The farm bill, explained
What is the farm bill?
The US farm bill is a multi-billion dollar piece of legislation that controls the federal government’s spending on farm subsidies, food for the domestic poor, agriculture conservation programmes, and overseas food aid, among other things. President Franklin Roosevelt signed the first farm bill into law in 1933, and subsequent versions have been enacted at roughly five-year intervals ever since. The latest iteration will expire on 30 September 2012. Congress, which is back in session this week, has spent several months hammering out a new bill, which would control farm spending until 2017, but progress on the legislation stalled in July.
Has the new farm bill already been written?
Sort of. There are two draft versions of the bill: one created by lawmakers in the House of Representatives and another drafted – and passed – by the members of the Senate. The bills are broadly similar but differ in the range and depth of their budget cuts, as well as their policies on food-aid reform. Legislators will need to reconcile the two versions before a new farm bill can become law.
How will the new farm bill affect overseas food aid?
The US is one of the few major donors that still “ties” the vast majority of its food aid, meaning that the food it distributes overseas has to come from US farms and be delivered on US-flagged ships. The 2008 farm bill included funding for a pilot programme that allowed a modest amount of food aid to be purchased locally – that is, in the region where it would be distributed. A recent study by Cornell University showed that the pilot project cut the cost of food aid by nearly 50% and significantly shortened delivery time. The Senate version of the new farm bill would make that pilot programme permanent and slightly expand its funding. The House version makes no mention of it.
Any other food aid changes?
The Senate version of the farm bill makes it harder for NGOs and recipient governments to sell their food aid as a means of funding other development projects. The practice – known as monetisation – has proven to be enormously inefficient, as many NGOs have been selling the food that they receive from the government for much less than the food is worth. A US government report from 2011 concluded that monetisation resulted in the waste of $219m (£139m) over three years. The Senate version of the new bill would require that NGOs recover at least 70% of the actual cost of the food (and its shipment) if they decide to sell it overseas; the House bill fails to address this issue as well.
Why those differences between the House and Senate?
Members of the Republican-controlled House of Representatives were less swayed by the lobbyists pushing for food-aid reforms than their colleagues in the Democrat-controlled Senate. Interest groups arguing against potential reforms to the procurement and monetisation policies include shipping companies, agribusiness and even some NGOs that receive food aid from the government, fearful of the loss of the income from sales of that food aid.
Will the new bill change domestic farm subsidies?
Both the House and Senate versions of the new farm bill would terminate direct payments to farmers – money that’s doled out regardless of whether a farmer does any planting – as well as countercyclical payments, which offer farmers income support when crop prices fall below a given level. At the same time, both versions of the bill would strengthen crop insurance programmes to help protect farmers from small drops in income. The draft bills also propose structural changes to the dairy and cotton programmes. Officials in Brazil and other cotton-producing nations will be closely watching the latter, given that the World Trade Organisation has ruled that US cotton subsidies violate world trade rules. If the US fails to reform the subsidies, it could be left open to trade attacks on its intellectual property by Brazil, as ruled by the World Trade Organisation.
What happens after 30 September?
If a new farm bill has not been enacted by the time the current version expires, then what’s known as “permanent law” – mothballed, out-of-date farm rules from the 1930s – will take effect. Nobody wants that to happen, so the most likely scenario is that Congress will pass a short-term extension of the current legislation, then take up the farm bill again in early 2013. But not everybody is happy about that. US farmers are in the middle of the worst drought they’ve faced in half a century, and pressure is growing from Democrats, farm lobbies, and deficit hawks for Congress to enact the new law.
Why do they not just vote on it now?
Politics. When the farm bill eventually comes to a vote, it will probably split Republicans, which could embarrass the party, politically. Republican John Boehner, Speaker of the House, controls the voting schedule of the House of Representatives. Observers say that Boehner is loth to put his fellow Republicans into an awkward political situation this late in an election year.
[Tractor on a farm via Shutterstock]