As the revenue gridlock over the 2008 farm bill continues, key Democratic members of Congress are talking about letting agricultural policy revert to 1949 law while the Republican Bush administration cautions people about the effects of such a change.
This song and dance has played out before, sort of, over and over. Under farm-program law, every five years Congress reauthorizes the permanent agricultural policies, while making all of the necessary changes to update those policies for the modern era. Throughout the history of the farm-bill debate, when talks stall, people start revisiting 1949 with nostalgia.
Twelve years ago, Democratic Agriculture Secretary Dan Glickman was upset that the Republican-led Congress had not completed a farm bill. Glickman told members of the American Farm Bureau Federation in January 1996 that he was directing staff to begin preparations for implementing the permanent provisions of the 1949 farm policies.
"I want to emphasize that I do not prefer this course of action and those sections of the 1938 and 1949 Acts that I have referred to are inconsistent and ill-suited for the agriculture of the modern era," Glickman told Farm Bureau members at the time. "But we all should be aware of the consequences of Congress' failure to act in a responsible manner ... Unless Congress approves acceptable agriculture policy by the Feb. 15 deadline, then I will proceed."
Permanent law is often a threat when Congress has missed deadlines for passing a new farm bill. In 1985, county USDA staff was required to reconstitute wheat acreage allotments in preparation for going back to permanent law before the 1985 farm bill was passed. Wheat farmers had not had acreage allotments since 1977. Under provisions of the 1949 law, only farmers who grew wheat in the 1950s are allowed acreage allotments.
Iowa farmer George Naylor, president of the National Family Farm Coalition, said members of both parties have frequently misrepresented the effects of the 1949 law just to make political points when they want a new farm bill done.
"It's all part of the charade," Naylor said.
Right now, the farm bill is locked up in a battle over revenue with President Bush telling Congress he will accept no legislation in his last year of office that increases taxes. The farm bills passed by the House and Senate both have tax measures and need about $10 billion in increased revenue to balance.
Barring any compromise before the latest extension of the 2002 bill runs out on March 15, Senate Agriculture Committee Chairman Sen. Tom Harkin, D-Iowa, said Thursday that reverting to permanent law is a possibility and it could make the budget baseline "extremely high" for finishing the current farm bill.
"I guess the White House should think about that and what the downside would be if we went to the 1949 law," Harkin said. "There are some problems to be sure, but that could happen ... I don't think it's the best solution at all. I would not be in favor of that, but it could happen."
Harkin was pressed on the risk of doing that because the so-called "parity" pricing provisions in the 1949 law would raise milk prices from $19 per hundredweight to nearly $30 per hundredweight during an election year when there are already complaints and fights about food prices and economic recession. Harkin said Congress could easily tweak such provisions.
"We can adjust the milk price," Harkin said. "We can adjust that. So we can go back to the '49 bill with the following adjustments. We can make that."
House Agriculture Committee Chairman Collin Peterson, D-Minn., was the first to raise the possibility of going to 1949 law. Others involved in the farm debate, though, don't think such a shift is practical.
"Parity is based on 1914 to 1915 prices, and you know, this is the 21st Century, it's not 1914 to 1915," Sen. Charles Grassley, R-Iowa, said Tuesday.
National Farmers Union President Tom Buis, looking to spur negotiations forward on the current farm bill, said last week that reverting back to 1949 law would be better than another round of extending the 2002 law.
"I know permanent law is not perfect, but given the alternatives, if we get to that, I think that's the best bet moving forward," he said.
Buis said 1949 was a good option because of the boosts in loan rates. The parity formula gives commodity loans the same buying power levels that they had in the timeframe from 1910 to 1914. The corn safety net would go from a $1.95 loan rate to $4.12, still below current market prices. The loan rate for wheat would increase from $2.75 a bushel to closer to $8.32 a bushel. Buis said the loan rates would be comparable to what perhaps should be the current safety-net level to prevent a major price collapse in commodities.
Some commodities would see soaring prices. Cotton, which at a current 52-cents-a-pound loan rate, would see the loan rate increase to $1.36 a pound, nearly double the current future prices.
Advocates for tighter commodity payment limits might also appreciate permanent law. Under permanent law, payment limits also revert back to the 1985 law. Marketing loan gains, loan-deficiency payments and "emergency compensation" are capped at $75,000 and total payments would be capped at $250,000.
The 1949 law had no counter-cyclical program and no direct payments. At least 19 commodities now covered under farm programs also would not have those protections under permanent law. That includes rice, soybeans, sugar cane and sugar beets.
Some analysts have raised alarm about the 1949 price effects on dairy and cotton, as well as particular commodities not specifically covered in the permanent law. But Glickman, in his 1996 speech to the Farm Bureau, said the agriculture secretary had broad statutory authority under the Commodity Credit Corporation Charter to carry out programs on upland cotton, oilseeds, dairy, sugar and peanuts "essentially unchanged" from current law. The secretary also has the authority, due to the potential costs to the federal government, to eliminate storage, handling and carrying charges of commodities forfeiting through non-recourse loans.
Glickman's speech and the 1996 USDA assessment of the 1949 law were provided to DTN by staff from the National Family Farm Coalition. The Congressional Research Service also released a report earlier this month on the potential effects of the 1949 law.
When it came to crops, wheat was the major focus in the 1949 law with provisions for acreage allotments and marketing quotas that require a producer referendum. Under the 1949 law, the agriculture secretary is supposed to establish acreage allotments for wheat based on the number of acres the secretary determines will be needed to meet expected demand. The ag secretary can waive such requirements by determining that the total wheat crop would not be "excessive."
Given the market prices, it is hard to argue the wheat crop in 2008 would create a glut. Feed grains such as corn do not have acreage allotments under the permanent law.
Events and prices of 1949:
Gene Autry had a No. 1 music hit with "Rudolph the Red-Nosed Reindeer."
John Wayne and Joanne Dru starred in John Ford's "She Wore a Yellow Ribbon."
The Chinese communist revolution officially ended as Mao Zedong (spelled Mao Tse-tung in 1949) declared the People's Republic of China in Beijing.
Gasoline cost 17 cents a gallon and a pound of bacon cost 50 cents.
A Cadillac Coup de Ville cost $3,497.
Comparable to today, farmers planted 86.7 million acres of corn. The average national yield, however, was 38 bushels an acre. Farmers received an average of $1.24 a bushel.DTNAg
