Budget Issues Shaping a 2012 Farm Bill

Jim Monke Specialist in Agricultural Policy

Budget issues are one of the primary factors affecting the development of a new farm bill, particularly in a Congress that is focused on deficit reduction. The Senate passed its version of a 2012 farm bill (S. 3240) on June 21, 2012. The House Committee on Agriculture reported its version (H.R. 6083) on July 11, 2012. House floor action and/or reconciliation of the differences between the chambers is pending.

The Congressional Budget Office (CBO) projects that current farm bill programs, if they were to continue from the 2008 farm bill, would cost nearly $1 trillion over the next 10 years. Compared to this “baseline,” the Senate-passed farm bill, S. 3240, would reduce spending by $23.1 billion (-2.3%); and the House-reported bill, H.R. 6083, would reduce it by $35.1 billion (-3.5%).

One of the most noticeable budget differences between House and Senate bills is the reduction proposed for the nutrition title, with the Senate reducing the nutrition baseline by $4 billion and the House bill reducing it by $16 billion. This has emerged as one of the most important political issues for the bill, especially in the House, with some calling for less reduction and others for more. For crop insurance and farm commodities, the combined change for these titles in the House bill (-$14.1 billion) is similar to the combined crop insurance and commodities subtotal in the Senate bill (-$14.4 billion), even though policy approaches differ between the bills.

The $23 billion 10-year reduction in the Senate bill is consistent with a joint House-Senate Agriculture committee proposal to the Joint Select Committee on Deficit Reduction in the fall of 2011. The $35 billion 10-year reduction in the House bill is consistent with reconciliation instructions in the House budget resolution for FY2013.

Funding to write the next farm bill is based on CBO baseline projections of the cost of farm bill programs, and on varying budgetary assumptions about whether programs will continue. The CBO baseline is an estimation (projection) at a particular point in time of what federal spending on mandatory programs likely would be under current law. When new bills are proposed that affect mandatory spending, their impact (or “score”) is measured as a difference from the baseline. This process sets the mandatory budget for considering a new farm bill.

The budget situation is more difficult and uncertain this year than for recent farm bills because of the attention on the federal debt. Uncertainty about government-wide deficit reduction plans is beyond the control of the agriculture committees and may not be resolved for months. Several high-profile congressional and Administration proposals for deficit reduction are specifically targeting agricultural programs with mandatory funding. Across-the-board reductions to most farm bill programs also could occur in 2013 unless Congress avoids an automatic budget sequestration process. Moreover, some 2008 farm bill programs do not have a baseline to continue, and some budgeting rules have changed since the last farm bill.

The desire by many to redesign farm policy and reallocate the remaining farm bill baseline—in a sequestration and deficit reduction environment—is driving much of the farm bill debate this year. Political dynamics concerning sequestration and broader deficit reduction goals leave open difficult questions about how much and when the farm bill baseline may be reduced. In this context, Congress faces difficult choices about how much total support to provide for agriculture, and how to allocate that support among competing constituencies.


Date of Report: August 20, 2012
Number of Pages: 27
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The 2012 Farm Bill: A Comparison of Senate- Passed S. 3240 and the House Agriculture Committee’s H.R. 6083 with Current Law

Ralph M. Chite, Coordinator
Section Research Manager

Congress periodically establishes agricultural and food policy in an omnibus farm bill. The 112th Congress faces reauthorization of the current five-year farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246) because many of its provisions expire in 2012. The 2008 farm bill contained 15 titles covering farm commodity support, horticulture, livestock, conservation, nutrition assistance, international trade and food aid, agricultural research, farm credit, rural development, bioenergy, and forestry, among others.

The Senate approved its version of the 2012 omnibus farm bill (S. 3240, the Agriculture Reform, Food, and Jobs Act of 2012) by a vote of 64-35 on June 21, 2012. Subsequently, the House Agriculture Committee conducted markup of its own version of the farm bill (H.R. 6083, the Federal Agriculture Reform and Risk Management Act of 2012) on July 11, 2012, and approved the amended bill by a vote of 35-11. Floor action on the House farm bill is pending.

Within the 12 titles of S. 3240 and H.R. 6083, both farm bills would reshape the structure of farm commodity support, expand crop insurance coverage, consolidate conservation programs, revise the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), and extend authority to appropriate funds for many U.S. Department of Agriculture (USDA) discretionary programs through FY2017. Among the major differences in the two farm bills is how each would restructure the farm safety net. Both farm bills borrow conceptually from current programs, by revising (and renaming) them to enhance price or revenue protection for producers. The House farm bill is similar to the current mix of farm programs in that it retains producer choice between a counter-cyclical price program and a revenue enhancement program, while the Senate farm bill provides for a revised revenue program with a slightly higher guarantee than in the House farm bill.

