Farmers will see a lot they recognize in the 2007 farm bill passed by the House Agriculture Committee in the early morning hours of July 20. But they'll also find some new features they may not like or may have to tolerate, according to cotton, rice and wheat groups.
As promised by Committee Chairman Collin Peterson, the new farm bill retains the structure of the 2002 farm bill. But it breaks new ground by providing a revenue counter-cyclical program, “rebalancing” target prices and loan rates and spending up to $1.6 billion for fruit and vegetable growers.
It also puts new limits on farm program payments that could cause some economic disruptions for cotton and rice producers who have been struggling with lost markets and resulting low prices in recent years.
The latter was the result of a last-minute compromise worked out between Peterson and House Speaker Nancy Pelosi. Peterson said he agreed to the new language because the speaker agreed to work to defeat even more stringent payment limit language on the House floor.
“This represents the biggest change in payment limits ever,” Peterson told reporters during a press conference held the morning after the committee approved its new farm bill by a unanimous vote.
The language would make any farmer with more than $1 million in adjusted gross income ineligible for farm program payments. It would also require direct attribution of farm program payments to individual farmers.
“This is beyond where I wanted to go,” said Peterson. “This is all part of the reform that a lot of folks wanted, but some of our members were clearly uncomfortable supporting it. They had to have some assurance they wouldn't be subjected to even more changes down the road.
“The new rules don't go as far as some people would like, but they also go farther than we expected to go.”
Peterson said he felt wheat, cotton and rice organizations would oppose the new payment language. But groups like the National Cotton Council, USA Rice Federation and U.S. Rice Producers Association appeared to be reconciled to the changes.
“Although the rice industry would have preferred there be no further reductions to payment limits, the USA Rice Federation and U.S. Rice Producers Association have reluctantly agreed to the changes, recognizing the political realities Chairman Peterson faces in moving the bill through committee and across the House floor,” the groups said.
“We appreciated the strong statement from (House) Speaker Pelosi on this bill,” said Craig Brown, the Cotton Council's vice president for producer affairs. “She said she thought the bill contained some strong reforms.”
The committee bill reduces the adjusted gross income farm program eligibility cutoff from the current $2.5 million with a 75 percent exemption for farm income to a three-year average adjusted gross income of $1 million. The bill creates three tiers of income with an exemption of 66 and 2/3rds percent for farm, ranch and forestry income for the middle tier of $500,000 to $1 million.
It also requires USDA to assign one payment limit to a single social security number rather than allowing a farmer to participate in payments for up to three farm entities. Farmers would still be allowed to participate in more than one entity.
On the other hand, the committee voted to increase the limit for direct payments from $40,000 to $60,000, keep the limit for counter-cyclical payments at $65,000 and to remove the cap on marketing loan gains or loan deficiency payments. The latter effectively removes the need for the issuance of commodity certificates.
Peterson said he believe the transition period represented by the changes in the payment limit caps was justified because of the market losses incurred by farmers, particularly cotton producers.
“You have to remember that these folks have huge investments in farm equipment and land,” he said. “These are not wealthy people who have the means to withstand all the risk they take on.
“If they don't have support from the government they have to go find it in the corporate world. If that happens, you basically turn them into contract farmers, which is not what we want to do. Most of the people like OxFam International who criticize the payments these guys receive have no clue how the real world operates.”
Peterson said the House committee's farm bill incorporates new ideas and important reforms, “focusing farm program benefits so they get to real farmers and boosting investment in programs that help those who haven't received benefits through the farm bill.”
The new farm bill, which is expected to go to the House floor before the scheduled Aug. 4 recess, would also provide farmers with a choice of safety net programs: either the traditional, price-based counter-cyclical payment or the revenue-based CCP supported by the National Corn Growers Association and USDA.
The bill would also provide the first time more than $1.6 billion “to strengthen and support the fruit and vegetable industry in the United States.” The latter includes funding for research and pest detection, block grants, organic farming, farmer's market promotion, the Environmental Quality Improvement Program and the National School Lunch Program.
The bill would raise target prices for wheat by 23 cents to $4.15 per bushel and soybeans 20 cents to $6.10 per bushel but lower that for upland cotton by 2.4 cents to 70 cents per pound. The target price is used primarily for calculating counter-cyclical payments.
It would also increase the wheat loan rate 19 cents to $2.94 per bushel and for oats 6 cents to $1.39 per bushel. The committee rejected a recommendation by Agriculture Secretary Mike Johanns that marketing assistance loan rates be reduced for most of the program crops, including cotton from 52 to 45 m
The committee's payment limit changes did not go far enough to suit environmental and other interest groups such as the Sustainable Agriculture Coalition and the Environmental Working Group that have been demanding farm bill reforms that would eliminate “big payments to wealthy farmers.”
EWG President Ken Cook complained that the Congressional Budget Office's scoring of savings of $45 million per year for the House ag committee new payment limit amount to no savings at all.
“At the level of these savings, it is obvious that Mr. Peterson's proposal will have no effect on the flow of taxpayer funds to the largest, wealthiest subsidized farms in the country, and once again leave less for people and priorities that have gone begging for farm bill support year after year,” said Cook.
The Sustainable Agriculture Coalition downplayed the committee bill's decision to increase the current limit on direct and counter-cyclical payments from $40,000 to $60,000 per person and remove any cap on marketing loan gains while focusing attention on a means test for adjusted gross income.
“The House should not be fooled by watching the hand that goes after millionaires, while missing the hand with the extra $40,000 in goodies for the mega farms,” said the Sustainable Ag Coalition's Ferd Hoefner. “Bribing mega farms in order to be allowed to try to catch a few millionaires is a raw deal.”
Farm-state members such as Rep. Mike Conaway, R-Texas, said the change in payment limit rules reflects the reality commercial, row-crop farmers face in the debate over the 2007 law.
“We were able to work with commodity groups and their leadership to come up with a compromise on this issue,” he said. “(House) Speaker Pelosi says that she will back this bill in its current form. It is important to have the leadership behind us as we take the farm bill to the House floor.”
The Cotton Council's Craig Brown said his organization's plans are “to support the chairman on the floor and get the bill passed while avoiding any damaging amendments. We will be working very hard to defeat the amendment that is expected to be offered by Rep. Ron Kind, D-Wis., and Jeff Flake, R-Ariz. That amendment would completely wipe out the work we've done on farm programs.”