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Stephen Frerichs February 2013 Legislative Update Stephen Frerichs February 2013 Legislative Update

What we know Election did not significantly change politics or players One change in What we know Election did not significantly change politics or players One change in Agriculture Committee leadership – Senator Cochran ranking member instead of Senator Roberts American Taxpayer Relief Act of 2012 extended farm bill through crop/fiscal year 2013 2

What’s Ahead March 1 – Sequester kicks in March ? – President releases budget What’s Ahead March 1 – Sequester kicks in March ? – President releases budget March 27 – Continuing Resolution expires April 15 – Congressional budget deadline May 19 – Debt ceiling reached Farm Bill -- ? ? ? 3

Sequester A result of 2011 Budget Agreement to raise the debt ceiling Applies to Sequester A result of 2011 Budget Agreement to raise the debt ceiling Applies to most Federal Programs with some exceptions including Social Security, Medicaid, Medicare and food stamps Roughly a 7. 3% reduction in defense and 5. 2% reduction in non-defense spending Applies to DCP, ACRE, Conservation programs except CRP and existing contracts Does not impact crop insurance 4

Opportunities for Entitlement Reform The pain of the sequester results in Congress pursuing a Opportunities for Entitlement Reform The pain of the sequester results in Congress pursuing a global budget agreement to cut spending Congressional Budget due in April is an opportunity to reach an agreement to cut spending The possible debt ceiling breach in May acts as an additional incentive to reach an agreement 5

What does this mean for the farm bill? Chairwoman Stabenow and Chairman Lucas are What does this mean for the farm bill? Chairwoman Stabenow and Chairman Lucas are saying they will wait on the farm bill until budget picture becomes clearer Farm bill or significant parts of a farm bill could be part of a deficit reduction package in the context of raising the debt ceiling/ or voiding the sequester 6

If not in budget deal, then what? 112 th Congress failed to complete farm If not in budget deal, then what? 112 th Congress failed to complete farm bill Election did not significantly change politics or leaders Farm bill completion as a stand-alone bill unlikely without some clarity on budget cuts, especially regarding food stamps Supplemental Nutrition Assistance Program (food stamps) cut and dairy policy remain key sticking points. 7

Potential Outcomes If completed in 2013, farm bill policy will likely be very similar Potential Outcomes If completed in 2013, farm bill policy will likely be very similar to Senate passed and House Agriculture Committee reported bills. If completed in context of deficit reduction, cut could be larger than Senate passed $23 billion. Commodity policy will include some version of higher target prices 8

What Will Next Farm Bill Look Like? Past is prologue Committees do not anticipate What Will Next Farm Bill Look Like? Past is prologue Committees do not anticipate holding many, if any, hearing before going into a mark-up Neither Committee is likely to want to change much, if anything With Senator Cochran as new ranking member, Senate Agriculture Committee will be forced to change its commodity title somewhat to better accommodate southern commodities 9

2012 CBO Farm Bill Baseline FY 2013 – 2022 Total $ in billions Percent 2012 CBO Farm Bill Baseline FY 2013 – 2022 Total $ in billions Percent of Total $994. 6 Nutrition $771. 8 78% Crop Insurance $89. 8 9% Conservation $65. 2 7% Commodity Programs $62. 9 6% All Other $4. 9 0% 10

House v. Senate Committee Savings House Senate Commodity Title -$23. 6 billion -19. 4 House v. Senate Committee Savings House Senate Commodity Title -$23. 6 billion -19. 4 billion Conservation -$6. 1 billion -$6. 4 billion Nutrition -$16. 1 billion -$4 billion Research $546 million $681 million Energy $0 million $780 million Specialty Crops $428 million $359 million Crop Insurance $9. 5 billion $5. 0 billion Total -$35. 1 billion -$23. 1 billion 10 Year Savings, CBO Scoring of Senate Bill and House Chairman’s Mark 11

Commodity Title Senate Bill House Bill Eliminates direct, counter cyclical, ACRE programs Continues loan Commodity Title Senate Bill House Bill Eliminates direct, counter cyclical, ACRE programs Continues loan programs with change for cotton to make WTO compliant Continues Sugar Program, Reforms Dairy Program New Agricultural Risk Coverage (ARC) Price Loss Coverage (PLC) or Revenue Loss Coverage (RLC) AGI Test at $750, 000 per entity AGI Test at $950, 000 per entity $50, 000 payment limit person per year, plus peanuts $125, 000 limit person per year, plus peanuts Changes “Actively Engaged” rules No change to “Actively Engaged” Conservation Compliance Applies Wheat, corn, grain sorghum, barley, oats, long grain rice, medium grain rice, pulse crops, soybeans, other oilseeds, and peanuts. Note cotton is not a covered 12 commodity

Target Price Comparison Reference Price Wheat Rice Corn Oats Barley Sorghum Cotton Peanuts Soybeans Target Price Comparison Reference Price Wheat Rice Corn Oats Barley Sorghum Cotton Peanuts Soybeans Other Oilseeds Dry Peas Lentils Small Chickpeas Large Chickpeas Unit 2008 Farm Bill $/bu $/cwt $/bu $/lb $/ton $/bu $/cwt $/cwt 4. 17 10. 50 2. 63 1. 79 2. 63. 7125 495 6. 00 12. 68 8. 32 12. 81 10. 36 12. 81 2012 House Committee Bill 5. 50 14. 00 3. 70 2. 40 4. 95 3. 95 n/a 535 8. 40 20. 15 11. 00 19. 97 19. 04 21. 54 Percent Change The barley reference price for the 2008 Farm Bill used the USDA Feed Barley Price. The 2012 House Committee bill uses the USDA all-barley price. 31. 9% 33. 3% 40. 7% 34. 1% 88. 2% 50. 2% n/a 8. 1% 40. 0% 58. 9% 32. 2% 55. 9% 83. 8% 68. 1% 13

