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Senate Passes Agriculture Bill Aimed at Saving $23.6 Billion

June 21, 2012

Senate Approves Agriculture Bill Aimed at Saving $23.6 Billion

A wheat farm in Streator, Illinois. Photographer: Daniel Acker/Bloomberg

The U.S. Senate passed a bill that would cut agriculture programs by $23.6 billion over 10 years, mostly by ending direct payments to growers regardless of commodity prices, the biggest policy change in decades.

The measure was approved today 64-35. While the bill ends direct payments, farmers would be protected partly by expanded crop-insurance programs and aid for so-called shallow losses when prices drop or crops fail.

The bill is “about standing up for our farmers, our small business, our exporters, our manufacturers,” Agriculture Committee Chairwoman Debbie Stabenow said before the vote. “This represents significant reform.”

The bill sets policy for U.S. agricultural programs for a five-year period. The measure is a prime target for budget cutters because of near-record farm profits and the highest-ever expenditures on food stamps, the Department of Agriculture’s biggest expense.

Net farm income this year will be $91.7 billion, the second-highest ever, according to the USDA. Spending on food stamps reached a record $75.7 billion last year, double the level of four years ago.

Production Subsidies

The farm bill governs programs that feed needy families, improve air and soil quality, encourage rural development and provide a safety net for farmers who suffer crop or income loss. Production subsidies, which may reach $11 billion this year, aid agribusinesses such as Archer Daniels Midland Co. (ADM:US) and Cargill Inc. by lowering the costs of their raw materials.

In three days of debate this week, lawmakers turned back several efforts to cut or restrict crop insurance, including an amendment sponsored by New York Democrat Kirsten Gillibrand that would have reduced subsidies for insurance providers by $5 billion to increase funding for food stamps.

Senators also rejected amendments that would have ended the import-quota system that protects U.S. sugar producers and other support for the sweetener. The measures were backed by confectioners such as Hershey Co. (HSY:US) that say they artificially inflate sweetener prices.

Crop Insurance

While losing direct payments, growers of crops including corn, soybeans and sorghum would become eligible for insurance- reimbursement rates based on near-record high prices. A new insurance program was included for cotton farmers, who would also lose direct payments. The plan was modeled on a proposal from the National Cotton Council, the industry group for growers.

The Senate also turned back a plan to end payments to farmers with more than $250,000 in adjusted gross income while voting to cap gains on a crop-loan program at $75,000.

The House Agriculture Committee is still working on its version of the legislation, which will have to be reconciled with the Senate measure. Republican Chairman Frank Lucas of Oklahoma and Collin Peterson of Minnesota, the panel’s top Democrat, have said their bill will include more aid for rice and peanut growers, who have said the Senate’s bill doesn’t provide an adequate safety net.

‘Balanced Proposal’

“The House Agriculture Committee will consider a balanced proposal that saves taxpayers billions of dollars, recognizes the diversity of American agriculture, respects the risks producers face, and preserves the tools necessary for food production,” Lucas said in a statement after the vote.

Lucas yesterday said his committee will begin debate on its version of the legislation on July 11. Congress must pass a bill by Sept. 30 to keep programs from expiring. A lapse would require either an extension of the previous bill passed in 2008 or a reversion to the 1949 measure that underlies the current law.

Groups including the National Corn Growers Association and the American Soybean Association support the Senate plan, saying it helps farmers while lowering the federal budget deficit.

The Senate bill is S. 3240.

To contact the reporters on this story: Alan Bjerga in Washington at abjerga@bloomberg.net; Derek Wallbank in Washington at dwallbank@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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