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Life without a farm bill--Is it worth living?

By Ken Root

It is somewhat humorous that many in agriculture are crying out for new farm legislation to be put into effect. In an industry where farmers have cussed and opposed government programs, there now seems to be great fear of living without a policy umbrella overhead and a safety net underfoot. Farmers have been trained generationally to operate within the confines of government programs. You might compare the current plight of not having the assurance of a farm bill to a person from New York City being suddenly relocated to the plains of North Dakota and becoming paralyzed by the view of a distant horizon and exposure to the natural surroundings. Can agriculture function without regimented government programs? Is the relationship with government so strong that lack of legislative edict is like ending life support?

The federal government inserted itself into agriculture in the 1930s when farmers produced more than the market could consume. The depression cut workers' wages dramatically so farm prices went down sharply. That put the farmer in the same shape as those who had lost their jobs in business and industry. The government came in with acreage controls and herd reductions to save the country's food production system and save the farmer from himself. The industry suffered through the decade, as did the rest of the country, before a war economy brought on the modern age of growing consumer demand. But farmers still had substantial periods where they produced too much and prices fell to levels below the cost of production.

Government farm programs were aimed at keeping food prices low with the cover story that they were keeping people on the land. If growers jumped through the hoops to comply, they had a somewhat better chance of surviving bad times. Growers, however, soon learned how to farm the government and the land so dual income streams could be depended upon each year.

Politicians played into the process as they saw a way to improve prosperity and attract the rural vote with a variety of policies to provide payments to farmers in their region. In the last two generations, the most successful farmers were the ones who exploited farm payments and expanded land base at the same time.

Now we are (perhaps briefly) in an era where demand is outpacing supply. Soybeans at $15 per bushel and corn at $7.25 are not the norm for any extended period of agricultural history. Government price supports are irrelevant to current market prices and that is where farmers have always said they wanted to be: "Let me get my price from the marketplace!" So I ask why we should have any government programs if we've achieved our objectives?

The fact is that the federal farm legislation provides incentives other than production deficiency payments. There are payments for land in the Conservation Reserve Program as well as cost sharing for conservation and wildlife habitat. The list of incentives is long and attractive to growers who are romanced by many different programs and comforted by the cash they gain from participation.

Rural members of Congress love to keep a farm bill on the books because it holds farm programs and food and nutrition together. Moving the food stamp program over to the Department of Health and Human Services would be a death blow to future farm bills. The "horse trading" of attaching nutrition spending to farm spending has been the means of getting votes from liberals and conservatives.

Could agribusiness and farmers live without traditional farm legislation? That depends on what replaces it. If incentives become regulation, then farmers would have requirements on their businesses without incentives for compliance. The mechanism would move from a carrot to stick. This is a great fear that EPA, OSHA and the Labor Department will regulate air, water and worker protection all the way to the farm. That could substantially raise the cost of doing business.

The problem is that farming has always been viewed as a "cottage industry" compared to other sectors of the economy that utilize legislation and regulation to bolster their businesses. Farmers have always seen themselves as "independent little guys" so that mindset would have to change to make a restrictive regulatory environment work in the farmer's favor.

Back to Washington, D.C., there was so much political bickering that it prevented the 2012 farm, food and jobs bill from being handled by both houses of Congress before the 2008 bill expired. Within that din of partisan conversation, there was a strong undercurrent of resistance to traditional spending. A farm bill, had it passed by September 30 of this year, would be mostly exempt from cuts that will likely be imposed by sequestration in 2013. The congressional leaders know that the permanent farm legislation (1938 and 1949 laws) is unworkable in today's world, so they had no fear of terminating the current legislation and allowing it to go into effect.

The outcome of the political maneuvering is not yet clear. It could result in Congress allowing tax increases to go into effect and tax breaks to end. Then the 2013 Congress could rescind the changes, thereby "saving" the populace from this deadly fate. It is sort of like setting a house on fire and then running in to put it out so you can be a hero.

I doubt many farmers are sweating like a drug addict in need of a fix but without a farm bill, the financial uncertainty is real. Lenders know the value of farm programs to the bottom line of farmer income and will recalculate their risk per what has been passed by Congress. Farms involved in a generational change are in a quandary as good planning can't be done in a changing landscape.

Over the last five years, agriculture has escaped much of the economic downtrend by having strong crop prices due to ethanol production and exports. If that continues, there are no worries. But combine a drop in world demand with bumper crops in the United States and the federal safety net will once again need to be stretched out to catch a falling industry.

Editor's note: Ken Root has been an agricultural reporter for 37 years. Root now does daily radio and television programming and is a columnist. He can be reached at kenroot@gmail.com.

Date: 10/15/2012

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