The Congressional Budget Office (CBO) projects that the programs of the 2008 farm bill, if they were to continue, would cost nearly $1 trillion over the next 10 years. Compared to this “baseline,” the Senate-passed farm bill would reduce spending by $23.1 billion and the House Agriculture Committee-approved farm bill would reduce it by $35.1 billion, both over the same 10-year horizon. Explaining much of the $12 billion difference in estimated savings between the two farm bills are provisions in the nutrition title of the House bill that would affect program eligibility for SNAP.

This report contains a more detailed summary of the major similarities and differences between the House and Senate 2012 farm bills and also provides a side-by-side comparison of every provision in the two farm bills and how these provisions relate to current federal law or policy. 

NOTE: As of the date of publication of this report, the House Agriculture Committee had not yet officially reported the text of H.R. 6083, as amended and approved by the committee at its July 11, 2012, markup. Hence, section numbers of the yet-to-be-reported bill are unavailable for portions of titles (IV, V, VI, X, and XII) that were amended without any reference to the amendment’s exact placement in the bill. This report reflects provisions of all of the adopted amendments (as posted on the House Agriculture Committee website) and will be updated with the appropriate section number references once the bill is reported


Date of Report: August 21, 2012
Number of Pages: 134
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Expiring Farm Bill Programs Without a Budget Baseline

Jim Monke
Specialist in Agricultural Policy

The Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) authorizes most federal farm and food policies. Its authorizations generally expire at the end of FY2012, or with the 2012 crop year for the farm commodity programs.

The farm bill provides the mandatory funding for many farm bill programs, including the farm commodity programs and some nutrition, conservation, research, bioenergy, and rural development programs. Funding to write the next farm bill will be based on the baseline projection of the cost of these farm bill programs by the Congressional Budget Office (CBO), and on varying budgetary assumptions about whether programs will continue.

Some farm bill programs have baseline beyond the end of the 2008 farm bill, while others do not. Those with continuing baseline essentially have built-in future funding if policymakers decide the programs should continue in their current form. However, 37 programs that received mandatory funds during the 2008 farm bill are not assumed to continue from a budgetary perspective because they do not have a budgetary baseline beyond FY2012. If policymakers want to continue these programs in the next farm bill, they will need to pay for the programs with offsets.

Depending on the approach used to estimate a cost to extend the 37 programs for five years, an estimated $9 billion to $14 billion of offsets from other sources may be needed. This is nearly 3% of the $507 billion five-year CBO baseline for farm bill programs (FY2013-FY2017), or 13% of the $108 billion five-year baseline if the nutrition title is excluded. Finding this level of offsets may be a difficult task in a tight budget environment, especially when many observers believe that some of the farm bill baseline may be lost to deficit reduction.

The 37 provisions without baseline beyond FY2012 are spread among 12 of the 2008 farm bill’s 15 titles. The title with the most such provisions is the energy title (8), followed by conservation (5), nutrition (5), and horticulture and organic agriculture (5). Just two of the provisions—the agricultural disaster assistance program and the Wetlands Reserve Program, each with uncertainty about future costs—account for about 80% of the value of programs without future baseline.

The House and Senate proposals for the 2012 farm bill provide funding to continue some of the 37 programs without budget baseline. The Senate farm bill, S. 3240, provides more than $3 billion of mandatory funding for 26 of the programs, and the House farm bill, H.R. 6083, provides more than $1.9 billion of mandatory funding for 14 of the programs.


Date of Report: August 21, 2012
Number of Pages: 19
Order Number: R41433
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U.S. Farm Income

Randy Schnepf
Specialist in Agricultural Policy

According to USDA’s Economic Research Service (ERS), national net farm income—a key indicator of U.S. farm well-being—is forecast at a record $122.2 billion in 2012, up 3.7% from last year’s record. Record gross revenues from crop sales (forecast at $222.1 billion), coupled with record revenues (forecast at $34.1 billion) from farm-related income—a category that includes crop insurance indemnity payments as well as income from custom work, machine hire, etc.—pushed total gross cash income to a record $433.6 billion (up 5.5%). This more than offset flat revenues from livestock markets ($165.8 billion), and a 6.6% increase in input costs (forecast at $294.2 billion) to account for the record forecast for overall net returns. When measured in cash terms, net cash income in 2012 is also projected record large at $139.3 billion, up 3.4% from last year’s record. However, when adjusted for inflation, current farm income forecasts remain well below the peak period of the early 1970s.

In addition to record farm income, farm wealth is also at record levels. Farm asset values—which reflect farm investors’ and lenders’ expectations about long-term profitability of farm-sector investments—are expected to rise nearly 7% in 2012 to a record $2,551 billion for a fifth consecutive year of gains. Farm land cash markets have continued to see gains related to strong crop prices in 2012. Since 2008, farm asset values are up 26% while farm debt has risen by only 8%. As a result, the farm debt-to-asset ratio has declined steadily since 2008 and is expected to fall to the lowest level on record in 2012 at 10.2%.

