One vote down,
at least one to go

House passes ag-friendly farm bill, but bottom-line impacts
of Senate version remain unknown

Most rice producers aren't complaining about the House of Representative's version of the 2002 farm bill. Although they didn't receive everything they asked for during earlier House Agriculture Committee hearings, they say they can live with the proposed law.

"I think it's the best we could hope for," says Don Bransford, a Colusa, Calif., rice producers and chairman of the U.S. Rice Producers Group. "In fact, I think a lot of us were surprised that [Texas Rep. Larry] Combest was able to hold it together."

But the battle is far from over as the Senate has yet to take up debate on its version of a farm bill.

Once the legislation passes the Senate, it and the House version move into conference committee, where members will hammer out the differences. Even after that, the bill could face a presidential veto if George W. Bush doesn't like it.

To complicate matters, the final version also has to meet guidelines set by the World Trade Organization.

Under the Uruguay Round of trade talks, the United States agreed to limit spending to $19.1 billion annually on domestic agricultural support programs considered trade-distorting.

According to an analysis conducted by the Food and Agricultural Policy Research Institute, the United States has about a 1-in-3 chance of exceeding the spending limit in the 2002 marketing year.

What the House bill does
The House bill—known formally as House Resolution 2646—would provide $179 billion over a 10-year period, starting with the 2002 crop. The full House adopted it in October on a 291:120 vote.

What about the Senate's version?
In what form the legislation emerges from the Senate is anybody's guess.

"Is it going to be different—absolutely," says Jack Pettus, a consultant for the U.S. Rice Producers Association in Alexandria, Va. "The membership of that committee [the Senate Ag Committee] is from all over—geographically and politically. Trying to put something together that's acceptable to that very diverse group is going to be tough for Chairman [Tom] Harkin. What it is going to look like? I wish I knew."

But Bransford and others point to a House amendment introduced by Reps. Sherwood Boehlert, R-N.Y., and Ron Kind, D-Wis., as a sign of what might be in store in the Senate.

The amendment, which failed on a 220:200 House vote, would have redirected up to $1.9 billion annually from producer payments to conservation programs.

Bob Young, co-director of FAPRI, a joint institute between the University of Missouri and Iowa State University, also points to Sen. Tom Harkin's Conservation Security Act as an indication of increased conservation emphasis in the Senate.

"You're talking more along the lines of payments to producers for conservation practices they are already doing," Young says. "You reward the good actors.

"The bulk of the [conservation] act is tied to land management practices rather than land retirement."

Harkin's draft farm bill proposal calls for marketing assistance loans with a target of $6.85 to $6.90 cwt for rice, direct and counter-cyclical payments.

The proposal also calls for a new incentive conservation payment program that provides income to producers for maintaining or adopting conservation practices on working lands.

Meanwhile, Sen. Richard Lugar, R-Ind. and ranking Senate minority member, has floated his own version of a farm bill that includes counter-cyclical payments and a phase out of AMTA payments after the 2005 crop year.

Lugar's proposal also includes vouchers that growers could use to purchase risk-management items, such as multi-peril crop insurance. The five-year plan would cost about $82 billion. The Bush administration's position Also adding to the uncertainty are recent comments from the Bush administration criticizing the House bill's cost as well as the inappropriate timing of the farm bill debates.

In a recently released 116-page document titled "Food and Agricultural Policy: Taking Stock for the New Century," the U.S. Department of Agriculture outlined its objectives. Among those are increasing environmental protection through "green payments," implementing a system of farm savings accounts, and continuing reliance on and government assistance with crop and revenue insurance.

The report also includes a list of items the USDA—and apparently the Bush administration—opposes, including market distortion caused by programs such as loan-deficiency and AMTA payments, supply controls and reserve policies.

"If you take all of those out, that means there's going to be much more emphasis on risk management and less on direct payments," says Wallace Tyner, a Purdue University agricultural economist.

Although Tyner says it is too early to tell how the Senate bill will shake out, he says a good bet is it will be pared down financially.

"My guess is the administration would like to see a little bit lower cost," Tyner says.

A 'food security' act
But Gary Sebree, a rice and soybean grower near Stuttgart, Ark., defends the House version and its accompanying costs, saying it is designed to prevent the United States from becoming reliant on other countries for food production.

Sebree testified before Combest's House Ag Committee earlier this year on behalf of the entire U.S. rice industry. Among the components the industry sought and received were counter-cyclical payments.

"It doesn't guarantee us a profit," says Sebree, speaking as an individual rice and soybean producer. "It would serve as a true safety net to help you survive through the bad times."

According to the FAPRI analysis, H.R. 2646 uses the same loan rate of $6.50 as the current farm bill. H.R. 2646 modestly increases fixed payments to $2.30 per acre from the current $2.04 per acre.

What the House version does, Sebree says, is ensure farmers stay in the business of providing a reliable, inexpensive food supply to the country.

"When you look at what happened in New York and how quickly the world can change, I think that people would be fairly foolish to turn their back on production ag and take a risk of all of the food being cut as quickly as the air traffic was cut off," Sebree says. "This is building a strong food policy. This is all that it has been since FDR [Franklin Roosevelt] after going through the Depression, wanted the U.S. to be able to afford food.

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H.R. 2646 at a glance
Here are a few of the key points of H.R. 2646 and how they’d affect rice producers:

H.R. 2646 provides for the continuation of fixed decoupled payments for the 2002-2011 crop years of $2.30/cwt.

H.R. 2646 retains the fixed $6.50 loan rate over the 10-year life of the farm bill.

Under H.R. 2646, the marketing loan program and LDPs (loan deficiency payments) are retained.

Here’s how counter-cyclical payments would be calculated: $10.82 (Target Price) — $2.30 (Fixed Payment)(Higher of: Marketing loan rate orseason average price received by producers) X (Payment Yield) X (85% of Base Acres).

Under H.R. 2646, payment limits are set at $50,000 for fixed decoupled payments, and $150,000 for marketing loan gains and loan deficiency payments. The limit for the new counter-cyclical payments would be $75,000.

It increases conservation spending by 78 percent.

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