WASHINGTONThe expiration of the farm bill on Oct. 1 left a number of conservation programs without funding and eliminated direct payments in the event of a crisis for the U.S. agricultural industry.
Several conservation programs are affected, including one that pays landowners to remove acreage from crop production. The farm bill's demise means the U.S. Department of Agriculture (USDA) cannot bring additional farmers into the roughly $2 billion Conservation Reserve Program at this time, said Ferd Hoefner, policy director of the National Sustainable Agriculture Coalition.
But USDA will honor the current contracts, which are 10-year agreements intended to protect the land from erosion and provide other benefits, such as protecting wildlife, he said.
A program to restore wetlands and a separate initiative to protect water quality in the Chesapeake Bay also are impacted by the absence of current farm legislation, Hoefner said.
The partial shutdown of the federal government on Tuesday overshadowed the farm bill expiring, but several sources maintained the latter development is significant nonetheless.
One agriculture source cited the absence of safety nets or direct payments intended to protect farmers. For instance, the 2008 farm bill specified minimum prices for a number of commodities that the federal government agreed to honor in the event of a market collapse, drought or another crisis.
Such a safety netthe government pays farmers the difference between the "reference price" and the lower price that is fetched on specific commodities from the market, including wheatis not available at this time, said Chandler Goule, a former staff member with the House Agriculture Committee and currently vice president of government relations with the National Farmers Union. Similarly, safety net payments to farmers for dairy products tied to a reference priceincluding Cheddar cheese, butter and non-fat dry milkalso would not be distributed if the market buckled, Goule said.
Goule maintained such safeguards are needed to protect farmers against the effects of catastrophes. He cited a surplus of crops in the 1990s due to favorable growing conditions.
Approximately $15 billion in federal aid was distributed to producers to help them during that crisis, although Goule noted the funds were authorized under ad-hoc disaster programs rather than the 1996 farm bill because the legislation eliminated safety net payments for farmers.
"There was just bumper crops everywhere and so there was nowhere to move any of the commodities," he said. "Just because we aren't making payments right now doesn't mean we don't need a safety net because no one knows what is going to happen next year."
The partial government shutdown also has stymied programs that are in place to facilitate trade, such as the USDA's Foreign Agriculture Service-operated Market Access Program. According to Sen. Tom Coburn (R-Okla.), the program spends $200 million annually to fund advertising, market research and foreign travel.
Some farm programs continue to operate in spite of Washington's failure to extend the 2008 legislation or pass a new 5-year package.
Most notably, food stamps and federal crop insurance subsidies intended to insulate farmers from certain risks remain in place. But the Risk Management Agency that oversees crop insurance planned to discontinue all activities during the partial shutdown.
The Congressional Budget Office previously estimated nutrition assistance comprises 79% of mandatory funding available, or $764 billion over 10 years, to write a new farm bill. The Supplemental Nutrition Assistance Program or SNAP, which has deeply divided Democrats and the GOP, eats up most of the funding.
Hoefner of the National Sustainable Agriculture Coalition said the crop insurance program costs taxpayers about $9 billion annually, with farmers footing about one-third of the total bill for their insurance premiums and taxpayers covering the remainder. Thanks to a record drought that battered the nation last year, producers received more than $17 billion in indemnities from federal crop insurance policies, according to the Congressional Research Service (CRS).
Congress's failure to extend the 2012 farm bill is not an anomaly. Washington is notorious for enacting farm legislation after the end of a fiscal year. In fact, over nearly the past half a century, only two farm bills were passed before the fiscal year ended, according to CRS.
But lawmakers must act before the end of the year. Otherwise, the consequences could be catastrophic, with the price of milk expected to skyrocket. Sources warn the agriculture industry would revert back to laws that were enacted decades ago.
The federal government would be forced to pay prices tied to an antiquated concept ("parity") that doesn't reflect the productivity gains and technological advances in the agriculture industry over the past century, according to CRS.
Under these old laws, the prices USDA pays for non-fat dry milk, Cheddar cheese and butter would be nearly "double recent market prices," Congress's research body stated last month in a report.
"The high purchase price mandated under permanent law could result in the government outbidding commercial markets for a sizable, share of processor output at considerable government cost, and that subsequently could raise the retail price of milk," CRS cautioned.
Such an outcome is certainly not Congress's intent. Rather, legislative provisions reverting back to old laws (upon the expiration of farm bills) are designed to force Congress to act, said Patrick Westhoff, director of the Food and Agricultural Policy Research Institute.
Many observers believe Congress will do somethingthe what is the obvious unknownbefore 2014. Lawmakers could extend the previous farm bill or pass a new 5-year package.
The Democrat-controlled Senate passed a farm bill over the summer that would yield $24 billion in cuts to agriculture programs, but the Republican-led House rejected the package and opted to split food stamps from a broader farm bill. A recent move by the House to reduce funding by $40 billion over a decade for the SNAP program infuriated Democrats in both chambers.
Years ago, Congress would have just imposed a short-term extension on the farm bill and it would have been a non-issue, Hoefner argued.
"Congress is so dysfunctional right now even doing something that is obvious and easy they can't bring themselves to do it," he said.
The Senate Agriculture Committee on Oct. 1 named conferees to hash out a farm bill with the House. But Sam Willett of the National Corn Growers Association expressed doubt that Congress can make much progress on the farm bill until lawmakers reach an agreement on a continuing resolution for appropriations and work out a deal on the nation's approaching debt ceiling.
Warning Congress that the United States will have no more than $30 billion on hand later this monthraising the specter that the government will default on its obligationsTreasury Secretary Jacob Lew has urged Congress to raise the debt ceiling.
A new farm bill, or even an extension, might just have to wait until lawmakers can get the nation's finances in order.