Ag & Politics - Will it ever end? The farm bill saga continues.

How does this affect me?

For most, the obvious question is, “What was actually decided?” The politicians will likely keep us in the dark a little longer; the specifics of the deal should unfold with more clarity soon.Here are the answers we expect to some of the basic questions:

Did they go with base acres, planted, or a combination? Base acres won out over planted acres.

Can I sign up for both price risk and revenue risk programs, or must I choose? You can sign up for price protection or revenue protection, but not both.

Can I get margin insurance for my dairy operation without losing income for sales above my historical base? The deal on dairy may be none of the above—as it turns out there’s no way to split the difference on supply management.

How big is the cut to food stamps and how will it be accomplished? There will be tightening of some SNAP rules that will translate to a one percent cut in total expenditures.

Overall effect

There are a growing number of stakeholders outside the agricultural community that are involved in the farm bill process now. With more parties voicing opinions and lobbying, it has become more difficult to pass a bill. This includes groups concerned how agricultural programs relate to the environment, animal welfare, health and nutrition, and so on.

While there are some new dimensions to how we get things done, we need to keep in mind that these programs, like many others, have a certain pendulum swing. Programs build, get more complicated, reach a saturation point, and then we simplify and strip them back.

Repeating history

Today's farm bill discussions and outcomes are reminiscent of the 1980s. Then, like today, we had just started recovering from a bumpy economic period that involved some big challenges and big opportunities. We enjoyed strong commodity prices, but worried about farmland price bubbles. The diary programs needed to be reworked but no one knew where to start.

When the bubbles finally burst, we took a pretty complicated set of programs, from the 1970s, and added even more bells and whistles in the hopes that we could weather this rough patch—and we did. By the early 1990s, the markets had rebounded and agriculture was on firm ground again.

As we contemplated the 1996 U.S. Farm Bill, corn was holding steady at $4.43 in July. This price gave us the confidence to pass the 1996 Federal Agricultural Improvement and Reform Act. This act simplified what many thought were overly complex policies. This was thought to be the beginning of the end of major farm programs and agricultural subsidies. Just as we had done during the prosperity of the early 1960s, we believed farmers were ready to take their chances in free markets.

The ink was barely dry when the agricultural economy went into a tailspin. Early harvest prices dropped to $3 and continued to decline. The pre-harvest price in 1999 was below $2 and stayed there all the while we were developing and debating the 2002 U.S. Farm Bill. In 2002 we ended up with a set of policies that kept direct payments that had been part of a transition strategy before ending payments. We also began restoring many of the same programs we had grown weary of just a decade earlier.

The 2014 U.S. Farm Bill will have some important reforms to how we support farming, but it is probably near the apex of this current cycle of agricultural policy development. The next farm bill (in 2019?) may be the next serious “reform” where we decide it is time to start fresh. If so, it will be influenced by where the agricultural economy is at that moment in time, as well as the political influence of the environmental, food, animal welfare, tax reform, and other lobbies.

It will, much like its predecessors, simply be the next arc of the swinging policy pendulum.