation with the Bush administration, proposed a 10-year farm bill with $6 billion in spending over the baseline. Farm groups had said the farm bill needs to spend $12.5 billion over the baseline over 10 years to avoid cutting farm subsidiesto pay for other parts of the bill.”

* February 18- Peter Shinn of Brownfield reported that, “The Senate Agriculture Committee on Friday issued a counter-offer on the farm bill. The Senate version spends about $12.3 billion dollars more than allowed by last year’s Congressional Budget Office baseline for ag programs. The House Ag Committee’s farm bill offer last week was a comparatively modest $6 billion dollars over budget baseline. The White House has called the Senate’s offer a non-starter, largely because it still requires raising revenue to fund the legislation.”

* February 21- DTN Political Correspondent Jerry Hagstrom reported that, “Key House and Senate agriculture leaders are putting the final touches on an agreement for a new farm bill that would cost $9 billion over the current baseline over a 10-year period, with a separate deal for a permanent farm disaster aid program, DTN has learned.”

Mr. Hagstrom added that, “The Capitol Hill source said that [House Agriculture Committee Chairman Collin] Peterson [D-Minn.], House Agriculture Committee ranking member Bob Goodlatte, R-Va.; Senate Agriculture Committee Chairman Tom Harkin, D-Iowa; Senate Agriculture Committee ranking member Saxby Chambliss, R-Ga.; Senate Budget Committee Chairman KentConrad, D-N.D.; and Senate Finance Committee Chairman Max Baucus, D-Mont., have all been involved in a ‘group’ effort to write the document and that a deal could be announced as early as Friday; however, because other members are difficult to reach during the congressional break, it might not be finalized until next week. The source said the exact amount of the increase for food stamps and other nutrition programs is still under discussion and will be somewhere between the House- and Senate-passed bills.”

* February 25- Philip Brasher noted at The Des Moines Register’s Cash Crops blog that, “Lawmakers are working toward reaching a deal this week on a spending limit for the farm bill, likely about $9 billion over the cost of existing programs…. Kate Cyrul, a spokeswoman for the Senate Agriculture Committee, said ‘we’re hoping that there will be some movement this week.’”

* February 26- DTN writer Chris Clayton reported that, “Congressional tax-writing committees will work to come to terms by the end of the week on provisions to add about $10 billion in spending to the farm bill, House Agriculture Committee Chairman Collin Peterson, D-Minn., said Tuesday evening.

“An agreement to bring this farm bill to conclusion was one of the main goals of a meeting between agriculture and tax-writing committee leaders and top Democratic Congressional leaders Tuesday night. Besides finding a cost figure that members of Congress could agree upon, lawmakers have to find a way to pay for added expense which appeals to the House and Senate, and then can be sold to the White House.”

* March 3- Peter Shinn reported at Brownfield that, “And according to [House Ag Committee Chairman Collin Peterson], another piece of the farm bill puzzle has fallen into place. On Saturday, Peterson said USDA sent him a detailed, written farm bill counter-offer that agrees to spend $10 billion over the Congressional Budget Office baseline for farm programs and also included a list of acceptable budget offsets.

“But Peterson also said some of those proposed budget offsets from the Bush administration include items like lowering Medicare reimbursements for those on oxygen. And, Peterson added, the Bush administration’s farm bill counter-offer also contains a long list of so-called reforms that it says are non-negotiable. Peterson said that list of non-negotiable reforms includes, among many other things, inclusion of a revenue based counter-cyclical program with recourse loans, elimination of the sugar-to-ethanol program, ending the prohibition of planting fruits and vegetables on program crop acres and setting aside 25% of emergency international food aid funds under PL-480 for cash purchases of local commodities in the countries receiving U.S. food aid.”

* March 5- DTN Political Correspondent Jerry Hagstrom reported that, “Democratic and Republican members of the Senate Finance Committee who are also farm bill conferees have agreed on a $12 billion package of farm bill offsets to offer the House and the Bush administration, a key Senate source said Wednesday.

“The package would involve $8 billion in spending cuts and $4 billion in provisions that would increase revenue. House and Senate farm leaders and the Bush administration have agreed to a $10 billion increase over the farm bill baseline over 10 years and it is unclear how a $12 billion finance package would fit with that $10 billion plan.

