* Ethanol wins with Obama back, some contend
* USDA Secretary Vilsack seen as likely to stay
* Extension of 2008 farm law likeliest outcome
By Charles Abbott
WASHINGTON, Nov 7 Federally subsidized crop
insurance will be a big target for lawmakers looking to cut the
budget deficit in the lame-duck session of Congress opening next
week, agricultural policy experts agreed the morning after a
status-quo general election.
But lawmakers will probably be unable to break their
deadlock over enacting a five-year, $500 billion farm bill
covering a wide range of agricultural policy from food stamps to
crop subsidies and soil conservation.
The worst drought to hit the Midwest farm belt in half a
century should double the cost of crop insurance this year, and
the nagging drought threatens 2013 crops as well.
Another key question for farm policy watchers after the
re-election of President Barack Obama is whether Agriculture
Secretary Tom Vilsack will serve a second term. Since the 1960s,
only one USDA secretary has served two terms.
Ethanol likely benefited from Obama's victory, said analyst
Mark McMinimy of Guggenheim Securities, noting that Obama and
Vilsack are biofuels backers.
The Environmental Protection Agency may decide this month
whether to relax the requirement to use ethanol in gasoline.
Livestock producers say they are being ruined by high grain
prices as more U.S. crops are diverted to fuel.
With Democrats still in narrow control of the Senate and
Republicans keeping their majority in the House, analysts said a
short-term extension of the 2008 farm law, probably into spring,
was the likely outcome.
ODDS AGAINST FIVE-YEAR FARM BILL
"Odds are against a five-year farm bill in the lame duck
(session) unless it's part of a budget agreement," and a budget
deal is also unlikely, said Pat Westhoff of the think tank Food
and Agricultural Policy Research, based at the University of
Crop insurance already is the biggest part of the farm
safety net, costing the government around $7 billion a year. The
cost was expected to jump to $15 billion or more this year
because the government will shoulder most of the underwriting
losses for the 16 insurance companies in the field.
The full cost of the drought indemnities will be revealed
during Congress' post-election session, which could direct more
attention to crop insurance. So far, farmers have collected $3.6
billion in indemnities that ultimately could hit $25 billion.
Senators voted overwhelmingly in June to reduce the federal
insurance subsidy for the wealthiest farmers. This could save
$1.1 billion over a decade. The House of Representatives has not
yet decided on this issue.
Costs could be cut further through an across-the-board
reduction in the premium subsidy - currently the government pays
62 cents of each $1 in premiums - or by requiring insurers to
accept a larger share of losses.
WHY ATTACK CROP INSURANCE? ASK FARM GROUPS
The major U.S. farm groups made a strong crop insurance
program their top priority for the bill, even if it meant
cutting other agricultural supports.
"Why start attacking the one tool we've been guiding people
toward for 25 years?" asked Dale Moore, a lobbyist for the 6
million-member American Farm Bureau Federation.
The House splintered over how deeply to cut crop subsidies,
many of which go to well-off farmers, and food stamps that are a
lifeline for millions of low-income Americans.
House Republican leaders refused to call a vote on the bill
during the summer, saying there was not a majority for it.
Majority Leader Eric Cantor says he will bring the issue to the
floor during the lame duck session.
The House Agriculture Committee's farm bill would slash $16
billion from the food stamp budget over 10 years, the largest
cuts in a generation and four times larger than those proposed
by the Senate.
Barry Flinchbaugh, Kansas State University agricultural
economist, said he does not expect a new farm bill until April.
The final version probably will look like the Senate bill,
Flinchbaugh told a bankers' meeting in Milwaukee this week.
It would end traditional crop subsidies, mainstays of U.S.
farm law for eight decades, and instead compensate farmers when
revenue from a crop was 11 to 21 percent below normal. Crop
insurance would cover deeper losses. The leading House plan
would also boost crop support prices by up to 40 percent.
VILSACK TO STAND DOWN OR STAY?
Farmers, in general, are not Obama fans. The president's
share of the rural vote dropped to 41 percent on Tuesday from 46
percent in the 2008 election, according to the Center for Rural
But Vilsack, Obama's agriculture secretary and a former Iowa
governor, has been a mostly popular USDA chief with a strong
focus on overseeing programs as diverse as nutrition, farm
exports and the national forest system.
Vilsack "is widely expected to continue" at USDA, said
Guggenheim analyst McMinimy. Some USDA insiders expect Vilsack
will stay for another year or two, a farm lobbyist said.
Potential successors could include former Senate Agriculture
Committee chair Blanche Lincoln and Deputy Secretary Kathleen
Merrigan, say farm activists.
Michigan Senator Debbie Stabenow, elected to her third term
on Tuesday, was expected to return as chair of the Senate
Agriculture Committee. Oklahoma Republican Frank Lucas, elected
to his 11th term, will likely be back as House Agriculture
Committee chairman. Each was the lead author of the farm bills
passed by their committees this year.