Farm bill talks revving up

A tractor is pictured. | AP Photo

Measured in planted acres, rice, peanuts and barley could fit in the back pasture of most farm bills. Measured in politics, they crowd right up to the road.

Rice is big for Arkansas where the farm bill is already an issue between Democratic Sen. Mark Pryor and his Republican challenger, Rep. Tom Cotton, in the 2014 election. Peanuts are a cash crop important to Georgia and its Republican Sen. Saxby Chambliss — Speaker John Boehner’s old pal and a veteran deal maker who came up through agriculture in his early years in the House.

And barley? Well, barley is literally its own political brew: selling for animal feed at one price but also capable of earning as much as one-third higher when “malted” — an important ingredient for beer. Northwest Minnesota is barley country and home to Rep. Collin Peterson, the top Democrat on the House Agriculture Committee and driving force now behind plans to almost double the barley target price in support of the richer malted market.

All this history is again relevant this week as the House-Senate farm bill talks begin to heat up — with Boehner saying privately that he will finally appoint House conferees.

House Agriculture Committee Chairman Frank Lucas (R-Okla.) is seeking a “Big Four” meeting of the top negotiators in advance. And the University of Missouri’s Food and Agricultural Policy Research Institute, or FAPRI, has weighed in with an analysis of the House and Senate bills.

Alongside the Congressional Budget Office and the Agriculture Department itself, FAPRI brings to the table a respected economic model to measure the impact of target prices set by lawmakers. It’s a farm bill player in its own right and the 30-page report contains a wealth of data important to the debate.

On balance, FAPRI’s verdict is gentle: “Under both bills, the average estimated impacts on production and prices are generally small relative to normal annual variation caused by other factors.” But the report does raise a red flag in the case of rice, peanuts and barley.

Most of the focus is on the House bill which raises the target prices for all three crops and then leaves the door open for farmers to increase production up to a cap. FAPRI’s model shows more planted acres as a result but also predicts market prices will fall and farmers end up more dependent on the government for a share of their returns.

In the case of peanuts, FAPRI predicts a drop of market returns of $70 per acre, offset by a $110 government payment under the House’s new price loss coverage or PLC program. Barley is down about $15 per acre on the market end; up $44 from PLC. Rice drops about $20 per acre but then gets $75 per acre from the government under the House approach.

At one level, this remains a backroom brawl. Rice, peanuts and barley add up to just 7.4 million planted acres in the FAPRI baseline or about 3 percent of the total for all of American agriculture. Corn and soybeans, by comparison, account for more than 168 million planted acres or 66 percent of the total.

Indeed, FAPRI’s model shows that the Senate farm bill’s treatment of corn could lead to an added 230,000 acres of corn production. That’s just a .3 percent change but not really so much less than the estimated 300,000 added planted acres predicted for rice, barley and peanuts — altogether — under FAPRI’s model of the House bill.

But wasting no time, the soybean lobby has been quick to jump on the findings, saying that FAPRI’s numbers show the potential for “global market distortions, which would increase U.S. farm program vulnerability to challenges under the World Trade Organization.”

Before he shifted to corn and soybeans, Danny Murphy, president of the American Soybean Association, grew cotton on his land in Mississippi. And that experience echoes in his response now.

“These lower prices would then impact other countries that produce the same crops, potentially spurring WTO complaints similar to what we saw when Brazil successfully challenged the U.S. cotton program under the WTO,” he said in a recent statement. “While we didn’t like the WTO’s decision in the cotton case, legislators need to be mindful of the outcome of this case and avoid increasing the vulnerability of U.S. farm programs to potential challenges.”

Rice, peanut and barley growers roll their eyes at the notion they are big enough to affect international markets.

Tim Johnson, president of the California Rice Commission, told POLITICO that his farmers were struggling to “make the math work” at $19.50 per hundredweight, let alone the $16 per hundredweight price set in the House farm bill.

Doyle Lentz, a North Dakota farmer and president of the National Barley Growers Association, said FAPRI’s model doesn’t measure how hard it is to bring a barley crop to the stage where it can be sold for malt.

Barley is a good cash crop for Northern-tier farmers like himself who still devote much more of their land to wheat or other grains. But it requires a level of management and attention that is demanding, Lentz said. Peterson’s target price increase is less about stimulating production than recognizing a shift that has already happened — away from barley sold for feed to malt varieties.

In Lentz’s own case, his family has been farming in North Dakota for 120 years now. Of his 7,000 acres, only 700, or 10 percent, are dedicated to barley. And he envisions no great shift now because of the target price.

“That’s simply not going to happen. It’s too difficult to grow,” he told POLITICO. “We knew we would put a target on our back if we did this but it’s the market that has changed.”

Powerful business lobbies, like the U.S. Chamber of Commerce and the National Association of Manufacturers, are raising their own trade fears akin to the ASA’s complaints. And the argument is that Congress will be taking a big step backward by coupling target prices again to planted acres — something lawmakers got away from under the system of direct cash payments established in 1996.

Those subsidies, worth about $4.5 billion annually, are distributed according to a historic allocation of about 260 million “base” acres among farms across the country. The money is tied to the land itself — not production — solving any trade problem overseas. But the system has bred conflict at home since subsidies are being paid by taxpayers regardless of farm profits or whether a farmer is even planting a crop.

Thus, in doing away with direct payments, both the House and Senate farm bills lean more in favor of planted acres. And much as Midwest Republicans have criticized the House’s PLC program, their own shallow-loss Agriculture Risk Coverage subsidy program will pay out according to the four-year average of a farm’s planted acres.

The Senate’s approach greatly helps corn and soybeans while the House would pay on 85 percent of all planted acres up to a level equal to the historic base for each farm. As a practical matter, this allows for about a 17 percent increase in acreage coverage. But the cap is also a brake on shifting resources from the South to the Midwest.

With his own roots in Mississippi, Murphy said that ASA concerns are genuinely about trade and “not a ploy to add a few more acres” to be certified for the ARC program. Close to 57 percent of the U.S. crop is exported, Murphy said, and this makes soybeans double sensitive to any potential trade problems.

But in FAPRI’s own report, soybeans, like corn, stands to gain significantly under ARC. And in the competition now for extra dollars, putting pressure on the House to roll back its proposed target prices in the final farm bill appears to be part of the strategy.