Expired farm bill feared; commodity prices would skyrocket in 2014
MITCHELL, S.D. -- As the debate over what to do or not to do in Syria continues to dominate national politics, one question looms ever larger in the minds of those in the agriculture industry: Would Congress really let the farm bill expire?
Increasingly, the answer appears to be yes, or at least a definite maybe.
The existing one-year extension of the bill passed in 2008 expires Sept. 30. Without action by Congress to further extend it, the farm bill would expire and so-called "permanent law" would take effect, sending commodity prices into the stratosphere.
The permanent law, parts of which date back to 1938 and others to 1949, uses price-support formulas that link market prices to the cost of production between the years 1910 and 1914, said Gary Taylor, an associate professor of ag economics at South Dakota State University.
"You would forget 100 years of technological advances," Taylor said.
According to Taylor's research, commodity prices under permanent law would be roughly these:
- Wheat, $18 per bushel.
- Corn, $12 per bushel.
- Soybeans, $27 per bushel.
- Cotton, $2 per pound.
- Milk, $52 per hundredweight.
Congress could have flexibility to reduce those by as much as half, but that probably would not be known until the end of the calendar year. The new prices would not kick in until Jan. 1, as remaining stores at the end of 2013 would figure into the formula.
Key members of Congress now see the threat of these wild price spikes as a political lever they want to use to force negotiations between the House and Senate. Rep. Collin Peterson, D-Minn., has called on Agriculture Secretary Tom Vilsack to begin notifying the dairy industry of how the new milk prices -- more than double current prices -- would be implemented at the start of 2014.
"Clearly this is not going to get done by the first of October, so my suggestion to the secretary is that they should start now putting the framework together to implement the permanent law on dairy Jan. 1," Peterson told The Hill newspaper recently. "And it sounds to me like they're going to take a very serious look at that."
The crop prices would take a few months longer to hit the markets, as the prices are effective in a given "crop year." So, as crops would be sold throughout 2014, the prices would increasingly affect food prices.
Presumably this window still affords Congress some time to get a farm bill passed. Ag industry news reports have recently noted the likelihood of a conference committee convening in early October, after the farm bill has expired but before the dire effects hit the country.
Peterson's proposal comes as Senate leaders have renewed their statements saying they will not support further extension of the 2008 law. Senate Agriculture Committee Chairwoman Debbie Stabenow appeared at a Capitol Hill rally last week and dug in her heels.
"It makes no sense. I don't support doing it," Stabenow, D-Mich., said at the rally.
Senate Majority Leader Harry Reid, D-Nev., has said he opposes an extension, and President Barack Obama has said he would veto one.
Sen. Tim Johnson, D-S.D., does not support an extension and appeared at a rally recently at the South Dakota State Fair calling on the Republican-led House to take up the farm bill passed by the Senate in June.
"The Senate is ready to move forward. Our leadership has already selected members for a conference committee to work out our differences with the House bill," Johnson said at the fair rally. "Unfortunately, the House, with its familiar unwillingness to compromise, has been dragging its feet and has refused to even send anyone to negotiate with the Senate about a final bill."
Sen. John Thune, R-S.D., and Rep. Kristi Noem, R-S.D., also oppose extending the bill further.
Thune wants commodity reforms passed by both the House and Senate to become law, and he wants the livestock disaster provisions included in the earlier extension to hold
so that ranchers get coverage for 2012, said spokeswoman Andi Fouberg.
Thune said: "The farm bill needs to be passed this year so farmers and ranchers know what to expect from the federal government regarding farm policy, and so the more than $20 billion in savings I helped draft in the Senate-passed farm bill can be realized. However, until the farm bill is signed into law, I will continue working with my colleagues on the conference committee to make certain the role of crop insurance is not diminished.
"I will also continue my efforts to make common-sense modifications to food stamp policy and program administration that do not change eligibility or assistance amounts for those who truly need it, but that make much-needed administrative reforms, such as one I offered on the Senate floor that would have saved $2 billion."
Noem also is pushing for a brand-new bill.
"An extension of the current farm bill isn't something that Rep. Noem is considering and isn't a viable option for her at this point," said spokeswoman Courtney Heitkamp.
Noem called getting a new bill passed "a top priority."
"I'm part of a small group of members of the House that has worked to build consensus on the best path forward so the House can finish our bill, reconcile it with the Senate's version, and get a final bill signed into law that gives our agriculture community the long-term certainty it deserves," Noem said.
Noem's work goes on as House Republican leaders are planning a vote on the part of the farm bill that has traditionally covered food stamps, school lunch programs and other nutrition programs. (The House passed a bill dealing only with the farm and ranch programs during the summer.)
Despite all the anti-extension rhetoric and scenarios, SDSU's Taylor said he still would bet on another extension, even if it is just until the end of the calendar year.
"They are not going to let those prices kick in. They can talk all they want about not allowing another extension, but they don't really have a choice," Taylor said. "They have to give farmers some idea of what is coming next year."