Senate Passes Farm Bill With Expanded Subsidies

By Jane Fyksen, Crops Editor
Thursday, December 20, 2007 1:39 PM CST

The U.S. Senate last week approved a $286 billion farm bill with an election-year expansion of subsidies for growers of soybeans, wheat, barley, oats and several other crops. The bill, which passed on a 79-14 vote, also creates new grants for fruit and vegetable growers, extends dairy programs and provides more dollars for renewable energy and conservation programs over the next five years.

While the House and Senate bills are similar, significant differences will have to be worked out after Congress reconvenes in January.

In recent years such subsidies have caused serious friction in trade negotiations with the Europe Union under the World Trade Organization's so-called Doha Round to produce a global trade arrangement. Talks that began in 2001 have foundered on the refusal of both the EU and the U.S. to eliminate subsidies for their producers.

President George W. Bush has threatened to veto the new farm bill, complaining it costs too much and should be cutting subsidies to some of the wealthiest growers at a time of record-high crop prices. He’d also threatened to veto the House version passed in July. The Senate's approval was sufficiently one-sided to override a veto, but the earlier House vote lacked the needed two-thirds majority.

Farm-state senators deflected several attempts to derail the bill and reduce government payments to large growers. Still, even some lawmakers from “farm country” acknowledge the bill doesn’t do enough to trim subsidies.

Senate Ag Committee Chairman Tom Harkin (D-Iowa) had hoped to reduce subsidies but was blocked by Southern lawmakers on the committee who favor current law. Southern crops such as rice and cotton, they argued, are more expensive to produce than corn, wheat and most other crops U.S.-grown commodities. Harkin had said earlier he wanted to reduce direct payments to farmers, but opposition was fierce among farm interest groups. Harkin eventually dropped it.

Both the House and Senate farm bills attempt to limit subsidies somewhat. The Senate legislation eventually would ban payments to “nonfarmers” whose incomes average more than $750,000 a year. The bill defines farmers as those who earn more than two-thirds of their income from agriculture. There would be no new income-based limits on what a farmer could collect, though the bill would ban some farmers from collecting payments for multiple farm businesses. The House version would ban payments to all who earn an average $1 million a year or more. A Bush Administration proposal goes much further, suggesting a reduction of payments to individuals who make more than an average of $200,000 yearly. The current cap is $2.5 million.

During debate, the Senate rejected a bipartisan amendment that would have limited overall farm payments to $250,000 yearly per married couple, down from the current limit of $360,000. The amendment, rejected 56-43, also was meant to close loopholes that allow some farmers to collect higher payments and required that farmers be “actively engaged” to receive subsidies.

Later, Senators also rejected an amendment by Sen. Amy Klobuchar (D- Minnesota) that would have banned payments to farmers who make more than $750,000 a year, after expenses. The vote was 48-47, again short of the 60 votes required.

Farm-state senators lobbied against the amendment, saying it would be too drastic a change for agriculture. “It just moves too far, too fast,” said Senate Ag Committee chairman Harkin.

Lugar argued current farm programs benefit the wealthiest farmers and should be scaled back as crop prices are hitting all-time highs. “There has never been a better time for farmers to change,” Lugar said.

Acting U.S. Ag Secretary Charles Conner issued a statement after the Senate passage calling the legislation “fundamentally flawed.” “Unless the House and Senate can come together and craft a measure that contains real reform, we are no closer to a good farm bill than we were before today's passage,” he said last week.

"Farmers and ranchers face enormous uncertainties and deserve a safety net, and I am a firm believer in federal support of agriculture. Yet, the farm bill just passed by the Senate fails to strengthen the safety net and increases taxes to generate $15 billion in revenue used to grow the size and scope of government. The bill further increases price supports and continues to send farm subsidies to people who are among the wealthiest 2 percent of Americans. The Senate-passed farm bill does not represent fiscal stewardship and lacks farm program reform,” Conner complained.

"Farmers need a stable safety net that helps in years they need it most," continued Conner. "And farmers deserve a farm bill that is free of budget smoke and mirrors and tax increases. The measure passed today has $22 billion in unfunded commitments and budget gimmicks, and includes $15 billion in new taxes - the first time a farm bill has relied on tax increases since 1933.”

Asparagus farmers held on to $15 million in farm bill subsidies as conservatives targeted the money as an example of wasteful spending in the farm legislation. The Senate rejected, 56-39, an amendment that would have taken the asparagus money out of the $286 billion legislation. Asparagus growers have not received direct subsidies in the past, and opponents said the money is illustrative of the bloated bill. Farm-state senators from both parties held together to save the asparagus language, authored by Sen. Debbie Stabenow (D-Michigan), who said producers have suffered because trade agreements have increased the amount of imported asparagus in recent years.

The Senate and House differ on how to pay for farm programs. The House voted to impose new taxes on certain multinational companies with U.S. subsidiaries that Democrats said are trying to dodge U.S. taxes. Republicans derided it as a tax hike. Senators found $3.7 billion to help pay for the farm bill with a crackdown on tax shelters.

