The process may be neither pretty nor predictable but the 2012 farm bill is coming together and will include changes that farmers and ranchers are more likely to choke down than swallow willingly.
“Risk management will be a priority,” says Jody Campiche, assistant professor and Extension economist at Oklahoma State University in Stillwater.
Campiche discussed the ongoing farm bill debate at the recent Rural Economics Outlook Conference on the OSU campus.
“Many details remain to be worked out,” she said. The latest information hints that farmers may have several options from which to choose when the final program is announced. A key element likely will be a “shallow loss program.
“But that will be difficult to develop so it benefits producers in all areas and a wide range of risk and buy-up levels for insurance.” Campiche said. “Different profiles exist for different crops. Oklahoma wheat, for instance, is not the same as Iowa corn. Oklahoma losses average 33 percent. That’s just 13 percent to 15 percent in Iowa. Losses in Iowa occur more often but are lower. Losses in Oklahoma occur less often but are bigger.”
She said adjusted gross income (AGI) limits will be “a major issue,” as farm bill details are finalized.
Possible choices for farmers may include some sort of revenue guarantee program. “That could be a modified ACRE program,” Campiche said. “It’s likely to be crop-specific and county-based.”
A counter-cyclical program could be coupled with a shallow loss program and an increased target price set closer to the cost of production. That also may come with an option to purchase “area-type crop insurance similar to Group Risk Income Protection (GRIP).”
Campiche said cotton producers could have their own program but it’s “still up in the air. The Stacked Income Protection Plan (STAX) would get money from the Risk Management Agency and would not be subject to payment limits or AGI limits. There is some concern about developing a program just for cotton without those limits. But STAX is still on the table.”
She said livestock programs such as the Livestock Forage Program (LFP) and the Livestock Indemnity Program (LIP) “are likely to continue. Conservation will see a reduction but they are trying to protect the Environmental Quality Incentive Program (EQIP). The Conservation Stewardship Program (CSP) will be reduced and the Conservation Reserve Program (CRP) acreage will be lower.”
Nutritional programs will take some hits, Campiche said, but the cuts will not be as deep as those for commodity programs.
The Average Crop Revenue Election (ACRE) likely will be replaced, too, though it has been popular in some areas, including among Oklahoma wheat farmers. The complexity of ACRE makes it more difficult to support, Campiche said. She said about 25 percent of Oklahoma farmers signed up for ACRE. “Farmers already in the direct payment or counter cyclical programs were mostly satisfied (with those programs).”
Direct payments probably will not be an option for 2012. “I will be surprised if direct payments remain,” she said, even though DP is WTO-compliant, offers a guaranteed income and is linked to other farm programs. “Losing the DP programs will come with significant drawbacks.”
All changes are budget driven and the next farm bill will be developed following intensive negotiations among Senate and House Agriculture Committee members, farm organizations, consumer advocates, and budget hawks. Campiche mentioned seven or eight different proposals that have surfaced from House and Senate members, as well as farm organizations.
“The current reality is that we are in an expedited farm bill process because of the Budget Control Act of 2011 that changes the way a farm bill traditionally is developed. There has been no time for problem framing, debate or public input.”
House and Senate ag committees have worked diligently to develop a farm bill, including some $23 billion in cuts, to present to the Super Committee. They prefer that, observers say, to giving that committee free rein to begin carving funds out of the program.
Earlier ag budget reduction proposals included figures as high as $40 billion from the Ryan plan. Democrats countered with a $20 billion reduction proposal.
Campiche said the ag committees failed to meet a Nov. 1 deadline to present their proposals to the Super Committee. “But they are close.”
The next hurdle is making a Nov. 21 deadline that would take the budget to the Congressional Budget Office for scoring.
“Things could change at any time,” Campiche said.