The Farm Bill fiscal cliff

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The set of events that set the country on this path has its roots in the agriculture policies of 1938 and 1949. They are the core of the “permanent law” that current Farm Bills supercede. Understandably, the former element was written for a country struggling with the Depression and the latter as America transitioned to a post-World War II economy. In both cases, they addressed a country with a far more rural identity than the one we live in today.

Should we reach September 30th without agreement on a new Farm Bill or an extension, key provisions of U.S. food policy will begin to revert to permanent law and the impact on agriculture spending will be striking.  For example, the support price for wheat is estimated to rise from $2.94 per bushel today to a minimum of $13.13 under permanent law.  Rice would rise from a support price of $6.50 cwt today to $20.15. Milk would move from its current indirect support price of $9.90 cwt to $37.28.[1]

These massive increases take place due to the provisions of permanent law that intend to maintain present day “parity” for the purchasing power of a given commodity, with the years 1910-1914 being the original reference period. The prices mandated by parity are well above the recent market and effectively make USDA the purchaser of first choice.

This threat of reversion to permanent law has made previous Farm Bills relatively immune to extensions. In the last forty years, only the 2008 bill technically required an extension and despite the conventional wisdom that it is difficult to enact major legislation in election years, the last four Farm Bills were completed in them. Most recently, the 2008 bill was completed during a volatile and contentious Presidential election year.

Nevertheless, should Congress bow to the pressures of the current election cycle, simply extending the current bill will not be a “simple” undertaking.  The current Farm Bill maintains a variety of expiring provisions impacting energy, conservation, nutrition, horticulture and organic, rural development, trade and other titles. In order to maintain the bill at current levels, money will need to be found to continue these programs. Altogether, they are estimated to cost between $9-10 billion over the five year life of the bill. Additionally, it is highly unlikely that the budget picture for agriculture spending will improve if the bill is delayed well into 2013 or beyond.

In short, it is not possible to avoid the issue of the Farm Bill in this contentious election year. A difficult vote must be taken either to reauthorize or extend this fundamental piece of our food policy, or large federal spending increases will trigger and affect farmers, rural lenders, suppliers and ultimately all of us at the grocery store. Despite dwindling days on the Congressional calendar to complete the Farm Bill, there are major benefits in addressing this fiscal cliff and providing certainty to participants in U.S. food policy.

[1] Monke, Jim.  “Possible Extension or Expiration of the 2008 Farm Bill”  Congressional Research Service March, 2012

Quarles is director of legislative affairs at McDermott Will & Emery.