Reference prices are the farm bill mystery and roadblock

Congress is not so much stalled over writing the new farm bill as unable to get started on it, considering the ongoing mystery of reference prices, said farm policy expert Jonathan Coppess. Higher reference prices, a key factor in boosting crop subsidies, are a priority of farm groups and their allies in Congress but no proposal has been made public in the past year to increase them.

“If raising reference prices is a policy priority, the silence on that priority is deafening,” wrote Coppess, an associate professor at the University of Illinois, on the farmdoc daily blog. “There has been no clarity on which crops or what reference price levels, and this precludes any analysis about the impacts of such a proposed change.”

For months, farm bill discussions have been in the hands of the so-called four corners, the Democratic and Republican leaders of the Senate and House Agriculture committees, without a resolution. There have been opaque comments by the leaders and second-hand reports of an impasse over higher reference prices and how to pay for them, with climate funding as the oft-mentioned target. “An entire year … has passed with little public information about the priorities for farm policy … a complete mystery,” said Coppess.

Higher reference prices would be expensive — $20 billion over 10 years for an increase of 10% and $50 billion for an increase of 20%, according to an unofficial estimate. By comparison, CBO estimated last year that commodity supports now in place would cost nearly $62 billion over that period. Subsidy payments are issued under the Price Loss Coverage (PLC) program when the average price for a crop is below the reference price set by Congress. The PLC is one of two crop subsidy programs available to farmers.

“It’s the cost of this [that] makes the discussion very difficult,” said Zippy Duvall, president of the American Farm Bureau Federation, during a FERN interview on the closing day of the AFBF annual convention in late January. The top AFBF lobbyist said during a convention-opening news conference that farm groups report to lawmakers abut agricultural issues and defer to Congress on funding sources. The AFBF said its policy-setting delegates “reaffirmed their support for increasing reference prices in the farm bill and maintaining a strong crop insurance program, including an expansion of eligibility to ensure more commodities are covered.”

Other farm groups will hold their annual meetings in coming weeks. The Commodity Classic, a forum for groups representing corn, soybean, wheat, and sorghum farmers, is Feb. 28-March 2 in Houston, and the National Farmers Union convention is March 10-12 in Scottsdale, Arizona.

A state-by-state comparison of crop subsidy payments with cash receipts for farm program crops indicates “farmers in Southern states have benefited disproportionately from farm policy in the two previous farm bills,” Coppess wrote.

Other farm policy analysts have noted the divergence in farm bill activity. In years past, prominent lawmakers from various regions, the Midwest or the South, for example, would file marker bills that spelled out in detail their goals to aid crops grown in their part of the country. Sometimes the result was to pit wheat, corn, and soybeans against cotton, rice, and peanuts. Other lawmakers would argue how to devise payments that would go to the farmer working the land rather than the landlord.

At some point, election-year politics are expected to freeze congressional action on the farm bill, and other legislation. Lawmakers will test the electoral winds as they decide whether to make a deal now or wait until the Nov. 5 general election in the belief their side will gain seats, or even control of the House or Senate. Negotiations over the 2018 farm bill were concluded quickly after the midterm elections, with Democrats as the victors, shattering House Republican hopes of large cuts in SNAP.