Sunday, November 13, 2011

Why I'm not talking much about...  

The SECRET FARM BILL NEGOTIATIONS. This near-farcical drama has been portrayed as circumventing the legislative process (a fair charge, IMHO), probably futile, generating an even more complicated program, and anti-small farms.

I have followed the leaks and speculation, but there are some good reasons why I think it will be a waste of time.

1. The proposals I have seen smell like Yellow Box payments WTO-wise.
These green box subsidies have to be government-funded, not by charging consumers higher prices, and must not involve price support. They tend to be programs that are not directed at particular products and include direct income supports for farmers that are decoupled from current production levels and/or prices. [More]

The "shallow loss" idea definitely is linked to current production, it seems to me. And for farmers who carped about feet-dragging on the FTA"s to turn around and deliberately invite WTO sanctions would be breathtakingly counterproductive.

2. The CBO will not score it as generously as the writers imagine. While we never have been able to predict what a farm bill will cost - and always underestimate badly - one reason many farmers are interested is because an insurance-type outcome could make the safety net a true hammock. This doesn't happen unless we siphon more off the treasury, not less. I don't think the CBO will share the Gang  of 4 budget smoke-and-mirrors optimism.

3. The AFBF is not amused. I think the sprawling farm organization senses a whacking loss of clout should corn, soy and cotton advocates push the shallow-loss idea through.
The American Farm Bureau Federation also has sent a letter to members of the House and Senate agriculture committees questioning the development of any farm bill proposal that covers "shallow losses." Several proposals effectively involve gap coverage that would protect farmers' income up to 90% levels. Effectively, a farmer buys crop insurance at 75% protection levels, and the shallow plan would cover anywhere from 10-15%, depending on the proposal.
Farm Bureau said "a shallow loss program is a drastic departure from any previous farm policy design" and that "our biggest concern is that by reducing the risk of shallow losses, farmers may be encouraged to take on more risk than they would in response to market signals alone."
Farm Bureau said creating a shallow loss program would increase moral hazard because "insured individuals may engage in riskier behavior with only a $250 deductible, they may drive faster or in more extreme weather conditions than if they purchased a high deductible policy." See link below.
Farm Bureau's choice of a comparison led one commodity lobbyist to ask, "What are they drinking or smoking over there?" The letter puts Farm Bureau at odds with cotton, corn and soybean groups that have all proposed new crop programs. [More]

4. Finally, I am not optimistic the Super-Committee will get a package done. The big stick was supposed to be draconian cuts to defense, but those are either less alarming to many in Congress than previously imagined or seen as avoidable with legislative sleight of hand or by just ignoring them. In addition, letting the Bush Tax Cuts expire would be the single easiest way to address the budget deficit. There is no big win for getting a deal, looks to me.

So my bottom line: this is most likely just farm media filler and political blithering for use in upcoming campaigns in farm states.


Bill Harshaw said...

Yours is the first mention I've seen on the WTO impact of new farm bill proposals. I wonder why?

John Phipps said...


Here is the only mention I've seen.

It deals with the cotton situation basically. But any program that does what producers want strikes me as transparently counter-cyclical and thus likely market distorting.