US Senate Passes Farm Bill

27 June 2012

Just weeks after formally opening debate on the omnibus legislation that will drive US agriculture spending over the next five years, the US Senate passed its version of US Farm Bill by a 64-35 vote last Thursday.

The Senate's version of the Agriculture Reform, Food and Jobs Act of 2012 - which passed with bipartisan support after lawmakers debated 73 amendments over a period of three days, out of the 200-plus that were originally proposed - is projected to cost US$969 billion over the next ten years. Compared with the existing 2008 Farm Bill, it will reduce spending by US$23.6 billion over the same period, according to recent estimates from the Congressional Budget Office.

According to Mary Kay Thatcher of the American Farm Bureau Federation - an advocate of farm interests - the US$23.6 billion in savings comes from US$15 billion in cuts from the US$45 billion commodity subsidy programme; US$5 billion in cuts from the US$64 billion conservation programme; and a US$3.8 billion cut on the US$770 billion tab on food stamps, also known as the Supplemental Nutrition Assistance Program (SNAP).

The major difference between the 2008 Farm Bill and the Senate's proposed 2012 version is the termination of direct payments and counter-cyclical payments under the commodity title. Farmers will instead receive support through a crop and revenue insurance mechanism that will cover "shallow" losses, protecting farmer's incomes up to 80-90 percent.

The Environmental Working Group - a long-time critic of what it deems to be wasteful spending in the US Farm Bill - has called this a ‘bait and switch' that continues the system of subsidising wealthy farmers with taxpayer dollars.

Supporters of the bill, however, have argued otherwise. The bill includes an amendment that places a US$50,000 limit on revenue compensation, thereby ending the unlimited payments entailed in the 2008 law; it also reduces premium subsidies for farmers earning more than US$750,000 a year. However, effective limits on revenue compensation, while attempted in past years, have yet to make it into final legislation.

Additionally, the Senate version requires farmers to practice risk management and soil and water conservation in order to qualify for insurance. The new crop insurance programme has the potential to be more trade-distorting than direct payments, thereby putting US farm payments in WTO's "amber box" category of subsidies. Direct payments, considered minimally trade-distorting, are currently notified as "green box" payments and are not subject to limits.

The Senate bill still includes the Stacked Income Protection Plan (STAX) proposal, as tabled by the National Cotton Council. While some US lawmakers have included STAX in the Farm Bill as an effort toward resolving the long-running United States - Upland Cotton dispute with Brazil, Brazilian officials have said that they do not view it as a legitimate remedy. (See Bridges Weekly, 3 May 2012)

Remaining hurdles to final passage

Before it can take effect, a similar bill must also emerge from the House Agriculture Committee and then be reconciled with the Senate version before being put up for a vote in both chambers. The bill will then require presidential approval to be enacted into law.

The House is expected to propose cutting another US$10 billion overall from its version of the agriculture legislation; oppose spending on food stamps; and include higher price supports to farmers - a system that the Senate wants to end.

The House Agriculture Committee has announced that it will begin working on a House bill in mid-July. Congress will then be in recess from the first week of August until mid-September, by which time the presidential election season will be in full gear - giving lawmakers scarce time to complete the process before the 30 September deadline.

However, lawmakers from the opposing parties have historically managed to find consensus on farm spending, even at the last minute. For example, the 2008 Farm Bill was vetoed by then-President George W. Bush, only to be overridden by both chambers of Congress and then passed into law.

ICTSD reporting; "Senate OKs Huge Farm Bill, Puts House GOP on Spot," SAN FRANCISCO CHRONICLE, 22 June 2012; "Senate Overhauls Farm Bill, but Time is Running Out," REUTERS, 21 June 2012.

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