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Sunday, 20 January 2013 22:11

Over a barrel: 2013 outlook uncertain without five-year Farm Bill

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 WEST MICHIGAN — Farmers have had it.

While the rest of the country fixated on the so-called fiscal cliff negotiations, behind the scenes, a quieter drama with potentially dire consequences was playing out with the package of legislation known as the Farm Bill.

Like the solution to the fiscal cliff, the Farm Bill situation remains largely unresolved.

While versions of the Farm Bill were developed independently in both the House and Senate agriculture committees with bipartisan support, neither made it to President Obama’s desk for his signature.

A bundle of legislation that covers as diverse topics as crop insurance and food stamps, the Farm Bill constitutes federal agricultural policy and is renegotiated every five years. The Farm Bill also includes funding for soil conservation, education programs for young farmers and ranchers and policy for ethanol production. The latest version of the Farm Bill was set to expire at the end of 2012.

As an emergency stopgap, Congress passed an extension of the 2008 Farm Bill, renewing some provisions but allowing others to lapse. For business owners in an industry that already has plenty of inherent uncertainty, any additional murkiness about the future is unwelcome, sources said.

Steve Weyhing, senior counsel at Warner, Norcross & Judd LLP, said what was particularly disappointing was how the Farm Bill proposals garnered support from both sides of the aisle and from organizations including the American Farm Bureau and National Grange, yet they still failed to pass a Congress deadlocked over budgetary issues.

“The legislation, as I understand it, had been vetted by all the folks that were going to get impacted by it, and it just didn’t get the votes to get through the chute,” Weyhing said.

Provisions of the Farm Bill began to expire in early fall, most notably provisions that controlled the price of milk. Those early-expiring provisions did not directly impact consumers, but one dairy provision set to end on Jan. 1 would have.

“I think finally the reason it got Congress’ attention was that someone whispered in their ear that if you don’t do something, you’re going to face a very angry consumer group,” Weyhing said.

Based on industry estimates, milk prices would have risen to between $7 and $8 per gallon, and that threat of a sudden shock to consumers was what jolted lawmakers into action.

“We think that the shock at the gas pump hits people,” Weyhing said. “You can tell what the price per gallon of milk is when you go into a store … and for that to go up two or threefold I think at least jerked them into doing something.”

While it prevents consumers from feeling the shock of rising milk prices, this extension leaves farmers and food processors without a clear picture of the future of federal agricultural policy.

“This was not well-received by the farming community (for Congress) to basically just punt again down the road,” Weyhing said. “In terms of impact, it’s unquestioned that this creates more uncertainty as to what really will be the federal government’s farm policy for even the short term of a five-year period. It puts farmers in a difficult situation.”

One of the issues that was “punted” was that of direct payments to farmers, some of the most hotly debated portions of the Farm Bill in the past. Direct payments, or subsidies, are paid to farmers regardless of whether the harvest was good or bad. Many conservatives see these subsidies as being costly and antiquated, sentiments that met with agreement from Sen. Debbie Stabenow, D-Mich., chair of the Senate agriculture committee.

“This Farm Bill extension prevented milk prices from doubling, but doesn’t support many other parts of our agriculture economy and continues costly taxpayer subsidies we can’t afford,” Stabenow said in a statement to MiBiz. “We need a full Farm Bill that ends big subsidies that no longer make sense while giving farmers and ranchers the certainty they need to continue building our agriculture economy.”

Likewise, the Michigan Farm Bureau was disappointed to see direct payments continued through the extension. Lately, the Farm Bureau’s goal is to shift federal agricultural policy from direct payments and subsidies to more risk management-based systems like crop insurance.

“Our policy would give up that direct payment for risk management systems,” Wayne Wood, president of Michigan Farm Bureau, told MiBiz.

A particularly poor year for tree fruit in 2012 may have helped Michigan farmers change their minds in supporting the shift to risk management systems and crop insurance over direct payments. Currently not all crops are insurable through the USDA Risk Management Agency. Some that are not insurable include tart cherries, which were hit by an early cold snap in March 2012. Additionally, many small growers are unable to afford the available crop insurance, and the lack of clear federal agricultural policy leaves farmers in a bind.

“They (Congress) have to do something,” Weyhing said. “We can’t just not have an agricultural policy for the United States of America. It’s a sector of the economy that’s often ignored, but in some ways it’s as significant as the banks and the auto industry.”

In her comments to MiBiz, Sen. Stabenow pledged to solve this problem, though she admits lawmakers will now have to start from square one.

“The Senate Agriculture Committee will once again begin work in the new year to pass a Farm Bill that cuts wasteful spending, provides disaster assistance for Michigan farmers and helps create new agriculture jobs,” Stabenow said.

Until then, farmers must wait. Though they may not like it, farmers are familiar with uncertainty, Wood said.

“I think that farmers are very positive about 2013, but they get nervous when policy isn’t settled,” Wood said. “There’s a lot of risk involved in farming, but that’s the business that we’re in.”

Regardless, farmers and processors likely won’t know for sure what the package of legislation will be until sometime later this summer when the Sept. 30 deadline approaches. By then, farmers will have a better picture of what crop yields will look like, based on precipitation and winter weather.

“The concern is, of course, we’ve got uncertainty now, and we’ve got a ‘back to the drawing board’ approach,” said Weyhing. “Who knows what the Congress will come up with?”

Read 3922 times Last modified on Friday, 18 January 2013 11:08
Carl Dunker

Contributing reporter

cdunker@mibiz.com

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