LSU AgCenter Economist Offers Perspective On Farm Bill Draft

Kurt Guidry, Blanchard, Tobie M.  |  8/15/2007 10:40:13 PM

News Release Distributed 08/15/07

The U.S. House of Representatives passed its version of the new federal farm bill in late July. Although farmers were hoping for an extension of the 2002 farm bill, that is not quite what they have so far, experts say.

But LSU AgCenter economist Dr. Kurt Guidry says Louisiana producers could find some satisfaction with the current draft.

"Where we started from, where it could have gone and where the House version is at is somewhere in the middle or close to where we’ve been," Guidry said. "For that reason I think most producers will be fairly agreeable with this version of the farm bill."

Direct and counter-cyclical payments would be extended in this version of the bill, and the House made a change in farmers’ favor to the counter-cyclical payment program.

"The big change was in offering a new revenue-based counter-cyclical program, which essentially gets targeted not only by prices falling but also from yields falling below historical levels," Guidry explained.

Guidry says if this provision had been offered in the 2002 farm bill, farmers would have received more payments during the past few years.

Another part of this draft alters payment limits. Under the 2002 bill, payments are limited to $40,000 for direct payments, $65,000 for counter-cyclical payments and $75,000 for marketing loan gains or loan deficiency payments.

The House version of the new bill raises the payment cap for direct payments to $60,000. The counter-cyclical payment cap is unchanged, and marketing loan gains or loan deficiency payments are unlimited.

On the downside for farmers, however, the bill eliminates the "three-entity rule," which has been allowing producers to receive half a payment for two other farms they were involved in.

"This would cause a little bit of an adjustment when looking at how farms are structured and implications of payment limitations," Guidry said.

Another change is to a farmer’s adjusted gross income limit. Under the 2002 farm bill, farmers earning more than $2.5 million were not eligible for government program payments. This new version disqualifies farmers earning more than $1 million from participating in payment programs.

"While this is tighter restrictions than what was in the 2002 farm bill, this is still higher than the USDA’s recommendation for adjusted gross income limit of $250,000," Guidry said.

Guidry thinks this change will not affect many Louisiana farmers.

"Texas A&M University did some research looking at what kind of impact that $250,000 adjusted gross income criterion would have had and found very little or minimal impact on Louisiana rice and cotton producers," said Guidry.

A stipulation included in this proposed bill requires that any individual or farm entity with a three-year average adjusted gross income of more than $500,000 must generate approximately 67 percent of that income from farming to be eligible for payments.

This version also proposes a change for the sugarcane industry.

"The major change I see for sugarcane was to increase the marketing loan rate from 18 cents to 18.5 cents, which was a positive," Guidry explained. "Processors that put their sugarcane under the loan can get more money."

In addition, this bill would have the USDA monitor Mexican sugar production because of easing provisions in some trade agreements. Louisiana’s sugar industry could benefit from knowing how much sugar Mexico is producing and its potential for importing its product into the United States.

The farm bill debate is far from over, however. The Senate will take up the issue in September. Once the Senate passes a version of the new bill, the two houses of Congress will have to reach a compromise, which then will have to go before the full House and Senate for a vote again.

"There is still a very long way to go before we get a final version of the farm bill," Guidry concluded.

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Contact: Kurt Guidry at (225) 578-4567 or kmguidry@agcenter.lsu.edu
Writer: Tobie Blanchard at (225) 578-5649 or tblanchard@agcenter.lsu.edu

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