Unbelievably, Members of Congress are headed out of town on Friday having not passed a new farm bill or extended the old one. This means that on Oct. 1, authorization for farm and food policies spanning the breath and depth of our economy will have expired.
Wheat farmers who are now taking on operating loans for the 2013 crop and putting it in the ground will be joined by many, many others wondering what farm safety net will exist in the new year and how much more deeply farm programs will be cut when the new Congress is seated in January.
Here are a few possible scenarios for what might happen next:
On Sept. 30, the 2008 Farm Bill expires, taking with it authorization for most farm and food programs, with the notable exceptions of crop insurance, authorized under the Federal Crop Insurance Act, and some conservation programs.
Many programs will continue to function, however, particularly if they have an appropriation the pending six-month continuing resolution. USDA is preparing a plan to phase out programs as law and funding expire.
Assuming Congress returns for a lame duck session – which is scheduled, but not guaranteed – both the House and Senate could consider a full, five-year bill, a three-month extension of the 2008 law or a one-year extension of the 2008 law.
The steps to pass a new, five-year farm bill in this Congress are surprisingly few: the House needs to approve the bill already presented by the House Agriculture Committee, that bill needs to be conferenced with a Senate bill, and the compromise measure needs final approval from both chambers and the president’s signature.
A House whip conducted last week on a three-month extension fell short of getting necessary support. Such an extension after the election would be even less likely.
More discussion has centered on a one-year extension in the lame duck to extend current law into the fall of 2013. This pushes off to the 113th Congress the task of finishing a five-year bill, which would be all the more difficult because funding is expected to be reduced for farm programs through some combination of sequestration, scoring changes and political shifts.
The path of a one-year extension depends heavily on the outcome of the November elections. Speculation is that if Republicans take the White House and the Senate, they will extend current law for a year and then work to create a new version of the farm bill tailored to Republican priorities.
If a lame duck session does not happen, or if there is no movement on passing an extension or five-year bill before the end of the year, the Agriculture Act of 1949 would go into effect on Jan. 1.
This underlying law is commonly known as “permanent law” because new farm bills actually amend it, rather than creating wholly original pieces of legislation. The soon-to-expire farm bill suspends permanent law until the end of the 2012 crop year.
The 1949 law uses “parity prices” for price support. A parity price is set to guarantee producers 50 to 90 percent of parity using the 1910 to 1914 ratio as a benchmark. For example, the farm market price for wheat in 2012 is $6.37 per bushel, and the parity price for wheat is $18.10 per bushel. Under permanent law the price for wheat would be set at 75 percent of the parity price, which would be $13.58 per bushel.
Rice, cotton, milk and honey would also have higher permanent law support prices than the market price while feed grains including corn, sorghum, barley and oats would not currently trigger permanent law price support. Soybeans, other oilseeds, peanuts and sugar beets would not have any support under the 1949 law.
Wheat is in a unique position since it is the first crop harvested, with 2013 winter wheat harvested as early as April. In theory, if Congress continues to do nothing, wheat growers could be receiving $13.58 per bushel from the government for their 2013 winter wheat.
Of course, if no lame duck session is scheduled, farmers and all other Americans will face two economic issues more drastic than a return to post-war era farm policy: sequestration cuts set to go into effect in January and the expiration of tax cuts, the combination of which is known as the “fiscal cliff.” Without action, this deadly duo is likely to upend the already shaky U.S. and world economies.
A Congressional Research Service report with more detail on possible 2008 Farm Bill extension or expiration scenarios is available through FarmPolicy.com at http://farmpolicy.com/wp-content/uploads/2012/09/R42442.pdf.