With the House just now about to debate the 2007 farm bill and the Senate Agriculture Committee yet to hold its first mark-up session for the legislation, farmers understandably are getting nervous about the outlook for a new law.
At press time, the House was scheduled to take up H.R. 2419, the farm bill reported by the agriculture committee, July 25 and 26th. Although the bill received an endorsement from House Speaker Nancy Pelosi, its passage was by no means certain.
Reps. Ron Kind, D-Wis., and Jeff Flake, R-Ariz., were expected to introduce their Food and Agriculture Risk Management for the 21st Century Act as a substitute for the ag committee bill, and one group - the Center for Rural Affairs - asked Pelosi to delay action on the farm bill to allow further study of its new payment limits.
With lobbyists still waiting for the Senate Committee on Agriculture, Forestry and Nutrition to begin the process, one farm group sent its leaders an outline of what happens if a new farm bill isn't passed.
First off, the commodity provisions of the 2002 bill do not expire on a particular day, except for milk. Instead, the 2002 law essentially ends when the 2008 crops are harvested and can be placed under loan.
If new legislation is not in place for the 2008 harvest, beginning with wheat next spring, the Agricultural Act of 1949 or the permanent law succeeding farm bills have amended goes into effect. The latter provides price support at parity-based levels for wheat, corn, rice and upland cotton, soybeans, peanuts and grain sorghum among other commodities.
The Agricultural Adjustment Act of 1938 contains provisions for marketing quotas, producer referendums on those, and individual farm acreage allotments for wheat and cotton. USDA has announced no marketing quota would be in effect for the 2008 wheat crop. A marketing quota announcement for the 2008 cotton crop has to be made by Oct. 15.
Under the 1949 law, loan rates would be based on parity prices, estimates of a commodity's price adjusted for relative changes in prices paid and received by farmers since the 1910-14 base period. USDA calculates parity prices annually.
Loan rates based on parity prices likely would range from two to four times the level of current rates. USDA projects the 2008 parity-based loan rate for cotton would be $1.83 cents per pound, over three times the current 52 cents.
Cotton growers would not receive that rate for their entire 2008 crop since production in excess of an individual farm acreage allotment would be subject to a penalty of 50 percent of parity or $1.03 per pound (as of May 2007).
One issue farmers would not have to confront under the permanent law would be payment limits. The Food Security Act of 1985, as amended by the Farm Security and Rural Investment Act of 2002, sets out the payment limit rules for the 2007 crops.