Two Updates to Look for in the Next Farm Bill

Amid the uncertainty as to when the next farm bill will be passed, Bart Fischer, co-director of the Agricultural and Food Policy Center at Texas A&M, discusses two topics experiencing ongoing debate with legislators that could have a big effect on growers’ bottom line.

The first debate Fischer spotlights is over an update to base acres.

“There’s nothing simple about base acres,” he says. “It’s important to distinguish a few things: one is mandatory versus voluntary, and the other is updating versus reallocating.”

Mandatory Base Acre Update An Option, But Not Likely 
The 2014 Farm Bill saw a voluntary reallocation of base acres. This means growers’ base acres will be an average of what they planted the past five years, and the total could go up or down. If their cropping mix had changed, there was the voluntary opportunity to update that number. 

Fast forward to present day, Fischer says one of the proposals being put on the table is a mandatory update, which means the total number of acres could change. 

“The question is: is it mandatory or voluntary? The challenge with voluntary is it gets very expensive,” he says. “There’s interest in doing a mandatory across the board update. The challenge with all of that is that the devil is in the details. What time period do you use? What years do you use?”

Overall, Fischer says the biggest challenge is the lack of available electronic data, which makes it hard to tell at a national level who will be impacted by specific changes.

“You have members of Congress who have to take votes on these things. On the surface, there might be an interest and they say, ‘Hey, let's do a mandatory base update.’ But if I can't tell that member who's going to be affected, and the degree to which that producer is going to be affected, all of a sudden, there's a lot of political risk,” he says. “And one thing I can guarantee you members of Congress don't like doing is making decisions where they don't really know who's going to be impacted.”

Fischer believes a mandatory base acre update is extremely unlikely. Instead, he expects something voluntary to appear in the next farm bill. However, it all depends on funding.

“Rather than a full-blown base update where there's just so much political risk, could there be some targeted opportunities to add base in cases where we don't have base on the farm? I think you could potentially see something like that,” he says. “That comes back to the broader conversation of if there’s going to be new money in the farm bill and where it will come from.”

Statutory Versus Effective Reference Price Update
Another update part of the ongoing debate is reference prices. 

The 2014 Farm Bill used fixed, statutory reference prices. But in the 2018 Farm Bill, effective reference prices were established – something that actually came from Fischer’s current office at Texas A&M to create more of a safety net. 

“The biggest debate we're seeing right now is do you change the statutory reference price? Do you change the Olympic average calculation? Do you change that budget calculation? Do you do some of all of them? I think all of those are fair game,” Fischer says. 

Fischer believes finding a balance between effective and statutory reference price updates with the long-term outlook of the ag industry in mind is critical in the next farm bill. 

“My concern with focusing just on the effective reference price is that they can come back down. I think it's a matter of finding a balance between the two, and my bias is probably much more to focusing on the statutory reference price,” he says. “Right now, it’s not really about making payments. It’s about making sure it works if the bottom falls out of the market.”

He goes on to add that if prices follow the path they did after the 2014 Farm Bill, the safety net without any reference price improvements would not perform well. 

“The difference between now and then is that margins are squeezed even tighter which, to me, makes it all the more important we get Title 1 right,” Fischer says. “We’re not passing a farm bill for now. We’re writing a farm bill with the anticipation of five years from now.”

To hear more from Bart Fischer on the upcoming farm bill, listen to this episode of the Top Producer podcast.