The 2008 farm bill expired at midnight on September 30. Congress is in recess until after the November 6 election. The farm bill possibly may not be passed until after the new Congress is in session in January. Nevertheless, the grain market impact of a non-farm bill may be non-existent.
Eighty percent of farm bill spending is for nutrition programs. Funding for nutrition programs will not be affected by the expiration of the farm bill.
Crop insurance programs do not expire, and they will not be affected by the expiration of the 2008 Farm Bill. Proposed improvements in the insurance program, including separating dryland and irrigated acres that were in both the House and Senate farm bills, will not be implemented.
Programs that will lose funding include the Foreign Market Development Program (FMDP) and the Conservation Reserve Program (CRP). The FMDP provides funding for export enhancement programs. Funding for personnel to run the USDA’s portion of the FMDP program is scheduled to run out October 31.
The FMDP potentially affects long-term export demand. With relatively tight wheat, corn, and soybean stocks, export demand should not be affected by a short-term loss of the FMDP.
About 6.5 million acres are scheduled to come out of the CRP program in 2013. Without farm bill funding, these acres will not be allowed to stay in the program and should be available for crop production in 2014. These acres should not have a price impact in 2012 or for the 2013 U.S. winter wheat crop.
Non-passage of the farm bill does have negative impacts. Any time there is uncertainty, and any time there is insufficient information to fully complete financial planning statements, costs may increase. For most producers, timely passage of the 2012 farm bill may help keep these costs to a minimum.
World and U.S. wheat and corn supply and demand situations will have a significantly higher price impact than the non-passage of the farm bill. Relatively tight wheat stocks have resulted in Kansas City Board of Trade December wheat contract prices increasing from $6.67 on June 15, 2012, to $9.57 on July 19, and the price is $8.92 at this writing.
December wheat contract prices have been trading in a sideways pattern between $8.69 and $9.57 since July 12, 2012. Within the next month or so, the odds are extremely low that anything will happen in the U.S. domestic grain market (excluding exports) that will cause wheat prices to break out of this sideways pattern.
Changes in world supply and demand conditions could, and probably will, cause wheat prices to break out of the sideways pattern. The odds are that the source will come from Argentina or Australia.
Wheat producers should concentrate on marketing any 2012 wheat that is in storage and producing and marketing the 2013 crop. The farm bill will be whatever it turns out to be and will have little, if not zero impact, on the net return for 2013 U.S. winter wheat production.