Rice Farming

March 15:
The Critical Date

A new Farm Bill or a return to 1949 ‘permanent farm law?’

By Carroll Smith

The 2002 Farm Bill was set to expire officially at the end of 2007. However, before the Christmas break, Congress passed a three-month extension for the ‘02 bill through March 15.

The extension gives the House and Senate Conference Committee an opportunity to negotiate the House and Senate bills and bring forth a Conference report that, hopefully, will lead to the final passage of a new Farm Bill. If that happens, then the final Farm Bill goes to President Bush for his signature.

So far, it sounds like a smooth enough process, even though the timeline is tight. Right? But, if you’re waiting for the second shoe to drop, here it is.

There are complications. President Bush has adamantly threatened to veto the final bill, and the necessary amount of votes to override his veto aren’t quite there yet in the House. This all means that if a final Farm Bill has not been passed, or Congress doesn’t have the necessary number of override votes by March 15, then it will be mandatory for USDA to implement ‘permanent farm law’ – the Agricultural Act of 1949.

High stakes poker
According to Reece Langley, vice president, government affairs, USA Rice Federation, the 1949 law “calls for a support price for rice between 50 and 90 percent of parity. Based on where the parity price is today and assuming USDA would choose 50 percent on the low end, the loan rate for rice would be about $15.15.

“This is not a marketing loan like we have today; it’s a pure non-recourse loan,” he explains. “This means that if a grower harvests his crop, he can put it under the loan and get $15.15 per hundredweight. Then he could either forfeit his crop, or he would have to pay back the loan in full, then turn around and sell his crop.

There are no LDPs with this program like we have today.”

During his remarks at the recent Arkansas Rice Council/Arkansas Rice Producers’ Group Annual Meeting in Brinkley, USA Rice consultant and former Texas U.S. Representative Larry Combest said that “there are a whole lot of people in this country who don’t want that (reverting to 1949 permanent farm law) to happen. I can also tell you that there is nobody who doesn’t want it to happen more than the Administration and USDA.

“This is high stakes poker,” he adds. “This is calling them up. If the Administration does not come around and sign the bill – if they veto the bill – they will get to enact the 1949 law. It is a gambit and a threat that if I were co-chairman of the committee, I would probably be willing to make myself.

“I think that if the Administration really begins to look at the situation and asks themselves, ‘OK, do we sign this bill that provides nutrition and all of these other things that spends only one quarter of one percent of the Federal Budget, or do we implement the 1949 law?’ I think it will become real clear to these folks what they ought to be doing. I’m ready to call their bluff.”

Comparing House and Senate Farm Bills
However, before the bill hits the President’s desk, the Conference Committee has to negotiate the differences in the House and Senate bills and write a final compromise bill to be sent to each chamber for a vote.

At the Arkansas meeting, Langley discussed some rice-specific provisions in the House and Senate bills as well as payment limit provisions that are of concern. Several key priorities the rice industry wanted to try to achieve in the bill included:

• Maintaining the direct payments, the loan rate and the target price at the current level that are in the 2002 Farm Bill.
• Minimize any impact on payment limitation provisions.
• Get included how the loan rate deals with different classes of rice and the way the counter-cyclical payments are calculated between long, medium and short grain rice.

“Fortunately, we achieved all of these priorities in either the House or Senate version of the Farm Bill,” Langley says. “We are now working to maintain those in the Conference Committee report.”

He notes that the direct payment has not been reduced, and the House actually increased the number from $40,000 to $60,000. Also, there is no change in the loan rate, and the limit has been removed on the Marketing Loan Program so that all production is now eligible for the loan. The target price remains the same, and in the Senate bill, the counter-cyclical program calculates the payment separately for long and medium/short grain.

“This type of calculation is primarily to address those instances where you have a difference in market price between long-grain and medium and short grain,” Langley explains. “With this approach, the coun-ter-cyclical payment will be calculated by each class based on actual market price.”

Both bills include an optional revenue-type program, but Langley says the numbers for both of these program don’t seem to work well for rice. However, he emphasizes that they are optional, so it’s not a real concern. The Senate bill also contains a disaster assistance program that is not in the House bill.

Status of payment limitations/adjusted gross income
On payment limitations, both bills eliminate the three-entity rule and require that all payments be directly attributed to an individual.

“This is something we saw coming going into this debate with all of the call for reform,” Langley says. “But to mitigate some of the impact, the bill does ensure that spouses are not discriminated against and are treated fairly within payment limit provisions. The spouse can qualify for a separate limit both on the payments as well as a separate limit on the adjusted gross income (AGI).”

