Senate farm bill markup underway

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It's been months in the making, and finally there's movement in the Senate on the 2007 Farm Bill as the Agriculture Committee begins is markup of the bill today (listen to the markup live at http://agriculture.senate.gov/live.ram). Earlier this week Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, released the chairman's mark of the bill.

Harkin's mark showed minor tweaks in commodity target prices (view old vs. new) and loan rates (view old vs. new). The mark does propose an Average Crop Revenue Program which takes away loan deficiency payments and makes the marketing loan a recourse loan. Farmers would have to pay back any difference between the loan amount and what they received for their crop. Similar to the House version, it gives farmers an option of choosing between a revenue program and the traditional commodity program.

Of note, the American Soybean Association released a statement Tuesday criticizing the lower rate of $6.00, an increase from the previous $5.80 rate, but much lower than ASA's original proposal of $6.85. ASA said the minimum should be no less than $6.30.

This point is one reason why the American Farm Bureau Federation came out against the revenue assurance idea last week. In a letter to the Senate Agriculture Committee, AFBF President Bob Stallman outlined the organization's opposition to a state-based revenue assurance program introduced by Sens. Richard Durbin (D., Ill.) and Sherrod Brown, (D., Ohio) and backed by the National Corn Growers Association. Stallman warned the Durbin-Brown proposal strengthens the counter-cyclical program at the expense of the marketing loan program and non-recourse loan benefits.

The American Soybean Association echoed the Farm Bureau's concerns. "ASA does not believe whatever benefit the recourse loan may provide as a financing tool outweighs the very negative precedent its introduction would represent as an alternative to the marketing loan program," said ASA President John Hoffman. "ASA recommends that the recourse loan provision in the ACR program option be eliminated."

ASA is also concerned with the proposed requirement that producers relinquish beneficial interest in their commodities in order to receive a Loan Deficiency Payment (LDP) under the marketing loan program. The LDP was developed as a "short cut" for realizing a Marketing Loan Gain without requiring producers to take out and repay loans. There would be no saving from eliminating the LDP option, and it would force all producers to take out and repay loans when prices are below the loan rate for their commodities.

"This would be costly and cumbersome for the Farm Services Agency to administer, and could cause unnecessary difficulties in the timely and efficient operation of the marketing loan program," Hoffman said.

Stallman also said the payment of $15/acre that would replace the traditional direct payment in this alternative program is "extremely prejudicial against some crops" although it does provide a greater benefit for soybean and wheat growers. The cut in direct payments alone is more than some farmers can even consider, and these farmers will be without a counter-cyclical revenue option for a safety net.

In addition, by legislating that farmers must update base acres if their 2002-2007 plantings are less than their current base, this proposal effectively moves direct payments that have traditionally been considered green box by the WTO into the amber box, Stallman wrote.

In the FarmPolicy.com blog, author Keith Good links to a graphic illustration of the importance of the LDP payment issue and why the current law might be changed is available here; while a more detailed explanation of this issue with additional analysis is available here.