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Farm bill targets federal ag spending

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Posted on June 28, 2012 |
By Andrea Suozzo



Editor’s note: This is the first of two articles on the 2012 federal Farm Bill. The second article, covering the bill’s possible impact on nutrition assistance programs, will appear in Monday’s edition.

WASHINGTON, D.C. — Last week, the U.S. Senate approved its version of the 2012 Farm Bill, a five-year bill that determines funding and policy for U.S. Department of Agriculture programs — including some that could affect Vermont farmers and residents.

Ted Foster, vice president of the Vermont Farm Bureau and one of the owners of Foster Brothers Farm in Middlebury, is particularly hopeful that a major dairy price reform in the Senate bill will carry through to the final version. With continued support from dairy producers across the nation, Foster said he thinks the reform has a chance of passing in the U.S. House, too.

“Hopefully people have ridden this roller coaster long enough that they’ll feel it’s worth some kind of stabilization program,” said Foster.

The farm bill, officially named the Agriculture Reform, Food and Jobs Act of 2012, passed by a 64 to 35 vote on the Senate floor. It sets spending levels and rules for USDA programs, including agriculture, forestry and nutrition. The House must also pass a version and the two must be reconciled, but Sen. Patrick Leahy, D-Vt., marked Senate passage as an achievement that will set the tone for negotiations in the House. Still, he said, it wasn’t an easy process.

“It was a very difficult Farm Bill at best,” said Leahy on Wednesday.

Th e Senate version of the bill would reduce federal spending by $23 billion over the next 10 years, call for a new dairy management program that would attempt to moderate extreme highs and lows in dairy prices, and curtail spending on the Supplemental Nutrition Assistance Program (SNAP) by $4.5 billion (see story next Monday).

The reduction in spending would be achieved primarily by replacing the direct payment system that compensates farmers for using land to grow crops, with payouts based on what was being grown there in 1995. That’s a system that Bob Parsons, a University of Vermont agronomist, said is long out of date, as it was slated for elimination in the early 2000s. In its place would be additional crop insurance measures.

The bill also does away with the Milk Income Loss Contract (MILC) in favor of a new dairy insurance program that would compensate farmers based on the margin between feed price and milk price, rather than simply looking at the milk price.

In what many Northeastern dairy farmers are calling a victory, farmers would have to buy into the Dairy Market Stabilization Program in order to obtain the margin protection insurance. The stabilization program would aim to prevent the production increases that have historically contributed to plummeting milk prices.

Under the program, falling milk prices would trigger a system where participating farmers would be notified to decrease overall milk production by a small percentage. Farmers would not be paid the full price for anything over that amount.

The aim of the program is to lower national milk production, which would, in theory, prevent milk prices from falling further.

Ted Foster said he is hopeful that dairy reform will make it into the final bill. From the perspective of a farmer on a small Vermont dairy, he said the market stabilization measures make a lot of sense.

“This program would allow us to manage the price of milk a little better,” he said.

Bob Wellington, senior vice president and a dairy economist at Agrimark, said in light of dairy prices that are falling once again and a MILC program that will lose much of its funding come September, talk of reform is much needed.

“One of the problems that the industry faces is that a small imbalance in the price of milk (in the stores) changes the price paid to farmers dramatically,” he said.

And, Wellington added, with milk prices more stable, the federal government would see a savings on the price of its insurance payouts to farmers, which rise when prices are low.

“It provides a safety net to the farmers, but at the same time lowers the cost to the government — that’s the right thing to do,” he said.

Insurance premiums are also much lower on the first 4 million pounds of milk a producer generates each year — about what a farmer milking between 150 and 200 cows would produce. That’s a drop in the bucket for a large dairy farmer out West, but Wellington estimated that about 90 percent of farmers who sell their milk to Agrimark fall under that category, and would only be paying the lower premium. That, said Wellington, is a provision added and championed by Sen. Leahy.

But Bob Parsons said nothing is conclusive on this plan, even if it does pass into the final Farm Bill as it currently stands. He said a lot will depend on the rulemaking process, where the legislation is put into regulation.

One concern, he said, is that the market stabilization measures were originally proposed as mandatory for all dairy farmers. Now that they are tied to insurance, Parsons said dairy farmers will have the option not to take the insurance if they don’t want to be in the market stabilization program. And depending on how many farmers choose to opt out, that could doom the proposition for failure.

“To make this work, they’re going to have to get as many farmers involved as possible,” said Parsons. “A lot is going to depend on how the insurance is set up.”

He said the insurance could cover any large drop in production margins, or that it could cover only unexpected drops — that is, only declines below the predictions forecast on the futures markets. That type of insurance, he said, is not as appealing, since even the anticipated drops leave farmers struggling to make ends meet.

