After more than two years of negotiation, Congress early this month passed a compromise farm bill that reduces spending by an average $16.6 billion per year and sets a course for the next five years of farm policy under the U.S. Department of Agriculture (USDA).
“It has been a long trip getting this far,” Sen. Patrick Leahy, D-Vt., said in a statement last week. Leahy serves on the Senate Agriculture Committee and had a spot on the conference committee that hammered out a compromise bill that both chambers were able to pass.
Vermont Secretary of Agriculture Chuck Ross said last week that despite the many compromises that went into writing the bill, it is “a win for agriculture both in Vermont, and on a national level.”
The omnibus Agricultural Act of 2014 governs spending and programs within the USDA. The Congressional Budget Office projected the bill’s cost to be $956 billion over 10 years, or close to $100 billion per year. Of that, about 79 percent is allocated to nutrition programs like the Supplemental Nutrition Assistance Program (SNAP) and Women, Infants and Children (WIC).
Dairy policy and nutrition spending were the two major sticking points during the lengthy congressional negotiations, which began early in 2012. The 2008 farm bill expired in September 2012, though Congress extended many of its provisions for the next year.
During that time, the Senate and the House repeatedly failed to agree on nutrition provisions, with the House passing one version of the bill that reduced nutrition spending by some $39 billion over 10 years. The bill that ultimately passed includes a projected $8.6 billion nutrition spending decrease over 10 years.
Vermont’s congressional delegation expressed disappointment that the bill cut nutrition spending at all, but relief that the cuts were relatively minimal. In a statement last week, Sen. Bernie Sanders, I-Vt., said, “It is both morally and economically wrong to cut assistance to families in a very difficult economy,” and said he would work with Gov. Peter Shumlin to restore SNAP benefits to those who will lose them through new restrictions in the farm bill.
NO SUPPLY MANAGEMENT
The farm bill’s dairy provisions were the last to be solidified in the conference committee.
Initial versions of the bill, including versions that passed the full Senate and the House Agriculture Committee, included a dairy market stabilization program designed to rein in wild fluctuations in dairy commodity prices.
The so-called supply management program, which had been a major hope for many Northeastern dairy farmers, would have required farmers participating in a new dairy crop insurance program to reduce milk production when dairy prices fell. The program would have scaled back milk payments for farmers who produced more than their average seasonal output instead of leading to an oversupply of milk on the market and further decreasing commodity prices. These provisions aimed to stabilize the market and, in turn, reduce the need for USDA price supports.
House Speaker John Boehner, R-Ohio, called the supply management reforms “Soviet-style,” and blocked their inclusion in the bill. Late in the farm bill process, however, Leahy reinstated the margin insurance program in the bill, though not the supply management program.
Leahy called supply management “a common sense dairy policy,” pinning its failure on Boehner and “some of the very powerful, huge industry figures from out West.”
The margin insurance program replaces the Milk Income Loss Contract (MILC), which paid dairy farmers when prices dropped below a certain amount in order to supplement their milk checks. With the new program, dairy farmers must pay insurance premiums, with very low costs for farms producing less than 4 million pounds per year — about 150 cows — and higher premium costs for larger farms.
The program no longer issues payouts based on the price of milk; rather, payments are triggered when the difference between feed price and milk price falls below a certain amount. This new program attempts to reflect a farm’s expenses and income, rather than income alone.
The bill also creates a new program that authorizes the U.S. Secretary of Agriculture to purchase surplus dairy products for donation to food banks when dairy margins are low.
Ross said last week that the new program will provide “a necessary safety net for the bedrock industry of Vermont agriculture.”
Bob Wellington is a senior vice president and dairy economist at the milk cooperative Agri-Mark, which owns Cabot.
He agreed that the margin protection was good news for Vermont farmers, but said the proposed dairy market stabilization program would have made even more sense financially, for the federal government and for Vermont farmers.
“We had a program that was going to save money, work better in the marketplace, and they said they didn’t like it,” he said. “Unfortunately, (the margin insurance program) is probably going to end up costing the government more money if milk prices drop.”
Prices in Vermont have remained above $20 per hundred pounds of milk, or hundredweight (cwt), since September 2012. This is in stark contrast to the lows of 2009, when milk prices hit $12 per cwt, well below the cost of production for most dairy farmers.
But Wellington said that a recent dip in corn prices, and continuing high milk prices, mean that dairy farmers will begin increasing production, which could send milk prices falling as early as next year. And though it’s predictable, there’s little that Vermont or Northeastern producers can do to impact that cycle.
“Sometimes (dairy farmers are) their own worst enemy because they’re so efficient and so productive,” Wellington said.
On balance, however, Wellington said the bill could have been worse.
“Speaker Boehner did a lot of damage,” he said. “The only thing that kept it from being a very bad farm bill on dairy was that Leahy stepped in.”
CONSERVATION, ORGANICS, DIRECT PAYMENTS, HEMP
Among the 2014 farm bill’s other provisions, it:
• Eliminates the direct payments program (in which farmers were paid per acre of farmland) for all crops except cotton. The programs are replaced with disaster and crop insurance programs.
• Preserves conservation compliance, requiring farmers who participate in federal crop insurance programs to adhere to environmental guidelines on their farmland.
• Funds the organic cost-share program, which helps producers to cover the cost of organic certification.
• Provides beginning farmers and ranchers with help paying for crop insurance programs.
• Provides additional disaster assistance to fruit and vegetable farmers.
• Allows research institutions and agricultural agencies in states that have legalized industrial hemp production to conduct test plantings without federal repercussions. Vermont is one of nine states that allows industrial hemp production.
The bill also allows states to apply for grants to fund maple research, which Rep. Peter Welch, D-Vt., said was one of his legislative priorities.
“This bill is far from perfect but America and Vermont need a farm bill,” Welch said.