The 2012 outlook for a second year of strong farm income occurs in spite of slow growth in the domestic economy and the most severe and extensive drought in at least 25 years. The ongoing drought is expected to destroy or damage a significant portion of the U.S. corn and soybean crops, with deleterious impacts on all U.S. livestock sectors—cattle, hogs, poultry, and dairy— and with the potential to affect food prices at the retail level. Yet, drought-induced large increases in the value of this year’s crops, plus substantial crop insurance indemnity payments, are expected to more than offset rising production expenditures for both crop and livestock activities and generate record farm income. Government farm payments, at $11 billion (up 6%), are expected to remain relatively small in 2012 (second-lowest total since 1997) as high commodity prices shut off payments under the price-contingent marketing loan and counter-cyclical payment programs.

These data suggest a strong financial position in 2012 for the agricultural sector as a whole relative to the rest of the U.S. economy, but with substantial regional variation. In general, the increase in expenses will affect livestock producers more harshly than crop producers. Cash grain farmers in the Corn Belt and Northern Plains are expected to experience a second year of record revenues despite the drought. In contrast, livestock and poultry feeders are experiencing record high feed costs that have narrowed or eliminated profit margins despite record high wholesale and retail prices for their end products. In addition, the severe nationwide drought has limited grazing opportunities and hay production for cattle ranchers in the affected regions and led to substantial herd liquidation.

The lingering effects of the drought are expected to spill over into next year, when record-high market prices will likely motivate large feed grain and oilseed plantings. Eventual 2013 agricultural economic well-being will hinge greatly on spring crop planting and summer growing weather, as well as both domestic and international macroeconomic factors including economic growth and consumer demand.


Date of Report: August 28, 2012
Number of Pages: 28
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Deregulating Genetically Engineered Alfalfa and Sugar Beets: Legal and Administrative Responses

Tadlock Cowan
Analyst in Natural Resources and Rural Development

Kristina Alexander
Legislative Attorney

Monsanto Corporation, the developer of herbicide-tolerant varieties of genetically engineered (GE) alfalfa and sugar beet (called Roundup Ready alfalfa and Roundup Ready sugar beet), petitioned USDA’s Animal and Plant Health Inspection Service (APHIS) for deregulation of the items. Deregulation of GE plants is the final step in the commercialization process. Monsanto filed a petition for deregulation of its GE alfalfa in 2004, and for GE sugar beets in 2005.

As part of the deregulation process, APHIS conducts an environmental review under the National Environmental Policy Act (NEPA) to determine whether any significant environmental impacts will result from deregulation. APHIS conducted a limited review, known as an environmental assessment (EA), of the GE plants to assess the impacts of growing them on a commercial scale. APHIS issued a “finding of no significant impact” (FONSI) for GE alfalfa and GE sugar beets.

Lawsuits subsequently challenged the adequacy of the EAs in separate actions. Both courts held that APHIS should have prepared a more analytically thorough environmental impact statement (EIS) for the deregulation decisions. Separately, the courts directed APHIS to complete an EIS on the effects of deregulating GE alfalfa and GE sugar beets.

The court in the GE alfalfa case halted planting of the genetically modified seed, and nullified the deregulation. The injunction was appealed to the U.S. Supreme Court, which held that the injunction was too broad and that the court should have considered partial deregulation. The Supreme Court did not discuss the appropriateness of the environmental review. In the meantime, APHIS completed the environmental review directed by the lower court, releasing a final EIS for GE alfalfa on December 16, 2010. On January 27, 2011, Secretary Vilsack announced that APHIS was granting GE alfalfa full deregulation. On January 5, 2012, a federal district court rejected claims that the deregulation violated the law.

The court in the GE sugar beet case did not formally prohibit planting sugar beets, but it voided APHIS’s deregulation decision in August 2010, undoing the five-year-old approval of GE sugar beets, from which nearly half of U.S. sugar is derived. APHIS issued four permits authorizing seedling production that would not allow flowering or transplanting without additional authorization. In November 2010, a judge ordered those seedlings pulled from the ground, holding that APHIS had violated NEPA in issuing the permits. The Ninth Circuit temporarily halted that decision in December 2010, ultimately holding in February 2011 that the seedlings did not have to be removed.

APHIS announced on February 4, 2011, that the agency would partially deregulate GE sugar beet root crop production, but would continue full regulation for sugar beet seed crop production while the EIS was prepared. The final EIS for GE sugar beets was published June 1, 2012. On July 20, 2012, APHIS issued its determination of non-regulated status for GE sugar beets. Provisions to amend APHIS’s regulatory procedures under the Plant Protection Act have been introduced in the House farm bill (H.R. 6083) and in the House Agriculture appropriations bill (H.R. 5973).

The cases of GE alfalfa and sugar beets highlight continuing policy questions about the adequacy of APHIS’s deregulation protocol, particularly regarding the environmental review process. In their suits against APHIS, plaintiffs cited the EAs’ failure to assess the impact on non-GE alfalfa growers (particularly those who export to Japan, Korea, and Taiwan) and on producers of commercial table beet and chard seeds (species that can cross-pollinate with GE sugar beets).


Date of Report: September 10, 2012
Number of Pages: 18
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