Farmers look to Farm Bill negotiations

As Congress moves toward its holiday recess, Louisiana farmers are left waiting to see what the new year will bring in terms of a new farm bill.
“We still have no clear resolution on the farm bill,” said LSU AgCenter economist Kurt Guidry. “The latest news is that there has been some positive movement on addressing some of the issues, but no one seems to think it will happen before the end of the year.”
The House is scheduled to break for the holidays on Dec 13, and the Senate is scheduled to break on Dec. 20.
“It appears the latest hope is that Congress would go back to the negotiations in early January and have a farm bill passed by the end of the month,” Guidry said.
While the House had said it will bring an extension of the current bill to a vote, the Senate has said it would not pass an extension, particularly not one that would allow the U.S. Department of Agriculture to make direct payments again in 2014. Regardless, this would just be a short-term extension and would have limited effect on bringing any type of certainty to producers, he said.
“The longer that we go without a farm bill, the more difficult it is going to be for producers to make plans for 2014,” said LSU AgCenter economist Mike Salassi. Over the next several months, farmers must decide on which crops to plant, purchase inputs and secure financing.
“The uncertainty about what farm policy may look like will make this planning more difficult,” Salassi said. “In addition, the likely elimination of direct payments will cause difficulty for some farmers to acquire financing.”
Still, the economists say several relatively large issues must be worked out.
The House proposal calls for reducing funding for the nutrition program by $40 billion over a 10-year period while the Senate proposal calls for a $4 billion reduction.
“This has been and is likely to continue to be a big sticking point for the negotiations,” Guidry said. “While it doesn’t directly effect farm production, the longer the debate goes on, the longer our producers are going to be without a farm bill. So, indirectly, this issue could have an impact on how long producers are faced with uncertainty.”
Several members of Congress want to alter the payment-limit provisions that were included in the 2008 farm bill – both in the amount that an entity can receive as well as how entities are defined, Salassi said.
In previous legislation, a person had to be “actively engaged” in an operation to be eligible to qualify for a payment. Proposed new wording redefines “actively engaged,” which could limit who within an agricultural operation would be eligible for a separate payment, he said.
Under these proposed rules, the number of family members in a farming operation who receive payments could be drastically reduced, Salassi said. “The end result is that if these new regulations make it into the final legislation, it could mean fewer total payments for an operation. It also could affect how agricultural operations are structured and organized.
One area of debate revolves around how base acres are used in calculating payments.
“It appears that the latest movement has been to favor using historic base acres,” Guidry said. “In many operations, having to use the historic base acres would mean a lower revenue guarantee and, therefore, lower potential government payment levels.”
Removing direct payments could lead to some adjustments in rents paid for agricultural land and in the value of the land itself, Salassi said. In instances where direct payments are significant, eliminating those payments is going to have to eventually be reflected in the rents and land values.
“How much and how long it takes for these adjustments to occur will likely depend on the programs that replace direct payments,” he said.
For some crops, eliminating direct payments is going to make projecting positive cash flow more difficult, Salassi said. “This may cause some adjustments to the crop mix and force some operations to diversify their production.”
In the end, it appears farm bill negotiations are moving toward programs that offer minimal market distortion, the economists said.
“Congress seems to be adamant about making sure that farm bill programs do not provide any incentives for producers to plant crops that are not profitable on their own,” Guidry said. “As a result, it appears farmers will have to be more in tune with the market and potential market signals in making their production and marketing decisions.”