Putting the new farm bill in focus
The U.S. Senate on Feb. 4 passed the Agricultural Act of 2014 by a vote of 68 to 32. The House of Representatives passed the legislation on Jan. 29 by a vote of 251 to 166. The act then was to be sent to President Barack Obama for his signature. Once enacted, the Agricultural Act of 2014 and its farm, conservation and nutrition programs will supplant those of the expired Food, Conservation and Energy Act of 2008.
The new farm law was expected to reduce spending on farm and nutrition programs by $23 billion over 10 years (when spending reductions from the sequester are included). The most significant farm policy reform was the ending of direct payments to producers that have been made for each of the past 18 years. The payments were established to help wean producers from then existing federal income support programs that were to be phased out. But the support programs, while modified, weren’t phased out, and the direct payments were enshrined in subsequent farm bills, even as they increasingly were viewed as indefensible, even by producers themselves.
Under the Agricultural Act, enhanced federally subsidized crop insurance will become the principal safety net for producers.
But of particular interest to the food industry is what is new, or not new, in key food and nutrition programs, including dairy, sugar, meat and nutrition assistance.
The Agricultural Act of 2014 introduced compromise reforms to the nation’s dairy program that, while not earlier championed by either dairy farmers or dairy processors, seemed at least workable for both.
The act establishes a Dairy Margin Protection Program to replace the Milk Income Loss Contract (MILC) program as the centerpiece of the federal dairy policy. The margin protection program would provide dairy producers with indemnity payments when dairy margins are below the margin coverage levels the producer chooses to insure on an annual basis. The dairy margin is defined as the all-milk price per cwt minus the average feed cost as calculated monthly by the U.S. Department of Agriculture.
The aim is to protect farm equity by guarding against destructively low margins, not to guarantee a profit for individual producers, proponents asserted. The bill requires the new margin protection program to be in place no later than Sept. 1, 2014, at which time the MILC program would end.
Sugar program remains the same
While the dairy program underwent an overhaul, the sugar program remained unchanged to the delight of growers but to the disappointment of the food industry.
“While reform was a key ingredient to this new farm bill, the American Bakers Association is disappointed that the archaic sugar program once again remains intact,” said Robb MacKie, president and chief executive officer of the A.B.A. “The current program continues to put bakers, consumers and other food manufacturers at a disadvantage, and sends thousands of jobs overseas.
“The current U.S. sugar program represents the most supply-control focused program in agriculture policy. It even goes so far as to prevent the U.S.D.A. from reacting to market demands for six months out of every year. This has created multiple supply concerns in the past and will undoubtedly lead to more issues in the future. This being said, congressional supporters of sugar reform gained substantial momentum this past year, and A.B.A. will continue to propel efforts for reform as we move forward.”
Sugar growers had a different view. A spokesman for the American Sugar Alliance said, “Falling sugar prices and foreign subsidies have created a challenging environment for U.S. sugar producers and the 142,000 U.S. jobs they help support. But the sugar policy contained in the 2014 farm bill gives them the hope of weathering the storm.”
Country-of-origin labeling remains
While the Agricultural Act reinstates and makes permanent a livestock disaster assistance program to help farmers and ranchers who lose livestock to storms, drought or other natural calamities, several meat industry associations, including the American Meat Institute and the National Cattlemen’s Beef Association (N.C.B.A.), opposed the bill because it failed to repeal country-of-origin labeling (COOL).
“We are calling on Congress to fix the mistakes they have made, mistakes that are costing cattlemen and women money every day,” said Scott George, N.C.B.A. president and a Cody, Wyo., cattleman. “Mistakes like country-of-origin labeling, which has already resulted in steep discounts to our producers and caused prejudice against our largest trading partners.”
Mr. George said failure to “fix” mandatory COOL may lead Mexico and Canada to impose retaliatory tariffs on a host of U.S. commodities and risks an unfavorable ruling at the World Trade Organization.
“This farm bill is fundamentally flawed, and the livestock sector is standing shoulder to shoulder in opposition of a farm bill that will only serve to cause greater harm to rural America,” Mr. George said.
The Agricultural Act will reduce spending on SNAP by an estimated $8.5 billion over 10 years. Congressional agriculture committee leaders asserted the reductions largely would be achieved by closing a loophole used by several states to inflate benefits for certain households. The states provide individuals who don’t have a heating bill (often because utilities are included in their rent) with $1 per year in home heating assistance. It is assumed if someone is receiving home heating assistance, they must have a home heating bill, and they would automatically have a standard average heating bill listed on their SNAP application. This allowed the affected households to secure higher SNAP benefits than otherwise would be the case.
The bill would prevent the states from listing a utility bill on an individual’s food assistance application unless the person receives at least $20 per year in home heating assistance, or if the person produces his or her utility bill.
“This change does not affect 96% of SNAP recipients,” said a spokesman for the Senate agriculture committee. “All recipients will continue to receive 100% of the SNAP benefits their actual expenses call for under the current rules of the program. The 2014 farm bill does not remove anyone from the SNAP program.”
Nevertheless, the reduction to SNAP funding divided anti-hunger advocates in the House, where 103 Democrats voted no to passing the Agricultural Act. Representative Rosa DeLauro of Connecticut was among liberal opponents to the farm bill. She reminded her colleagues the $8.5 billion in spending cuts contained in the farm act will come on the heels of cuts made in November 2013 with the expiration of the American Recovery and Reinvestment Act of 2009, which increased SNAP benefits temporarily because of the recession. Those spending cuts translated to a reduction of $5 billion in funding for the current year and $11 billion over three years, Ms. DeLauro said. She also pointed out cuts in SNAP benefits translate into reduced economic activity. Estimates were every dollar spent on SNAP benefits results in $1.70 in economic activity.
The Senate in its original farm bill authorized a $4 billion cut in SNAP funding over 10 years, whereas the House in its nutrition bill called for $39 billion in cuts.