Crop Insurance Title Senate Bill House Bill Creates new Supplemental Coverage Option (SCO) Creates Crop Insurance Title Senate Bill House Bill Creates new Supplemental Coverage Option (SCO) Creates new Stacked Income Protection for Cotton (STAX) Creates new Peanut Revenue Insurance Coverage Nationwide Sod-saver provision Prairie-Pothole Sod-saver provision Plug 70% 2013 and subsequent Plug 70% anytime Conservation Compliance Attached No Conservation Compliance AGI test, 15% point less subsidy if AGI exceeds 750, 000 No AGI test Separate irrigated – non-irrigated coverage at EU Separate irrigated – non-irrigated coverage at all unit levels 14

Senate v. House Crop Insurance Scoring House Senate SCO $3. 998 billion $3. 001 Senate v. House Crop Insurance Scoring House Senate SCO $3. 998 billion $3. 001 billion Yield Plug at 70% $1. 127 billion $. 855 billion STAX $3. 851 billion $3. 224 billion Interaction Effect -$. 639 billion -$2. 469 billion Coverage Level by Practice $. 672 billion $. 506 billion Specialty Crop A&O $. 205 billion $0 Total $9. 524 billion $5. 036 billion 10 Year Savings, CBO Scoring of Senate Bill and House Chairman’s Mark 15

Supplemental Coverage Option -SCO Area (county) coverage wrapped around individual coverage to cover deductible Supplemental Coverage Option -SCO Area (county) coverage wrapped around individual coverage to cover deductible Pays based on relationship between county yield guarantee and actual county yield Underlying individual coverage impacts payment County must have 10% loss If enrolled in ARC, 21% deductible; not available if enrolled in STAX or RLC 16

Stacked Income Protection Program -- STAX Cotton only Additional area coverage either as standalone Stacked Income Protection Program -- STAX Cotton only Additional area coverage either as standalone or on top of individual coverage Up to 30% coverage or amount of deductible of individual policy, whichever is less 17

Conservation Title Senate Bill House Bill Reduce CRP to 25 million acres by 2017 Conservation Title Senate Bill House Bill Reduce CRP to 25 million acres by 2017 from 32 million current level Wildlife Habitat program with Environmental Quality Incentives Program Creates one Easement Program with two legs – Agricultural Land Easements and Wetland Reserve Program Easements Create new Regional Partnership Program Limit CSP enrollment to 10. 4 million acres annually Limit CSP enrollment to 9 million acres annually Fund EQIP at $1. 455 B in FY 13, $1. 645 B in FY 14 and $1. 65 B in FY 15 Fund EQIP at $1. 75 billion annually 18

113 th Congress Senate Agriculture Committee Democrats Republicans Stabenow (MI) Cochran (MS) Leahy (VT)) 113 th Congress Senate Agriculture Committee Democrats Republicans Stabenow (MI) Cochran (MS) Leahy (VT)) Roberts (KS) Harkin (IA) Chambliss (GA) Baucus (MT) Mc. Connell (KY) Brown (OH) Johanns (NE) Casey (PA) Boozman (AR) Klobuchar (MN) Grassley (IA) Bennet (CO) Thune (SD) Gillibrand (NY) Hoeven (ND) Donnelly (IN) Heitkamp (ND) 19

113 th Congress House Ag Committee – Republicans (new members bold) Frank Lucas (OK) 113 th Congress House Ag Committee – Republicans (new members bold) Frank Lucas (OK) Bob Goodlatte (VA) Scott Des. Jarlais (TN) Steve King (IA) Chris Gibson (NY) Randy Neugebauer (TX) Vicky Hartzler (MO) Mike Rogers (AL) Reid Ribble (WI) Mike Conaway (TX) Christy Noem (SD) Glenn Thompson (PA) Dan Benishek (MI) Bob Gibbs (OH) Chris Collins (NY) Austin Scott (GA) Rodney Davis (IL) Scott Tipton (CO) Jeff Denham (CA) Steve Southerland (FL) Richard Hudson (NC) Rick Crawford (AR) Doug La. Malfa (CA) Martha Roby (AL) Ted Yoho (FL) 20

113 th Congress House Ag Committee – Democrats (new members bold) Collin Peterson (MN) 113 th Congress House Ag Committee – Democrats (new members bold) Collin Peterson (MN) Mike Mc. Intyre (NC) Filemon Vela (TX) David Scott (GA) Michelle Lujan Grisham (NM) Jim Costa (CA) Ann Kuster (NH) Tim Walz (MN) Richard Nolan (MN) Kurt Schrader (OR) Pete Gallego (TX) Marcia Fudge (OH) William Enyart (IL) Jim Mc. Govern (MA) Juan Vargas (CA) Suzan Del. Bene (WA) Cheri Bustos (IL) Gloria Mc. Leod (CA) Sean Patrick Maloney (NY) Joe Courtney (CT 21

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