The 2007 Federal Fiscal Year expired at the end of September, without a new Farm Bill being enacted, and most observers say it will be early 2008 before any action will be taken. Your farm has not been confiscated. The sun will rise tomorrow. You won’t be getting checks for parity payments. But what will or won’t happen while we are all in agricultural purgatory?

To help Congress understand the ramifications of a delay in the enactment of replacement legislation, Jasper Womach of the Congressional Research Service analyzed the Possible Expiration of the 2002 Farm Bill. Womach says the all-encompassing Farm Bill contains a wide range of programs, some of which are mandatory and require annual appropriations, and some of which are discretionary and change from year to year depending on the level of Congressional appropriation.

A mandatory commodity program was enacted in 1949, but the periodic Farm Bills supersede that federal statute by overriding its provisions for 4 to 6 year periods. The 2002 Farm Bill covered the crops planted in 2007, regarding price supports, crop insurance, and other annual programs. Your 1996 crop was planted about the time the 1995 Farm Bill was finally enacted. You are probably planning your 2008 crops without knowing what, if any, payments will be made. And there are certainly not any acreage setaside programs that require fields to be marked off and oats planted as a cover crop. Womach says, “(The) lack of new commodity support legislation before harvest in 2008 does little harm other than leaving producers of “covered commodities” uncertain about the size of payments they might receive. He says if Congress takes no action before the beginning of the 2008 harvest, then the provisions of the 1938 and 1949 farm laws that never expire will go into effect. But those would be so costly to the government that Congress is unlikely to allow that to happen.

The 1938 and 1949 permanent law provides mandatory support for basic crops with a non-recourse loan that would provide cash flow and forfeiture of the crop. However, there are no Posted County Prices and no Loan Deficiency Payments. Nor are there Counter Cyclical Payments or Direct Payments. However, those would be negligible to the loan rates which are linked to parity prices. The loan rate for corn would be between $4.05 and $7.28. The loan rate for wheat would be between $8.18 and $9.81. Additionally, the Secretary of Agriculture would announce acreage allotments and marketing quotas and then hold referenda to let producers decide whether to implement them. Soybeans would not be included, since they were not part of the permanent farm program. While the USDA has computed the soybean parity price at $17.90, there would be no loan program that would guarantee a support price. Womach says there would be insufficient time before planting season to address the allotment issue. Since the loan rates are all higher than current market prices, most producers would put their crop under loan and forfeit it when the 9 month loan matures. The market would have to bid above those levels to get the grain out of federal warehouses and into the marketing channel, in the unlikely event that would happen.

However, the milk marketing year begins January 1, so parity prices would go into effect in 5 weeks. Milk would be supported between 75% and 90% of the parity price of $30.38, but through the USDA purchase of nonfat dry milk, cheddar cheese, and butter. Womach says, “Under permanent law those purchase prices (based on July 2007 data) would be about three times as high a currently mandated and nearly 50% higher than market prices. Such high USDA purchase prices could result in the government outbidding commercial markets for a sizeable share of processor output.”

Conservation programs are part of discretionary spending with no guaranteed year to year program, and depending upon annual Congressional appropriations. While most conservation programs remain on the books their level of implementation depends upon appropriations. However, the more well known programs such as the Conservation Reserve, the Wetlands Reserve, EQIP, and CSP, do have expiration dates, most of which were September 30th. Many of those programs were all part of the 1985 Farm Bill which created a somewhat permanent structure for conservation, that is extended from one Farm Bill to the next. Since funding expired for the CRP at the end of September, don’t expect new enrollment announcements before a new Farm Bill is announced, but all existing contracts remain in effect.

Nutrition programs, which include food stamp distribution, are authorized in permanent law, but are depending upon annual appropriations. The programs would not change, but Congressional “Continuing Resolutions” are needed to keep the funding for the programs in place, and so far that is until December 14th. The WIC program, the school breakfast program, and other public feeding programs are authorized separately from the Farm Bill and do not depend upon its enactment.

Rural Development programs are part of permanent law, and financed with annual appropriations. A handful of programs new to the 2002 Farm Bill have expired, and may not be re-authorized.

Agricultural research, foreign food aid, and some farm loan programs are all discretionary, and are not only funded from year to year, but may not be renewed in the next Farm Bill.

Summary:
The Farm Bill contains many programs that are temporary and require annual funding to be continued, but also contains mandatory programs that require funding, such as food stamps and commodity programs. Commodity programs were made permanent in 1949 but the provisions change from one Farm Bill to the next, and a new commodity program will have to be in place before next harvest to displace a loan program based on parity prices. Such a supply management program would put grain in federal storage that would be unavailable to the market at current prices, a scenario unlikely for Congress to allow.