2012 Farm Bill and Politics

Published in the March 2012 Issue Published online: Mar 13, 2012 Luther Markwart, Executive Vice President
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On February 1, Senate Agriculture Chairman Debbie Stabenow set out a schedule for farm bill hearings in February and March. You may monitor the hearings at http://ag.senate.gov.

Feb. 15 - An overview focused on energy and rural development

Feb. 29 - Conservation

Mar. 14 - Healthy food initiatives

Mar. 21 - Commodities and risk management. This hearing will evaluate the need for and cost effectiveness of risk management tools available to farmers who continue to face increasingly volatile crop prices, input costs and the threat of natural disasters and how the federal government can provide appropriate risk-management tools while making the best use of limited resources.

The work that the House and Senate Agriculture Committee leaders did in preparation for a submission to the failed Super Committee effort last fall helped narrow the issues in order to move a bill more quickly this year. The members of the Senate Ag Committee have much more experience with farm policy than their counterparts in the House. Therefore, in the best interest of U.S. agriculture, it is best for the Senate to take the lead. While there is no certain schedule for floor consideration in the Senate, it will need to move expeditiously in order to give the House time to craft a bill for floor consideration. By the time the last hearing is finished on March 21, there will only be 51 legislative days before the August recess, which is typically when a farm bill needs to be acted upon in both House and Senate. This would leave August for reconciling these two bills in preparation for a conference committee when the Members return after Labor Day. Final passage of the Conference Report could then come quickly, with very limited debate.

It is also very likely that U.S. sugar policy will receive various legislative attacks in both chambers to either eliminate the policy or make fundamental substantive changes. "Sugar reform" bills in both the House and Senate have few cosponsors, but they have to be taken seriously. These proposals are simply recipes for disaster. Our customers continue to pursue policies that risk driving their suppliers out of business. They just want to oversupply the market and drive prices down significantly. As you can see, this will be a very busy year, but our grower leaders and industry representatives are prepared for whatever battle confronts us.

 

Congressional Budget Office (CBO) Projections

On the last day of January, the CBO released its preliminary baseline for the 10-year period of FY2013- FY2022. This gives us an early glimpse of what the final baseline spending projections will be when they are released in early March, and what the Congress will use for scoring purposes for any legislation being passed this year, including the farm bill-so the numbers really matter to legislators and industry alike. Assuming no change in U.S. sugar policy through that period, the cost of the policy for the next 10 years is "$0." In Title 9 of the Farm Bill, the Feedstock Flexibility ten-year baseline shows expenditures starting in 2014/15 through 2022 totaling $389 million. This would mean that sugar prices would be so low that the government would have to step in and remove and dispose of sugar each year after 2014. CBO does not reveal how they arrived at that specific number, but most industry observers and others who project program costs do not see it costing the government any money. The real question for everyone is what the sugar production will be in Mexico, how much they will send to us in during that period and what impact it has on the market. Most of us believe that the CBO projections are unreasonable and the cost of the program is most likely to be zero.

 

Politics

The battle to become the Republican Presidential nominee will take longer than expected, but could be sorted out as a result of multiple primaries on "Super Tuesday," March 6. Candidates will stay in the race as long as they have sufficient funding; each wants to stay on the national stage as long as possible because it gives them exposure, name recognition and experience that helps them gain influence in the party, more opportunities in the private sector, etc. There are no real losers in these contests-for the most part they all come out ahead of where they were before the campaign began.

The money that is spent and the attacks on one another, however, do in fact take a toll on the party's eventual nominee. The President loves the thought of a long drawn-out Republican primary process that keeps the focus off of him and forces valuable Republican time and resources to be used against themselves. It is a bit like watching a political demolition derby.

On the other hand, the latest unemployment projections for the third quarter are over nine percent, and that spells trouble for the President if those numbers hold true on Election Day. Stay tuned!

We also continue to watch congressional retirements. As of February 2, there are 11 House members running for Senate (and one appointed who is running for re-election); 4 House members running for other office; 18 House and 9 Senate members who are retiring; and 6 members who resigned (5 House, 1 Senate), resulting in open seats and special elections. There are more to come as primary challengers and redistricting come into play.