Farm bill situation produces uncertainty

LSU Agricultural Center Economist Mike Salassi is unsure how to advise Louisiana “row crop” farmers during a time of market uncertainty and the lack of a federal farm bill.

The so-called fiscal cliff deal on Jan. 1 extended the old federal farm policies through September. But the proposed five-year federal farm bill died in doing the extension and now must start from scratch legislatively.

Salassi said the uncertainty is made worse, particularly for southwestern Louisiana rice farmers, because many banks and other lenders are operating cautiously, as if the federal direct payments to farmers could cease even before Sept. 30.

“I don’t know. There’s not much we can tell them,” Salassi said about advising farmers. “It’s a bad situation that I hope is going to change shortly.

“They can’t wait too long. They’ve got to plant,” Salassi said. He noted that production costs also have risen substantially in recent years for the nearly $500 million Louisiana rice industry and other row crop farmers.

“They’re going to move forward with as much financing as they can,” Salassi said.

The Louisiana rice industry is in a more precarious position than the sugarcane and soybean industries, because of the debate about whether to include price-control funds in the bill.

The issue for the rice industry is that direct payments and price-control funds, called countercyclical payments, were axed in last year’s Senate-passed bill in favor of adding more money to crop insurance programs. But rice is seen as a stable crop and does not need to rely on traditional crop insurance, unlike corn and soybeans. The risks for rice pertain more to swings in market pricing and demands.

That issue is largely why Sens. Mary Landrieu, D-La., and David Vitter, R-La., voted against the bill. Vitter also opposed it because of the amount of nutrition program funding, which includes food stamps, in the bill.

The House Agriculture Committee bill though offered the option for such countercyclical payments that benefit rice farmers.

Rep. Charles Boustany, R-Lafayette, was upset with the House leadership last year for refusing to act on the five-year farm bill that was approved by the House Agriculture Committee.

Boustany said the food stamp funding debate was a big reason the bill might not have acquired enough votes for a vote on the House floor. “Those fights will all play out again,” Boustany said, which is why he said he will continue to “push our leadership.”

“We need to get a five-year bill in place to create the certainty for the farmers and the bankers,” Boustany said.

Boustany said he is in touch with House Agriculture Chairman Frank Lucas, R-Okla., who wants to move on a new bill “as soon as possible.”

The hope is the committee will start acting on a new bill as soon as February and that it could be ready for House floor votes by summertime, Boustany said.

“I’d really hate to see us wait until we have Sept. 30 knocking on the door,” he said.

Both the Senate and House committee bills did away with federal direct payments to farmers.

So, even though the temporary extension includes them, bankers are hesitant to factor them into their lending decisions, Salassi said.

The Louisiana rice industry also is looking into the potential of exporting to China, Colombia and other regions with the expectation that the global demand for quality rice is growing, according to the LSU Agricultural Center.

Without a federal farm bill, though, the nation reverts back to policies from 1949, a move that was dubbed the “milk cliff” that could push prices to nearly $8 a gallon.

Louisiana Agriculture and Forestry Commissioner Mike Strain said the temporary extension was better than falling over the cliff, but that a five-year bill is needed.

He is traveling to Washington, D.C. at the end of the month with other state commissioners as part of a farm bill lobbying effort.

It is important to note, Strain said, that the temporary extension had cut funding for agriculture research and conservation programs like the Conservation Stewardship Program that are critical for long-term agricultural sustainability.

While the extension included the disaster agriculture funding program, it did so without actually mandating that it is funded. So all farmers are totally exposed to disaster threats now, Strain said.

In addition, the state’s large farmers are now working with tighter margins because of tax hikes on capital gains and other measures, Strain said.

Strain said he hopes the farm bill is not “held hostage” during the upcoming debt ceiling and spending cut fights that are expected in February and March.

“The concern is we have no idea what the next farm bill is going to look like,” Strain said. “And if we don’t pass a farm bill this year, then we may never pass one.”