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Regional Interests, Philosophical Divides Color Commodities Debate

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(AP Photo/David Goldman)

Amid heavy pressure to slash government spending, the debate over how best to protect domestic production of agricultural commodities is ensnarled in a web of competing regional interests on Capitol Hill.

In the old days, the core farm program consisted of making payments to crop farmers when the price of a commodity went down. Today, crop insurance is the main part of the program, and a battle has arisen between the North and the South over how the supplemental commodities programs should work.

 

Varied political allegiances and philosophies among House and Senate Agriculture Committee leaders have generally resulted in a House commodities section of the farm bill that is more attractive to Southerners and a Senate version that is more palatable to Northerners, according to commodities lobbyists, academics, and congressional aides of all stripes.

Both chambers' measures attempt to strike a balance and include provisions designed to secure votes from members from all regions of the country and from both political parties. Both versions eliminate controversial "direct payments" to farmers based on what they used to produce and instead rely predominantly on continued growth of crop insurance, which provides producers relief from natural disasters and declines in commodity prices.

But each bill includes a host of commodity programs meant to supplement the types of support available to farmers and to make up for the loss of direct payments.

 

The House legislation relies on increasing price floors in an existing countercyclical program as the main backstop against the risk of sustained low commodities prices; Southern rice and peanut interests like this approach, because they are the most likely to benefit from such support.

The Senate bill, meanwhile, creates a more robust revenue-risk coverage program than the House bill. It would cover "shallow losses," to make up some of the risk that crop insurance does not cover, and is most championed by corn and soybean farmers in the North and Midwest.

"Most people would say that the Senate version probably hews a little more towards the center of the country—the corn- and soybean-producing parts of the country," said Roger Johnson, president of the National Farmers Union, which represents a wide range of farmers and ranchers nationally. "The House version might heel a little bit more towards the Southern parts of the country and a little more toward wheat producers, which tend to be scattered a lot more, all over the country."

Agriculture-industry representatives note that in the House, Chairman Frank Lucas, R-Okla., hails from a state where wheat is the largest cash crop, but he has closely aligned himself with Southern agriculture interests, who tend to favor support through price floors. Ranking member Collin Peterson, D-Minn., has also long championed such price protection.

 

This year, the Senate Agriculture Committee bumped up price floors for peanuts and rice, as a concession to Sen. Thad Cochran, R-Miss., the panel's new ranking member. Cochran elevated Southern interests when he succeeded the former ranking member, Sen. Pat Roberts, R-Kan., who is no fan of government-set price floors.

How the House and Senate might hash out the competing commodities sections depends on how the overall farm-bill fight plays out. That debate largely centers on differences over nutrition programs. But should the House and Senate manage to make it to conference on the farm bill, several major disparities in the commodities programs would need to be reconciled.

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PLANTED VERSUS HISTORIC ACRES

A key sticking point between the House and Senate versions is whether to base countercyclical farm payments—which kick in when prices fall below set price floors—on a farmer's historically planted acres or on currently planted ones.

Under current law, both the automatic, or direct, payments—which are being phased out—and the countercyclical payments are set by the acreage a farmer used to plant, a basis that could be several years out of date.

The House bill seeks to change that by tying payments to currently planted acres.

Lucas and Peterson have argued that it makes more sense and is easier to justify an approach that pays farmers for currently planted crops that fell below price floors.

Southern crops such as rice and peanuts make up a significantly smaller slice of the commodities market than faster-growing segments such as corn and soybeans, and Southern producers fret that if they lose acres to other crops, they will not have enough raw material to maintain production flows and keep costs down.

Because peanuts and rice tend to enjoy higher relative price floors than other crops, countercyclical payments are more likely to kick in for them. And payments tied to currently planted acres provide an incentive to grow rice and peanuts, thus keeping acreage levels up.

On the opposite side of the debate is Senate Agriculture Chairwoman Debbie Stabenow, D-Mich. Her Senate bill keeps the countercyclical payments tied to historically planted acres. The argument for historic or "base" acres is that such a benchmark does not risk driving planting decisions that could distort the market and trigger World Trade Organization penalties.

In the House, Rep. Bob Gibbs, R-Ohio, a corn farmer, shares these concerns about WTO problems and is an outspoken critic of this House's provision.

"It's definitely market-distorting, because farmers will plant based on the program," he said. "Since the '96 farm bill, we have tried to move to be more market-driven, and the House bill actually moves us away from being more market-driven. Farmers, for the most part, want to make their decisions off what the market is telling them and not what government policy is."

CROP INSURANCE CONSERVATION STANDOFF

Another key difference between the two bills is the Senate's requirement that farmers implement certain conservation measures to continue enjoying federally subsidized crop insurance. Under current law, farmers must adhere to conservation requirements to benefit from other federal commodity programs. If a farmer's land includes wetlands, for example, he must protect them, or if the property includes highly erodible land, he must put conservation plans into place to reduce soil erosion. The Senate bill aims to extend these long-existing conservation requirements to the most significant commodity-support system: the steadily growing crop-insurance program.

A broad coalition of agriculture and conservation organizations reached an agreement to support this change earlier this year.

But House Agriculture leaders object, arguing that this could put additional burdens on farmers and potentially complicate participation in crop insurance.

"If you engage in a whole series of things, such as, 'You can't get crop insurance unless you plant in a certain way, on a certain day, in a certain direction, or you can't access a variety of other programs,' then we aren't having a farm bill that helps farmers raise food and fiber, but we have a social tool here that's used to direct how farmers … conduct their business," Lucas told DTN's The Progressive Farmer earlier this year.

Ultimately, agriculture lobbyists argue that the differences between the House and Senate commodities provisions could be worked out if lawmakers can resolve bigger-picture issues in the farm bill, such as the stalemate over food stamps and nutrition programs.

But until funding levels and other top-line decisions are made, lobbyists following the debate closely argue it is hard to forecast how the details might be worked out.

"The issues are not insurmountable," said Mary Kay Thatcher, senior director for congressional relations for the American Farm Bureau Federation. "But it is going to require somebody at the top—Harry Reid and John Boehner, presumably—to say, 'Here's how much you have got to save.' There's not that much that's financially different in the crop-insurance and commodities titles, but until they get that number for how much savings they have to do in the overall bill, how can they cut a deal?"

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