Cotton producers and other row crop farmers may get an unpleasant surprise when the House and Senate Agriculture Committees begin trying to restart the farm bill process sometime during the next few months.
Since Congress did not pass the farm bill drafted by the House Ag committee last summer and, instead, extended the 2008 farm bill, both bodies will have to start anew if they want to pass new farm legislation when the fog begins to clear on budget and debt issues.
“This Taxpayer Relief Act that extended the farm bill for one year made no cuts in agricultural spending,” said Mark Lange, president and CEO of the National Cotton Council.
“The result will be that when the Ag Committees meet again and start talking about farm policy they’re going to have to make five years of cuts fit into four years of farm bill.”
Lange, speaking at the Council’s Beltwide Cotton Conferences in San Antonio, said many row crop farmers were already resigned to an estimated $25 billion to $35 billion in farm program spending cuts under the 2012 farm bill proposals passed by the Senate and not by the House.
“They’re still going to have to meet the same cuts; they may even have to make larger cuts as part of the deficit reduction and fiscal cliff associated with the debt ceiling and sequestration,” he said in an interview.
“So the problem I see is that agriculture is probably in a little deeper hole now than it was in the fall of 2012.”
While the prospective of a single fiscal cliff captured most of the nation’s attention on New Year’s Day, Congress and the Obama administration will face three cliff-like situations concerning the federal budget within the next 30 to 60 days.
“The fiscal cliff was really about the expiration of tax cuts and the restoration of some significantly higher tax rates,” he noted. “The new cliffs we’re talking about are that, effective on Dec. 31, we essentially hit our debt ceiling. Now the Treasury can do some manipulations but only for a little while. Sometime around mid-February, Congress has to deal with a new debt ceiling.
Congress must take action
“The Taxpayer Relief Act also postponed sequestration for 60 days. So Congress is going to have to take some action to deal with the conditions that bring about sequestration, which again has to do with spending cuts. Or, effective March 2, there will be sequestration on most government payments to the tune of about 8.5 percent.”
The biggest impact will be defense spending cuts. If those happen, significant layoffs will occur, further damaging the already fragile economic recovery. That’s an action Congress and the administration would rather avoid.
Third, right before it recessed for the Nov. 6 elections, Congress passed a continuing resolution that funded the continued operation of the government through March 27. Unless Congress takes further action, every agency in the government will shut down on March 28.
“They’re not going to let that happen,” said Lange “But there will be a significant fight about the extension of the operation of the government.”
And the new farm bill? House Agriculture Committee Chairman Frank Lucas had said he planned to start marking up a new version of the farm bill by March 1. On Jan. 4, Lucas backed away from those plans, saying it would be difficult to do while Congress is debating how to resolve the government’s fiscal situation.
Given those realities, Lange says he thinks an August recess timeframe for completing writing of a new farm bill may be a more realistic scenario.
The continued delays are creating uncertainty for farmers elsewhere. U.S. cotton is unique in that the industry’s every move is monitored by the Brazilian government, which challenged the target price and export credit features of the cotton program in a WTO case filed more than 10 years ago.
“The ultimate thing for us right now is we need a negotiated settlement that should be part of a legislative package that should be part of the cotton program as well as the GSM Export credit,” said Lange.
“Signals from Brazil are that a package that looks something like the Senate STAX package could work, but they are adamant that there not be a reference price or a target price in any cotton legislation. So the big thing they have is they don’t want to see any reversion to target prices or reference prices in the safety net for U.S. cotton”.