Both House and Senate farm bills would require meat and other fresh foods to be labeled with their country of origin starting next year, and allow interstate shipment of state-inspected meat. And the one that passed the Senate last week includes provisions that would help dairy producers by renewing the Milk Income Loss Contract (MILC) program at a higher rate. Currently, when prices fall below a baseline level, the federal government pays dairy producers to cover 34 percent of the difference. Under the Senate’s farm bill renewal, the rate would increase to 45 percent. The House version keeps it at 34 percent.

Lawmakers also extend '02 farm bill

The Senate and House also agreed on a plan to extend 2002 farm bill until March 2008 to make sure there is no gap in funding as Congress works to produce the new farm bill. House Ag Committee Chairman Collin Peterson (D-Minnesota.) was hesitant to agree to such a lengthy extension but relented after Senators convinced him it would be for the best. While Peterson favored extending only 17 programs recommended by the Congressional Budget Office, he said senators wanted the entire law extended until March 15 to ensure that nothing "slips through the cracks." Peterson said he expected the farm bill extension to hitch a ride on the fiscal 2008 omnibus appropriations bill that Congress must clear before it quits for the year.

Most programs have been operating under a temporary extension since the last five-year farm law expired Sept. 30.

Democrats and Republicans in the Senate bickered for a month over how many amendments could be offered to the bill, finally agreeing that each party would offer 20 amendments.

NCGA Pleased with passage

The Senate farm bill passage marks another positive step forward of an optional revenue-based counter cyclical program, notes the National Corn Growers Association (NCGA). The adoption of the Average Crop Revenue (ACR) program incorporates a more market-oriented farm safety net program that better meets the needs of producers in today’s economic environment. ACR is scheduled to be available beginning 2010 and is designed to deliver more efficient support for producers who experience revenue shortfalls.

Moratorium on milk extended

The International Dairy Foods Association (IDFA) hailed a key amendment on animal cloning, and the fact that the Senate bill contains no provisions to implement a dairy import assessment and has the same provisions on dairy forward contracting as in the House-passed bill. It also calls for a commission to improve federal milk pricing policies.

The Senate farm bill contains the same fundamental package of dairy programs that was approved by House, including, as noted, dairy price supports and MILC. However, another important provision to the dairy industry was a successful amendment on cloned cows, offered by Sen. Barbara Mikulski (D-Maryland), requiring further scientific study in tandem with an economic and trade analysis of the impact of allowing milk and milk products from cloned animals to enter the food supply. Under the Senate farm bill provision, both studies would be required to be completed before the FDA is allowed to lift the current moratorium on milk and meat from cloned animals entering the marketplace.

Both IDFA and NMPF (National Milk Producers Federation) supported the amendment and the dairy industry as a whole is reportedly very concerned about the lack of responsiveness by the FDA on this issue. IDFA represents dairy manufacturing and marketing industries with a membership of 530 companies. IDFA is composed of three constituent organizations: the Milk Industry Foundation (MIF), the National Cheese Institute (NCI) and the International Ice Cream Association (IICA). IDFA's 220 dairy processing members run more than 600 plant operations, and range from large multi-national organizations to single-plant companies. Together they represent more than 85 percent of the milk, cultured products, cheese and frozen desserts produced and marketed in the U.S.

The Senate farm bill also includes: incentives for producers to raise more biomass for cellulosic ethanol and thermal heat, a study to develop ways to produce nitrogen plant nutrients locally from renewable energy sources, a two-year extension of the biodiesel tax credits, new incentives for cellulosic ethanol production, a two-year extension of the small ethanol producer credit, rural Renaissance bonds for distance learning and telemedicine and telecommunications projects, a two-year extension of the ethanol import tariff, a personal 30-percent tax credit for residential wind property.

Bob Stallman, President of the American Farm Bureau says the Senate farm bill contains important provisions like expanded marketing programs to encourage the consumption of fruits and vegetables, incentives for beginning farmers and provisions to promote the production of home-grown renewable fuels. The bill also meets the needs of more of producers by providing new funding for specialty crop research, conservation and pest and disease programs, according to Stallman.

National Farmers Union says the Senate passed a good farm bill with record investments in nutrition, conservation, renewable energy and specialty crop programs, while maintaining a strong safety net for producers when prices fall. The Senate bill includes many of NFU's priorities such as creation of a standing disaster assistance program to aid producers affected by devastating weather conditions.

The Senate-passed bill includes a livestock competition title, including a ban on packer ownership, establishment of an Office of Special Council and voluntary arbitration.

