Farm law to expire but many programs funded through March

CHICAGO Fri Sep 28, 2012 4:06pm EDT

A farm is seen in the distance behind corn fields in Redkey, Indiana June 28, 2012. REUTERS/Brent Smith

A farm is seen in the distance behind corn fields in Redkey, Indiana June 28, 2012.

Credit: Reuters/Brent Smith

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CHICAGO (Reuters) - Expiration of U.S. farm law on October 1, shutting off dairy supports and putting 2013 crop subsidies in limbo, will cause pain for some farmers and frustration for many but programs like food stamps and crop insurance will roll on, analysts said.

Government funding is assured through March 2013 for many programs based on a July deal to extend budget authority reached by feuding Republicans and Democrats ahead of the November elections.

Analysts said that the expiration will not affect food stamps and nutrition programs -- about 75 percent of the USDA budget -- and crop insurance, the biggest "safety net" tapped by farmers in this drought year.

But dairy farmers will be hit financially.

"Immediate impact will be felt by dairy farmers because the supplemental payment many of them have been receiving, the Milk Income Loss Contract Program, expires on September 30," said John Blanchfield, senior vice president for agricultural and rural banking at the American Bankers Association.

"Since milk check payments run 30 days behind the delivery of milk, dairy farmers will notice the suspension of these payments with the November milk checks," he said.

Dairy farmers and livestock producers have been hit hardest this year by drought. Crop losses have been covered to a great extent by insurance, supported by USDA programs. But soaring feed prices have squeezed livestock producers, prompting herd liquidations and financial failures.

"Congress has to got to do something in November," said Jackie Klippenstein, vice president of industry and legislative affairs for Dairy Farmers of America. "The farm bill provided a measure of hope. The fact that Congress went home without addressing it has really deflated a lot of folks out there who are struggling."

"There's been so much equity lost," said Ray Souza, a California dairy farmer. "Many dairy farmers have had to borrow against their equity to stay afloat."

After the November 6 election, Congress will return to work on the farm bill. The House of Representatives was splintered over how deeply to cut food stamps and farm programs. The Senate passed its version in June but both chambers must reach agreement before it can become law.

"The best angle I've heard is that if Obama wins, a farm bill completed during the lame duck is more likely; if Romney wins, they'll extend and save changes for 2013," Gary Blumenthal, head of Washington-based agricultural consultancy World Perspectives, told the Reuters Global Ag Forum this week.

For crop farmers and their bankers, the main question has been about decisions to plant fall-seeded crops like winter wheat and purchases of fertilizer or other crop inputs.

"Right now the main issue is the uncertainty," said Dale Moore, public policy deputy with the American Farm Bureau Federation. "The biggest thing by not knowing what the new farm program is when they are sitting down with their bankers to get their credit while planning for next year -- they don't know what they are going to be dealing with."

Chris Hausman, a corn/soy farmer near Champaign, Illinois, said: "Without having a Farm Bill in place it leaves that uncertainty, especially when it comes to crop insurance."

LAME DUCK AND BEYOND?

Analysts said they expect a deal on farm legislation before January 1.

"If Congress does nothing, we go back to this permanent law, called the 1949 Act. I think most in DC believe that won't happen," said Klippenstein. "That takes us to a time in policy that no longer exists in real life and doesn't have programs or policies that reflect modern agriculture."

Analysts said reversion to the 1949 law would bring back old concepts of "price parity" from the last century that would sharply hike support prices and restrict planting and marketing.

To avoid those headaches, many politicians and farmers believe the lame-duck Congress will either pass the stalled 2012 Farm Bill or extend the 2008 law before year-end.

"One or the other, I think you'll get," Iowa Senator Chuck Grassley, a Senate Agriculture Committee member, told reporters. "I think it will be handled in the lame duck."

Farmers like Hausman were hopeful but by nature skeptical.

"It could happen but I'm not going to hold my breath," said Hausman of prospects for a new farm bill by Christmas.

(Additional reporting by Chuck Abbott. Editing by Peter Bohan and David Gregorio)

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