“The Bush administration has reacted positively to the spending cuts, but negatively to the revenue raisers, the source said.”

* March 10- DTN Political Correspondent Jerry Hagstrom reported that, “The chairman of the House Agriculture Committee said Monday that progress on the farm bill is being complicated by senators’ attempts to turn it into a tax bill and by the difficulties in writing a permanent disaster program.”

* March 12- Congressional Quarterly reported that, “The Senate on Wednesday passed a 30-day extension of the nation’s farm law to give bicameral negotiators more time to hammer out a deal on a long-term agriculture policy overhaul.”

* March 13- “If a final agreement is not reached by April 18, I call on Congress to extend current law for at least one year,” President Bush said in a statement.

* March 17- Jerry Hagstrom writing at AgWeek.com, reported that, “Congress left town March 14 for a two-week spring recess, but congressional leaders agreed to continue work on a bill that would add $10 billion over 10 years to a bill that already costs $597 billion.”

* March 18- DTN writer Chris Clayton reported that, “A framework agreement on how to divvy up $10 billion in extra funding for the farm bill may be ‘dead on arrival’ because itwould drastically cut proposed funds to create a permanent disaster plan for farmers.

“Demonstrating the inner-fighting going on with these talks, Senate Finance Committee Chairman Max Baucus, D-Mont., issued an angry statement Tuesday afternoon after learning the House and Senate Agriculture Committees would attempt to cut proposed funding for a permanent disaster program from $5.1 billion to $2.2 billion over a five-year span. Baucus said he opposes ‘slashing’ the disaster package.”

* March 27- DTN writers Jerry Hagstrom and Chris Clayton reported that, “Senate Budget Committee Chairman Kent Conrad, D-N.D., told DTN on Thursday he would be satisfied with a $4.05 billion farm disaster program that farm bill negotiators appear likely to add to the new farm bill.

“Last week Conrad was among those who said a plan to provide only $2.24 billion for disaster aid was ‘unacceptable.’

“The new allocation for disaster aid was revealed in a new farm-bill framework agreement that DTN obtained on Thursday. According to the document, the chairmen and ranking members of the House and Senate agriculture committees are considering a new framework agreement under which the money for the new weather-related disaster aid program would rise to $4.05 billion, while the increases for conservation, specialtycrops and energy programs would be lower than in the proposal crafted last week.”

* March 28- Congressional Quarterly writer Catharine Richert that, “For many on Capitol Hill, this week is looking a lot like do-or-die for the farm bill.

“Lawmakers and staff from the House and Senate Agriculture committees spent the two-week spring recess deciding how they’d spend an extra $10 billion above the bill’s budget baseline they’ve been promised by the Senate Finance and House Ways and Means panels.

“But there’s a problem: The Agriculture Committee members say they haven’t seen plans from the tax-writing panels on how they’ll come up with the cash.”

* April 1- Reuters writer Charles Abbott reported that, “Lawmakers need to put more reforms into the new U.S. farm law, the chairman of the House tax committee said on Tuesday, suggesting more money for federal anti-hunger programs.

“‘Our farm bill is not the most popular legislation,’ chairman Charles Rangel of the House Ways and Means Committee said after meeting his Senate counterpart to discuss ways to pay for a $10 billion spending increase for the new law.”

* April 3- Philip Brasher, writing at The Des Moines Register’s Cash Crops Blog, explained that, “The biggest sticking points on the farm bill have come to down to how much money to put into farm disaster assistance and to food stamps and other nutrition programs.

“That’s the word today from Senate agriculture chairman Tom Harkin.

“The disaster program is a must for two powerful Democrats: Kent Conrad of North Dakota and the chairman of the Senate Finance Committee, Max Baucus of Montana. Conrad is chairman of the Senate Budget Committee and is a member of both the finance and agriculture committees.”

Mr. Brasher noted that, “At the same time, Senate Republicans are resisting any cuts to the annual fixed payments that go to grain and cotton farmers.”

* April 8- Philip Brasher, writing at The Des Moines Register’s Cash Crops Blog, pointed out that, “The chairmen of the House and Senate agriculture committees say the biggest hangup on the farm bill continues to be the dispute over how to fund it and comply with pay-as-you-go budget rules.

“‘The biggest problem we’re facing is the issue of offsets,’ said Rep. Collin Peterson, the House agriculture chairman.