Conservation spotlighted

According to Ducks Unlimited, the Senate farm bill reauthorizes the Wetlands Reserve Program, and takes care of a land appraisal issue that recently discouraged many landowners from participating in the program. A “sodsaver” provision was added which would build on the House-passed bill providing even stronger protection for the last native prairie remaining in America critical to waterfowl breeding. The Conservation Reserve Program (CRP) will continue to protect 39.2 million acres. A Biomass Crop Transition Program is a new program with safeguards in place for grasslands. The Senate also established a new grant program to encourage landowners to provide public hunting and fishing access on their conservation lands. Grasslands Reserve Program: The Senate reauthorized the Grasslands Reserve Program and made the Prairie Pothole Region a nationally recognized priority area. And the Conservation Stewardship Program (previously the Conservation Security Program) also survived and even achieved nationwide status.

Specifically, the Senate included $2 billion over five years for CSP, which was first authorized in the 2002 farm bill. The new CSP would allow 13.3 million acres to be enrolled each year through a continuous, nationwide enrollment opportunity and a ranking system to ensure strong natural resource and environmental outcomes.

The National Potato Council commends the Senate for passing unprecedented advances in funding and policy priorities for the fruit and vegetable industry, including:

- Expansion of the USDA Fruit and Vegetable Snack Program to more than 4.5 million schoolchildren across all 50 states

- Expansion of Specialty Crop Competitiveness projects focused on regional and local priorities for specialty crop producers

- Investment in prevention and mitigation protocols to combat invasive plant pests and diseases

- Enhanced critical trade assistance and market promotion tools that will grow international markets for specialty crops

- Significant new investment in research to improve the safety, quality, affordability and access to fresh fruits and vegetables.

The Specialty Crop Farm Bill Alliance (SCFBA), a national coalition of more than 120 specialty crop organizations representing 350 individual specialty crops, is also celebrating for the same arm bill provisions noted by NPC.

Strong livestock reforms included

The Senate bill contains the strongest livestock reforms ever passed in a farm bill, taking steps to stop widespread use of certain contract practices and disproportionate market power of meatpackers. The livestock title, as noted, includes a ban on meatpackers owning, feeding, or controlling livestock 14 days before slaughter; elimination of mandatory binding arbitration clauses in contracts between livestock producers and packers and processors; good faith bargaining and contract fairness on the part of packers and processors; and strengthened enforcement of laws against certain practices of packers and processors.

The National Cattlemen’s Beef Association is not celebrating, however. NCBA wants the upcoming Conference Committee to remove the packer ban provision, which the organization contends would jeopardize many of the marketing alliances cattlemen have worked to build.

“NCBA policy supports a competitive, free-enterprise market,” says NCBA’s Vice President of Government Affairs Jay Truitt. “It is unfortunate that the Senate chose to include legislative language that limits cattlemen’s ability to market their cattle in ways that provide the best return on their investment.”

“This provision will hurt consumers, stifle the entrepreneurial spirit of cattle producers and put the government in charge of a rancher’s business decisions,” says Truitt.

NCBA will also urge conferees to fix the Adjusted Gross Income (AGI) cap and payment limitations for conservation that exist in the House farm bill. This language makes many cattle producers ineligible for conservation programs. “The goals of voluntary conservation programs are compromised when artificial caps and limits are applied,” says Truitt. “Cattlemen will urge the conference committee to exempt cost-share programs such as the Environmental Quality Incentives Program (EQIP) from the AGI caps and payment limitations.”

There are a number of positive provisions for pork producers in the Farm Bill approved by the Senate, but the measure also includes some that could have a negative impact on the competitiveness and profitability of the U.S. pork industry, said the National Pork Producers Council.

The bill includes fixes to the Mandatory Country-of-Origin Labeling law, funds for pseudorabies and swine genome research and authorization for a national trichinae certification program, all of which NPPC supports and all of which it will urge be included in a final Farm Bill. NPPC also will recommend that a final bill include increases in investments in renewable energy, nutrition and conservation programs, which along with changes to the COOL law, were included in the House Farm Bill.

Among the detrimental provisions included in the Senate Farm Bill are ones that would ban packer ownership of hogs, restrict marketing contracts and establish an Office of Special Counsel to investigate and prosecute livestock competition issues.

“The Senate Farm Bill is kind of a mixed bag for the U.S. pork industry,” said NPPC President Jill Appell, a pork producer from Altona, Ill. “When Senate and House lawmakers meet to craft a final Farm Bill, NPPC will work for a measure that doesn’t include restrictions on producers and that protects the pork industry’s competitiveness.”

NPPC kept out of the Senate bill amendments that would have:

- Created an Agriculture Competition Task Force with powers to investigate agricultural competition issues and to develop guidelines governing competition.

- Required the Department of Justice n under guidelines developed by the competition task force to challenge livestock mergers and acquisitions under a standard much more restrictive than antitrust reviews conducted of transactions involving any other industry.

- Allowed a plaintiff to file a lawsuit alleging “unfair” competition without offering evidence that he or she suffered a competitive injury.

- Prohibited packers from paying premiums for value-added livestock, such as “antibiotic-free,” by eliminating “business justification” as a defense against lawsuits alleging unfair competition. The amendment was defeated on a 40-55 vote.

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