The key, he said, will be to make the insurance appealing.

“You want to make that carrot as attractive as possible so they’ll bite,” he said.

LOCAL ROOTS

The Senate Farm Bill includes hundreds of other provisions, including an amendment by Sen. Bernie Sanders, I-Vt., that would support small community energy projects like the Acorn Renewable Energy Co-op, an Addison County-based organization that distributes sustainably forested wood pellets to heat the homes of local members.

The amendment falls under the Community Wood Energy Program, which the Senate reauthorized for $5 million per year. It creates an opening for smaller projects to get startup funding of up to $50,000 in a move that Sanders said could help spread a similar model across the country.

“This is a very innovative, grassroots effort, and I think other communities in Vermont and around the nation could benefit from this approach as we move to sustainable energy sources such as biomass,” said Sanders in a statement.

Peter Carothers, president of the Acorn board, said the organization would have been able to do more right off the bat with access to startup capital.

“We would be farther along right now,” said Carothers, noting that initially, the organization was hard-pressed to afford staff, feasibility studies and an advertising budget that could have raised awareness of wood pellet distribution in the community.

And, he said, while the organization has a growing voice in the renewable energy discussion on the statewide level, startup capital would have given Acorn the initial time and resources to become a statewide advocate.

“Two or three years ago, we could have had a seat at the table in influencing renewable energy policy in the state.”

Carothers said he hopes the Acorn Energy model is one that others will be able to look at when they start up similar programs.

“We would like our model to be copied as much as it’s worthy of being copied,” he said.

CONSERVATION/ORGANICS

Leahy said the fight to preserve conservation measures in congress was a stiff one. Particularly threatened was the Forest Legacy program, which helps states develop interests in privately owned forest lands that they wish to preserve, and helps states develop forest conservation plans for working forest lands.

Bob Wellington and Bob Parsons both noted the importance of the Environmental Quality Incentives Program (EQIP), which aids farmers — particularly dairy, in Vermont — in preventing agricultural runoff by helping to fund stream bank and pasture fences and manure runoff solutions.

Parsons said that program and a number of others are important resources for Vermont farmers, and that they could still be eliminated from the House bill.

“If those are ended, it’s going to have a major impact on the farmers,” he said.

And Dave Rogers, policy advisor for the Northeast Organic Farming Association of Vermont, said Leahy also went to bat to secure funding for a program that helps small farmers to pay the cost of organic certification. The Senate Farm Bill allocates money to support beginning farmers and ranchers and to promote farmers’ markets.

Rogers also noted the preservation of a number of existing conservation programs, as well as the addition of increased crop insurance payments for organic farmers that reflect the higher price of that produce at the market.

While Rogers noted that most of this year’s victories in the Senate were preservations or extensions of existing programs, he said it’s no small feat for this year’s contentious bill.

“We’re in such a tough budgetary climate down there, just to hang onto what you’ve got is a victory,” he said.

LOOKING AHEAD

The House Agriculture Committee has not yet unveiled its proposed version of the bill. Once it does, the bill’s next step is onto the House floor, where it may come under scrutiny as early as the week of July 11. If recent budget discussions and votes serve as any indication, the funding reductions and program modifications that gain traction once that bill reaches the House floor could be even more significant than those considered on the Senate floor.

Rep. Peter Welch, D-Vt., who sits on the House Agriculture Committee, said on Monday that he will continue working hard to reform dairy and to prevent large cuts to SNAP benefits. He said he’s also working to make sure that organic and vegetable farmers are represented in the bill, and that the important conservation programs are preserved.

Welch takes heart from the relatively easy Senate passage.

“It was a very pleasant surprise, given the atmosphere in Washington,” he said.

Welch said dairy reform measures similar to those that passed the Senate have enjoyed strong bipartisan support in the house, so he is holding out hope for that reform. But he said overall, debate in the House won’t be easy.

“I think it’ll be contentious and partisan,” said Welch.

Even once the House does pass a bill, Bob Parsons warned that the process will be far from over, and the final bill may look very different from the Senate bill that passed. After both chambers have approved a bill, another committee will decide how to combine the two separate bills. In that committee, the bill could change significantly once again.

Since Leahy has confirmed he will sit on the reconciliation committee, however, legislation beneficial to Vermont farmers will have a strong advocate at the negotiation table. If past Farm Bills are any indication, said Parsons, “Leahy will have a lot of influence in the conference committee.”

But Parsons said with election season coming up, it’s not going to be easy for the House to reach a compromise, especially if representatives think they may be able to get better deals passed after the upcoming elections.

“It really depends on which way the political winds are blowing,” said Parsons.

Reporter Andrea Suozzo is at andrea@addisonindependent.com.

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