The AGI is a very important issue since the President continues to focus on it and wants a lot more give in that area. According to Langley, both the House and Senate bills have already made huge steps to try to address the issue.

“The House bill puts in place a million dollar hard cap on the AGI compared to the current 2.5 million in the 2002 bill,” he says. “The Senate goes a little further down to $750,000 AGI, but it’s a soft cap. Therefore, if two-thirds of that income is from farming, then it doesn’t impact you, which makes sense.”

At the end of the day
As the March 15 date looms, Combest, who has been called the architect of the 2002 Farm Bill, recalled that day in May when he and his wife were invited into the Oval Office for the 2002 Farm Bill signing ceremony. They were the only ones there.

“I said, ‘Mr. President, there were a lot of people around you today who do not wish that you were signing this bill,” Combest says. “And he said, ‘Yes, but I am the President, and they are not.’ That’s the President that I want to surface again in 2008.

“Regardless of all the people who work around him, regardless of their philosophy, their pet peeves or their personal vendettas, I want him to stand up. He is the President of the United States, and that’s the same guy I want to see come back and sign the 2008 Farm Bill. So let’s keep up the fight.”

Contact Carroll Smith at (901) 767-4020 or csmith@onegrower.com.

Coalition’s Farm Bill Conference
Beneficial Interest Letter – Jan. 18, 2008

Dear Mr. Chairman and Ranking Minority Members:
The undersigned farm organizations commend your efforts to finalize the 2008 Farm Bill as soon as possible. We look forward to working with the Conference Committee to complete action on this important legislation, including an optional market-based revenue counter-cyclical program, in the coming weeks.

We are concerned by continuing efforts by the Administration to require producers to lose beneficial interest in their commodities at the time they receive either a Marketing Loan Gain (MLG) or a Loan Deficiency Payment (LDP) under the marketing loan program. This proposal would have the effect of limiting the support provided under this program to the face value of the loan rate. Current loan rates for most commodities are in the range of 72 to 88 percent of their average prices in 2002-2006. Requiring producers to sell their crop when prices are below loan rate would seriously undercut the value of the marketing loan program.

Since it was first authorized in the 1985 Farm Bill, the marketing loan program has allowed producers who receive a MLG or LDP to retain ownership of their commodities and market them at a later date. Producers deciding to retain ownership after receiving a MLG or LDP have no assurance of receiving a higher price when they sell later in the marketing year. USDA’s proposal to eliminate this option was included in its Farm Bill recommendations early last year, and the Department had ample time to encourage its adoption by Congress. Since both of your Committees chose to maintain the current operation of the marketing loan program in your respective versions of the Farm Bill, we strongly urge you to reject the renewed effort to include this proposal in Conference.

We would like to take this opportunity to reiterate our strong support for completing new farm legislation rather than extending current law. Our producers need a long-term economic and policy foundation on which to base their decisions. In addition, both the House and Senate versions of the 2008 Farm Bill include many new provisions that enjoy broad support, both in the agriculture sector and among the nutrition, conservation and other agriculture-related communities. Moreover, we are concerned that an extension of the 2002 Farm Bill would result in the loss of an estimated $13 billion from the current budget baseline. For these reasons, we urge you to complete the 2008 Farm Bill as soon as possible, and to oppose extension of the 2002 Act.

Sincerely yours,

American Soybean Association
National Association of Wheat Growers
National Barley Growers Association
National Corn Growers Association
National Cotton Council
National Farmers Union
National Sorghum Producers
National Sunflower Association
US Canola Association
USA Dry Pea & Lentil Council
USA Rice Federation

Senate Farm Bill Conferees*

Democratic conferees:
• Ag Committee Chairman Tom Harkin (D-IA)
• Patrick Leahy (D-VT)
• Kent Conrad (D-ND)
• Max Baucus ((D-MT)
• Blanche Lincoln (D-AR)
• Debbie Stabenow (D-MI)

Republican conferees:
• Ag Committee Ranking Republican Saxby Chambliss (R-GA)
• Richard Lugar (R-IN)
• Thad Cochran (R-MS)
• Pat Roberts (R-KS)
• Charles Grassley (R-IA)
* As of Feb. 5, the House Farm Bill Conferees had not been named.

Farm Bill Trivia Question

Q. In 2002, the Farm Bill wasn’t signed until May. Why was enacting the Agricultural Act of 1949 not an option at that time?

A. According to USA Rice’s Reece Langley, the 1996 Farm Bill did not expire until the end of the 2002 crop, so it really was written early. Once the bill was signed, Congress made it apply to 2002, pre-empting the 1996 bill that was still in place.