Ag Policy Blog

CBO Projection Lowers Possible Farm Bill Savings

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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As if the odds of getting a farm bill done weren't higher enough, the odds got $8-$10 billion higher Friday with the cost estimate released by the Congressional Budget Office.

CBO budget forecasters scaled back potential savings in commodity and nutrition provisions proposed last year by the House and Senate Agriculture Committees.

New annual farm bill estimates came out Friday. The budget office report shows the House and Senate Agriculture Committees will have to cut $8.5 billion to $10 billion more, respectively, from mandatory USDA programs to achieve the same levels of savings their farm bills had been projected to cut a year ago.

CBO scoring measures possible cost increases or savings in USDA programs by comparing those program costs against the 10-year projected costs if all current programs continued to operate without changes. If the baseline -- status quo -- remained over the next decade, USDA's mandatory program costs would be $976 billion in spending from 2014-2023.

The Senate Agriculture Committee farm bill showed $23.1 billion in projected savings over 10 years and cleared the full Senate last year. The House Agriculture Committee's version projected last year to save $35.1 billion but it never got a floor debate despite bi-partisan support passing the committee's bill.

Now, CBO projects the same Senate bill would have saved $13.1 billion from the 2014-2023 baseline. The House bill would save about $26.6 billion.

For the Senate Agriculture Committee, a challenge will be to modify or outright replace the Agriculture Risk Coverage program. ARC is a shallow-loss program that would raise a farmer's guaranteed revenue. Higher commodity prices have pushed up the cost of the program to $30.1 billion over the next decade. Also, lower milk prices increase the cost of a new dairy program. Disaster aid in the Senate farm bill would also cost more.

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In conservation, CBO projects the high market prices for crop rental land will bring down interest in the Conservation Reserve Program. That lower enrollment actually eliminates some of savings forecast last year from a 25-million acre CRP cap. Thus, over 10 years, conservation programs would cost about $1.4 billion more than what the CRP had forecast last year.

Also, projected increases in food prices for nutrition programs virtually wipe out the Senate farm bill's projected $4.4 billion in cuts to nutrition programs, mainly the Supplemental Nutrition Assistance Program. So the Senate Agriculture Committee will have to deeper to find nutrition cuts.

Under the Senate bill, Commodities overall take a $15.57 billion net cut, Conservation takes a $5 billion cut and crop insurance sees a $5.5 billion projected increase in spending. Energy programs would see a $780 million bump in spending over 10 years while research programs also would see a $681 million increase from 2014-2023.

On the House side, the shallow-loss program and target-price program created by the Ag Committee would cost $1.1 billion more than estimated last year. Once again, lower dairy prices increases the cost of the dairy provisions and disasters have increased the cost of livestock programs.

With the House and Senate having comparable conservation changes, Conservation programs in the House farm bill would show $1.7 billion more than projected last year.

The House Agriculture Committee's cuts to nutrition programs no longer appear as robust. Last year, House changes in eligibility may not be implemented by states. CBO now projects the House nutrition cuts would be about $4.3 billion over 10 years, compared to the $16 billion projected last year.

Crop insurance costs in the House bill now are projected to increase another $1.4 billion because participation in the House target-price program, the Price Loss Coverage Option, would encourage more producers to sign up for the Supplemental Coverage Option shallow-loss crop insurance.

Both the House and Senate farm bills include Supplemental Coverage Option crop insurance programs. The House version cost nearly $5.3 billion over 10 years while the Senate version would cost $2.9 billion.

The House and Senate have comparable provisions the crop insurance program being set up for cotton known as the Stacked Income Program, or STAX. The House version is $3.8 billion over 10 while the Senate would cost $3.7 billion.

The CBO report can be found at

http://www.cbo.gov/…

I can be found on Twitter @ChrisClaytonDTN

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