Schafer stands firm on Farm Bill rules
DTN Staff Reporter
OMAHA (DTN) – Agriculture Secretary Ed Schafer is butting heads with members of Congress over actual language in the 2008 farm bill and what Congress argues is the intent or way some provisions on farm programs should be interpreted.
Schafer told DTN on Thursday USDA is “getting a lot of heat” from Congress because of efforts to cut off the smallest farmers from receiving direct payments or counter-cyclical payments. Though spelled out in the farm bill passed earlier this summer, Congress wants USDA to be more flexible in shutting off people from commodity programs due to the provision eliminating farmers who own 10 acres or fewer.
In a similar vein affecting commercial-sized farmers, USDA is having an ongoing tug-of-war over how to interpret the Average Crop Revenue Election program, set to begin by the 2009 planting season. Schafer argues Congress budgeted ACRE one way, but that it wants USDA to implement the program another way.
“That goes back to the same thing,” Schafer said. “When they scored this bill and said this is how much it’s going to cost the United States taxpayers, they scored it at some early years.”
Under a new revenue assurance program, farmers who sign up for ACRE would be eligible for a state-based revenue guarantee on acres planted, up to 90 percent of the state average yield calculated against a national average price for the crop, averaged over two years. In return, those farmers agree to give up 20 percent of their direct payments and also take a 30-percent cut in their loan rates. A farmer can elect to enter the program any year from 2009-2012, but once in the program, a producer cannot opt out.
The ACRE program’s projected cost was modeled using years with lower commodity prices than farmers are currently receiving from the markets, Schafer said. That lowered the cost and estimated participation rate projected by the Congressional Budget Office.
“That was how CBO scored it, and now they come back and say we want you to use ’07 and ’08 because those were big crop years,” Schafer said.
“Not only does it change the number of dollars that go out, but as you can imagine, it changes the participation rate,” Schafer said.
The farm bill sets the guaranteed price for ACRE as “the simple average of the national average market price received by producers of the covered commodity or peanuts for the two most recent crop years, as determined by the Secretary.” There is concern, though, over just where USDA pegs the “two most recent crop years” given that the bill was passed in 2008 but the ACRE program goes into effect in 2009.
“What difference it makes is Congress scored it in a certain way, and they said ‘We’re going to spend this much of the taxpayers’ money.’ Now members of Congress want to come back and say behind the door or around the corner that ‘You are really going to spend this much money.’ I don’t think that’s appropriate. We need to be open and upfront with the taxpayers on what this is going to cost.”
At issue with ACRE is what year the program starts its two-year rolling average for per-bushel price models on crops. The values can be dramatically different. In corn, for instance, the 2006 average national price was $3.04 a bushel, while the 2007 national average was $4 a bushel. That’s a two-year average of $3.52 a bushel. But that average could be significantly higher if the average 2008 price comes in over $4 a bushel.
“So where do you start?” Schafer said. “We’re, of course, now getting letters from Congress saying to start using ’07 and ’08. I’m not so sure that’s appropriate… We’re trying to sort this out. I think there are some gray areas on this.”
A spokeswoman for the Senate Agriculture Committee responded Thursday that the language in the bill “is generally understood to mean the prices for the 2007 and 2008 crop years.” To implement the program in a timely manner for 2009, USDA would have to use an estimated 2008 crop-year price, however.
“This is a procedure that USDA followed in implementing the 1990 farm bill, which set loan rates using recent crop-year prices,” committee spokeswoman Kate Cyrul stated. “We have been told that USDA intends to pursue an alternative interpretation of the meaning of the most recent two crop years. The law clearly states that the secretary must use market prices.”
These arguments came up throughout the presidential veto because USDA projected ACRE would cost billions of dollars more than what an analysis by the Congressional Budget Office estimated it would cost.
John Johnson, deputy administrator for farm programs at the Farm Service Agency, said USDA is still analyzing how ACRE would work with rolling two-year averages or if the department just has to create a single two-year pricing average that would be constant throughout the farm bill.
Implementing ACRE and other programs is also a challenge. Last week, USDA asked Congress for $172 million more in funds for modernization of the Farm Service Agency and to upgrade computers for the 2008 farm program, which includes not only ACRE but also a new permanent disaster program.
“The ACRE program, with our computers and software we have right now, we could not deliver that program,” Schafer said.
Meanwhile, Schafer received a letter earlier this week from 23 senators complaining about the way USDA is interpreting the 10-acre rule. The senators state USDA is ignoring statutory language that applies the limitation to “the sum of the base acres of the farm.” The senators state this is written in the manager’s amendment attached to the law.
“The bill language simply says that payments are not to be made if the sum of the base acres on the farm is less than 10 acres,” Iowa’s two senators, Democrat Tom Harkin and Republican Charles Grassley, said in a joint statement. “There is no inconsistency between the guidance in the statement of managers and this statutory language. In fact, the statement of managers further clarifies that the provision streamlines payment administration, which is the very same purpose served by consolidating smaller bases acreages. USDA seems intent on going out of the way to cut off payments that would be made if a farmer were allowed to combine bases on farms.”
USDA right now intends to follow through on eliminating those 10-acre-or-smaller tracts from collecting direct payments and counter-cyclical payments. There are thousands of such tracts in most states.
“We’re going to implement this according to the law, which says 10-acre farms are going to be excluded from direct and counter-cyclical payments,” Schafer said.
USDA is not going to allow farmers to consolidate tracts or reorganize a farm ownership to ensure the property continues to qualify for those payments, Schafer said. The law has some provisions excluding disabled and socially disadvantaged farmers from being affected under the bill.
“It’s disappointing to me that members of Congress who passed this legislation now come back publicly and say ‘Oh, it’s USDA’s fault, and they aren’t doing what we want them to do,'” Schafer said. “I just don’t think that’s appropriate. If members of Congress want to change the law as it’s written, we’ll do so, and we will implement it according to the letter of the law.”
chris clayton can be reached at chris.clayton@dtn.com
