The Farm Bill is an expansive piece of legislation that impacts every American, especially farmers. It is renewed every 4 years, typically the legislation is passed before the current bill expires on September 30th. This year the legislation was allowed to expire as no new bill was passed by September 30th. We are still operating without a Farm Bill. Unfortunately in the past 20 years Farm Bill extensions at the end of legislation have become more common. The 2002 Farm Bill went through several short term extensions, the 2008 Farm Bill was extended for the 2013 crop year. Despite the recent frequency, each extension is different, none of them are ideal, and a lot of questions remain.
What happens when a Farm Bill expires?
What does that mean for farmers?
How long can we go without a Farm Bill?
These questions, and many others, are common questions – as well as important questions to answer for farmers across the country who depend on the programs within the Farm Bill. Each program faces different impacts from an expired Farm Bill. As always, I will try and simplifying this as much as possible – but feel free to reach out with questions or for clarification.
What happens when the Farm Bill expires?
The Farm Bill covers a wide range of programs from SNAP (Supplemental Nutrition Assistance Program) to Crop Insurance to Trade Promotion programs to the Forest Service. These programs have varying mechanisms for funding. SNAP and Crop Insurance are permanently funded. This means that with or without a Farm Bill they will still continue on. The rest of the Farm Bill is covered through mandatory or discretionary funding, neither of which carries a permanent mandate and must be refunded through either the renewal of a Farm Bill (mandatory funded programs) or annual appropriations (discretionary funded programs).
Without a Farm Bill any program funded under discretionary funding could continue to exist – if they were funded through the appropriations process however they would no longer have the specific authorization language contained within the Farm Bill. This leaves them exposed to fundamental changes through the appropriations process and/or by the USDA (the latter being unlikely).
If we get to January 1, 2019 without a new Farm Bill or an extension (unlikely to happen) many of the programs revert to “permanent law”. Permanent law for Farm Policy are the Farm Bills from 1938 and 1949. None of the programs contained within the permanent law function properly today. Implementation of them would be expensive, time consuming, and generate a huge amount of uncertainty for producers. There are also several very popular commodities that are not included in permanent law including oilseeds (including soybeans), peanuts, and wool. These reasons alone are enough to make this option highly unlikely, Congress will more than likely pass a short term extension for the 2014 Farm Bill, similar to their actions in 2012 when the 2008 Farm Bill expired without a replacement. The Congressional Research Service wrote a good summary of the implications of letting the Farm Bill lapse in 2012 that is still applicable today (although programs have changed).
What happens to specific programs?
Agriculture Risk Coverage and Price Loss Coverage: These two programs are some of the most important for farmers to understand. They are funded through the 2018 payment, which means farmers will receive their 2018 ARC/PLC payments in October of 2019 regardless of the status of the Farm Bill.
Conservation Reserve Program: If you have an existing contract you will continue to get paid. There will not be any new CRP signups however until a new Farm Bill is passed.
Conservation Stewardship Program: Similar to CRP. If you have an existing contract you will continue to get paid, no new contracts will be available.
Environmental Quality Incentives Program: EQIP was funded for the 2019 fiscal year several years ago. Signups for 2019 are available. The program will also continue to pay out funds for existing contracts.
Market Access Loans: Available for the 2018 Crop however any 2019 MAL’s would not be reauthorized until the Farm Bill was passed or extended.
Dairy Program: Dairy is typically the reason an extension is so time sensitive. It is the first program to revert to permanent law (January 1, 2019) and by doing so would be incredibly expensive to implement and cause huge price spikes in dairy prices for consumers. The reason it would be so costly is because permanent law utilizes a Parity Index from the 1910s that link prices to inflation. Dairy support prices would skyrocket. For context wheat according to NASS would have a floor price of $17.60 per bushel (well above the current $5.50 reference price and roughly $4.90 market average).
“Orphan Programs”
Here’s where it gets a little bit complex (and wonky – because only the federal government would consider $50 million in annual spending a rounding error). There are 38 so called “orphan programs”. The Congressional Budget Office “scores” every piece of legislation that is passed in Congress. The score determines the budget, the money that is actually spent on a program throughout the life of the program (in this case the Farm Bill) determines the amount of baseline it has. Programs with a baseline of less than $50 million annually are not considered to have a value, the CBO looks at anything under $50 million as a zero. They have zero baseline.
Some of these 38 programs include Foreign Market Development Program, Foundation for Food and Ag Research, the Beginning Farmer and Rancher Development Program and Wetlands Mitigation Banking. These programs all have annual budgets of less than $50 million and do not have any baseline to allow them to continue without the re-authorization of the Farm Bill.
What does it mean for farmers?
I have previously written about the importance of Crop Insurance and in conjuncture with that – the Title I programs provide a “shallow loss” safety net that farmers depend on. Thankfully crop insurance is permanently authorized and Title I programs are fairly easy to extend in an extension. The current Farm Bill is designed to be non-market distorting, so our planting decisions are not impacted by the functionality of a Farm Bill.
Extensive impacts from a lack of an extension, an extension that is not comprehensive, as well as an extension that does not allow us to take advantage of some of the improvements written into the 2018 Farm Bill exist. An extension does not always fund every program within the Farm Bill. In 2012 the extension of the 2008 Farm Bill did not extend any program that lacked baseline, so the 38 “orphan programs” would not be extended if a similar extension was used.
This lack of funding for these programs makes it difficult for farmers who had been planning on utilizing the programs, had designed financial plans around the programs, or expected to be eligible for them. Even though these programs are smaller budgetary items, producers, researchers, and our market promotion programs depend on the reliability of these programs and short term extensions with gaps in the funding creates too much uncertainty.
The loss the the Foreign Market Development program is particularly painful for the many organizations that utilize funding from the program. Most programs build in contingency plans to deal with the impacts from an extension or funding lapse due to an expired Farm Bill however they cannot operate forever without these funds. This impacts the effectiveness of our market promotion organizations such as U.S. Wheat Associates. U.S. Wheat Associates depends on funding through the Foreign Market Development program (as well as the Market Access Program) to maintain overseas offices. These offices provide important market promotion services for the wheat industry. I have previous written about the importance of trade to our operation as a result of that – these programs are very important.
Farmers also will not be able to take advantage of the various program changes that are in the 2018 Farm Bill without it passing. We have worked hard for the last few years to make important improvements to various programs throughout the Farm Bill, including attempting to reduce the number of “orphan programs”. Without a new Farm Bill farmers will not see those benefits and changes.
Conclusion
Anytime we are dealing with the Farm Bill there are incredible complexities and often a lot of confusion. The programs vary so much and impact every single American (even the ones who do not actively utilize any of the programs). It gets especially complex when we are discussing extensions, expiration, permanent law, and the various funding mechanisms.
I know there are many different programs that I did not touch on, however it is important to try to give an overview of the implications of an expiring Farm Bill as well as a possible extension. The timeline to finalize the Farm Bill and pass it during the lame duck Congressional session is quickly shrinking. The text needs officially scored, submitted, and voted on by both chambers – as well as signed by the President (and that is a simplified timeline), all of which takes time. I remain optimistic that we will pass a Farm Bill before the end of the year, but if you would have asked me in September I would have told you I was optimistic that they would pass a bill before the current one expired on the 30th. So now, two months later, here we are – without a new Farm Bill.
If you have questions about specific programs please reach out to me! I will do my best to track down the current status or put you in touch with someone who knows.
