Implications of the Farm Bill Expiration

The U.S. Senate and U.S. House Committee on Agriculture have passed their respective versions of the 2012 Farm Bill, but the legislation is stranded, and the 2008 Farm Bill expired on Sept. 30, 2012. Here is a summary report on the current state of play and practical implications of the 2008 Farm Bill expiration.

Farm state legislators have been eager to complete a Farm Bill in 2012, though this would be the first Farm Bill written in a Presidential election year. The reason is federal budget pressures are sure to mount in coming years. Getting a Farm Bill done in 2012 will likely require less spending cuts than passing a Farm Bill in 2013. A 2012 Farm Bill would cut a modest $23–35 billion from the trillion dollars of Farm Bill spending over the next 10 years. Approximately 80% of Farm Bill spending is for SNAP, the program formerly known as Food Stamps.

To date, budget hawks in Congress have sought to delay Farm Bill enactment to next year, when deeper budget cuts may be extracted. That could change in the lame duck session that will follow the November elections, but no one is ready to bet the home place on it. A one-year extension is a more likely possibility.

Expiration of the 2008 Farm Bill has not had major impact, though several relatively minor programs expired, including the Milk Income Loss Contract program for dairy farmers, Foreign Agricultural Service foreign market development programs, agricultural research programs for organic agriculture, beginning farmers and renewable fuels, and food aid and conservation programs.

For several major commodities, expiration caused reversion to the Agricultural Act of 1949 (for dairy) or the 1938 Agricultural Act for “basic crops,” which include turpentine and tobacco, but not soybeans. Farm program law has changed just as much as agriculture production practices over the last 60 plus years, so implementation of the 1938 and 1949 Acts would be a mess. As a practical matter, the permanent law for agriculture programs is based on crop years, so it has no real effect until January 1, when dairy price supports would go back to a parity-based system, with price guarantees about four times today’s market prices. That would cause such a market disruption that even the prospective recipients of those huge price increases don’t like the idea. Therefore, January 1 is the practical deadline for Congress to enact a 2012 Farm Bill or some form of extension. The path forward should become clear shortly after the election.

John Bode
Principal
John Bode LLC