“Peterson and his Senate counterpart, Tom Harkin of Iowa, said the funding issue is the problem of the House and Senate tax-writing committees.”

* April 9- Bill Tomson reported that, “The U.S. House of Representatives Wednesday appointed conferees to work with senators to create a unified farm bill, laying down a blueprint for agricultural and nutrition policy for five years.” (For a list of the House conferees, see this House Ag Committee press release).

Mr. Tomson added that, “The House, in a 400-to-11 vote Wednesday evening, approved a non-binding ‘motion to instruct’ farm bill conferees not to use tax measures to fund the 2008 farm bill,” the article said.

“For more on this “motion to instruct,” see this press release issued on Wednesday by Agriculture Ranking Member Bob Goodlatte (R-Virginia).”

* April 10- Chris Clayton, writing at the DTN Ag Policy Blog, indicated that, “The long-awaited first public conference meeting on the farm bill will happen Thursday morning at the Capitol.

“It comes as the House came together on a bi-partisan agreement to spend $6 billion above the baseline on the farm bill and do it without any tax increases. House Democratic and Republican leadership apparently have agreed to the approach.

“What’s effectively left out? The $4 billion permanent disaster program, along with a bevy of tax cuts in the Senate farm bill that range from tax cuts for the Conservation Reserve Program to accelerated depreciation for race horses and a capital-gains deduction for the timber industry. There were more than 60 such measures in the Senate farm bill.

“The lack of negotiating progress between Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Committee Chairman Charles Rangel, D-N.Y., led to the decision to move ahead with the House proposal.”

Recent Developments

DTN Political Correspondent Jerry Hagstrom reported yesterday that, “Senate farm bill conferees Friday afternoon finalized an offer to the House of Representatives of a $12.5 billion package that would increase spending in the farm bill by $10 billion over 10 years. The legislation includes a new disaster aid program and provides $2.5 billion in agricultural tax breaks. [Note: Related press release available here, funding details available here].

“Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, also scheduled a conference between the House and the Senate at 3:30 p.m on Monday in Washington.”

Mr. Hagstrom explained that, “Senate conferees want to use different offsets than the credit-card reporting requirement the House offered. Under pay-as-you-go rules in the House, spending cannot be increased unless it is cut somewhere else or government revenue is raised.

“House Agriculture Committee Chairman Collin Peterson, D-Minn., made a $5.5 billion offer without the disaster aid and tax package, but Senate Finance Committee Chairman Max Baucus, D-Mont., and Senate Finance Committee ranking member Charles Grassley, R-Iowa, said the House offer was unacceptable. ‘Chairman Baucus wants the agreement that Chairman Peterson sat in a room and made with him,’ a Baucus aide said, referring to a February meeting at which Senate Majority Leader Harry Reid, D-Nev., House Speaker Nancy Pelosi, D-Calif., Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, House Ways and Means Chairman Charles Rangel, D-N.Y., Peterson and Baucus had agreed to a $10 billion farm bill package and offsets.”

Yesterday’s DTN article also noted that, “Agriculture Deputy Secretary Chuck Conner told reporters Thursday that the White House would not support the House’s plan to use of increased government revenue from improved reporting of credit card sales. Baucus said he believes his offsets ‘will be more popular with the White House and the country.’”

Peter Shinn & Bob Meyer reported yesterday at Brownfield that, “The Senate counter-offer is for $10 dollars over budget baseline with a $4 billion permanent ag disaster aid fund and includes the controversial $2.5 billion in Senate tax breaks. That means it takes $12.5 billion in offsets to pay for it.

“A joint press release from Senate Ag Committee Chairman Tom Harkin of Iowa and Senate Finance Committee Chairman Max Baucus of Montana reminded House conferees that all had agreed to a $10 billion-over-budget-baseline approach to the new farm bill back in February. And Baucus addedthat ‘in farm country, a handshake is your word.’

“In a statement issued Friday evening, House Ag Committee Chairman Collin Peterson said, ‘The Senate’s Farm Bill counter-offer today affirms the House position on the core Farm Bill policies and shows how close we are to an agreement on those issues but also demonstrates that there is still work to do on financing the bill and other extraneous issues.’ Peterson specifically takes issue with, ‘$2.5 billion in tax giveaways that don’t even belong in the Farm Bill.’”

Keith Good