Behind-the-scenes farm bill negotiations tied to the super committee work on deficit reduction are attracting some negative press. The San Francisco Chronicle talks of 11th hour opposition  

From the story: 

In the 11th hour, a U.S. representative and a bipartisan coalition of 26 groups are trying to keep the House and Senate agriculture committees from pushing the 2012 Farm Bill through Congress, calling their process secretive and undemocratic.

The proposal is one of the nation's most significant pieces of legislation, dealing with everything from farm support programs to food stamps - the last Farm Bill has already exceeded $300 billion. The new bill is expected to be submitted to the congressional super committee as early as today.

The super committee, six senators and six House members from both parties, was formed this year in response to the nation's debt-ceiling crisis and tasked to cut the deficit by $1.5 trillion in the next 10 years. The group is scheduled to issue a budget recommendation Nov. 23, which will go Dec. 23 to a simple up and down vote by Congress - no amendments, no House blocks and no filibusters. The new farm legislation would be submitted without the opportunity for debate or a public comment period.


One element of the farm bill that is being hammered out  is whether direct payments will be replaced by a robust revenue insurance program for traditional subsidized crops like corn, wheat, soybeans and cotton.

The American Enterprise Institute has weighed in on revenue insurance and found it a potential boondoggle for taxpayers.

Check out the link to the paper, called "The ACRE Program: A Disaster in Waiting

The US Average Crop Revenue (ACRE) program was introduced as part of the 2008 Farm Bill. ACRE was marketed as a farm revenue safety net program, but in reality ACRE payments are largely driven by decreases in agricultural commodity prices from recent levels. As a result, the ACRE program is much more likely to generate subsidy payments for farmers of major crops like wheat, corn, and soybeans than the Countercyclical Payments program (which was introduced in the 2002 Farm Bill) or the long-standing loan rate price support program for which it currently substitutes. In fact, the ACRE program has the potential to be a federal budget nightmare because of the potential it creates for frequent and large subsidy payments that could amount to as much as $10 billion in some years and average as much as, or more than, $6 billion a year. The congressional deficit-reduction super committee should therefore pay special attention to the budgetary risks posed by Farm Bill initiatives that place ACRE, or ACRE-like programs like the recently proposed Agricultural Risk and Revenue Management (ARRM) program, at the center of a new and "reformed" US farm program in place of the $5 billion subsidies that farmers currently receive through the Direct Payments program.

In addition to having the potential to be a major fiscal problem, the ACRE program also could be a serious problem with respect to US commitments under the provisions of the 1994 Marrakesh agreement that established the World Trade Organization (WTO) and introduced a specific agreement on agricultural trade and domestic policies. The likelihood of future large ACRE program subsidy payments could create issues for the United States in terms of its commitments with respect to the current commodity-specific and overall levels of domestic supports (called "amber box" aggregate measures of support).

 A more serious WTO problem is associated with the inherent structure of the ACRE program, which violates underlying commitments made by developed countries to refrain from introducing new programs that tie subsidy payments directly to current price and output levels. In addition, in periods when market prices for the subsidized commodities are declining, other countries are likely to file WTO complaints about serious prejudice under Article 6 of the WTO Agreement on Subsidies and Countervailing Measures (SCM) on the basis that the ACRE program is contributing to "price suppression," lowering world prices, and adversely affecting their farmers. Such arguments would indeed be warranted.

The case histories associated with WTO disputes over price suppression resulting from domestic subsidies like ACRE that are tied to current production and market prices (especially the "Brazil cotton case") strongly suggest that plaintiffs are likely to be successful and, as a result, the United States will be subject to more trade penalties. Those penalties can take the form of countervailing trade restrictions on other sectors of the US economy (typically export sectors) as well as the agricultural sector. Alternatively, they can generate absurd "Alice in Wonderland" compromises through which US taxpayers fund programs, to the tune of $147 million a year, that improve the global competitiveness of Brazil's cotton producers because American cotton producers insist on continuing to receive (and Congress insists on providing) subsidies that violate US WTO commitments.

The ACRE program is an expensive taxpayer liability. It is also a Pandora's box invitation for other countries to successfully file WTO complaints against the United States that will damage US global trade relations and cost firms producing agricultural and many other commodities access to important export markets. On both grounds, the ACRE program needs to be terminated as soon as possible and should under no circumstances be replaced by look-alike programs.

Bringing the farm bill back to fresh produce, specialty crop lobbyists have been operating behind the scenes for the most part, so far not making public any communications with agriculture committee leaders. The perception is that specialty crop programs will fare better than most others in the ag committee recommendations to the super committee. However,  the fuzzy math linked to revenue insurance for the big program crops makes one dubious how much budget-cutting is really going on. What's more, fresh produce exports could end up taking a hit from retaliatory duties  if Congress is indifferent to making the 2012 farm bill WTO-compliant. Stay tuned for the unseemly details next week....