Will an extension of current law be needed if Congress does not enact a new farm bill before September 30, 2007?

Commodity provisions of the 2002 farm bill apply to crops harvested in 2007, and farmers entitled to payments will receive them even after September 30. Also, with past history as the example, it is unlikely that expired authority to appropriate funds for discretionary programs will constrain the congressional appropriations process.

Looking back, the 1990 farm bill expired in 1995, but Congress did not adopt the replacement legislation until the spring of 1996. What might happen if Congress does not enact a new farm bill before September 30, 2007 — the end of this fiscal year and the commonly reported expiration date of the 2002 farm bill?

The 2002 omnibus farm bill (P.L. 107-171) includes a wide range of program authorities, some of which are mandatory and others discretionary. Mandatory, in this context, means that the authority to spend necessary funds is provided by statute.

This category includes the commodity support programs, export programs, some conservation programs, and food stamps. Discretionary programs are authorized, but annual funding is subject to congressionally approved appropriations. Discretionary programs in the farm bill include some conservation programs, federal farm loan programs, rural development programs, agricultural research, and foreign food aid.

In nearly all cases, a farm bill supersedes permanent authorizing law for a period of four to six years. The farm bill is important because it may substantially change program design from what is in the permanent law, as is the case with commodity support programs.

Typically, with regard to appropriated programs, the farm bill sets upper limits on program activity levels and appropriations authority.

What would happen if a 2007 farm bill is not enacted by September 30, 2007? The mandatory commodity support programs authorized in the 2002 farm bill cover the 2007 crops. So, even if harvest is after September 30, the subsidized crops harvested in calendar 2007 are covered by the law. The 1981 and 1985 farm bills were enacted in late December, and the 1990 farm bill was enacted in late November. Enactment of the anticipated 1995 farm bill in April 1996 is the most extreme case of belated action.

The 1990 farm bill expired in 1995, but the subsequent replacement legislation was not signed into law until April 4, 1996, yet payments were made on the 1995 crops and farmers went ahead with planting operations for their 1996 crops.

Absence of a new farm bill poses some risk for crops harvested in 2008, particularly winter wheat that is harvested in early summer, but typically harvest comes late in the calendar year for most subsidized crops.

Since the 1996 farm bill, farmers have had substantial planting flexibility and acreage reduction requirements have been eliminated. Absent reversion to supply controls, enactment of a new farm bill as late as the spring of 2008 would inconvenience few farmers. Lack of new commodity support legislation before harvest in 2008 does little harm other than to leave farmers uncertain about the size of payments they might receive. One exception might be some farmers’ ability to acquire production credit if there is great uncertainty about future programs.

If Congress deems a temporary extension necessary for the commodity support programs beyond the 2007 crop year, that action likely could wait until close to harvest 2008.

Most discretionary programs in the 2002 farm bill would face the prospect of not having statutory authority for the appropriations committees to provide funding in FY2009 and subsequent years. The lack of authority to appropriate funds for authorized programs (and even for some programs not authorized) has not been a barrier for appropriations in past Congresses.

If Congress takes no action on commodity support before the beginning of the 2008 harvest, then the non-expiring provisions of primarily the Agriculture Adjustment Act of 1938 and the Agriculture Act of 1949 take effect. Provisions of these permanent laws are temporarily superseded by each farm bill. So, absent any amendments before the 2008 harvest, the permanent authority will apply.

However, the commodity support provisions of the permanent law are so radically different from current policy and inconsistent with today’s farming, marketing, and trade practices, as well as costly to the federal government, that Congress is unlikely to let permanent law take effect.

Permanent law provides mandatory support for basic crops through nonrecourse loans, but without the option of settling the loan obligations at posted county prices.

The only settlement options would be forfeiture of the commodities used as loan collateral or full repayment of the loans. Permanent law does not authorize counter-cyclical payments or decoupled direct payments.

Also, nonrecourse loan rates could be as high as 90 percent of parity and not less than 75 percent of parity for peanuts, 65 percent of parity for cotton, and 50 percent of parity for wheat and corn.

Acreage allotments and marketing quotas could be implemented for wheat and cotton. Milk support would be between 75 percent and 90 percent of parity. Support for rice and soybeans would not be mandatory.

Jasper Womach, specialist in
Agricultural Policy, Resources, Science
and Industry Division,
CRS Report for Congress