Regional Interests, Philosophical Divides Color Commodities Debate

In this June 10, 2013 photo, guest workers harvest an onion field in Lyons, Ga. Two years after a handful of Southern states passed laws designed to drive away people living in the country illegally, the landscape looks much as it did before: still heavily populated with foreign workers, many of whom don't have legal authorization to be here. There are still concerns over enforcement and lingering fears among immigrants, but in many ways people have gone on with life much as it was before the laws were enacted.
National Journal
Stacy Kaper
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Stacy Kaper
Sept. 18, 2013, 4:30 p.m.

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.

Lar­ger ver­sion

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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