Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Tuesday 01/08/13

Direct Payments Not a Sure Thing for 2013

While direct payments are included in the farm-bill extension, don't hold your breath waiting for the payment to show up.

Direct payments normally are sent out in the fall, which gives Congress several opportunities to could step in and redirect USDA from issuing direct payments, which cost about $5 billion a year. Barring action from lawmakers, USDA will plan to comply with the law and send out the checks, Agriculture Secretary Tom Vilsack said Tuesday.

"Absent congressional action that says otherwise, we plan on doing what we've been doing for the last several years with respect to direct payments," Vilsack said in an interview.

Last year, both the House and Senate Agriculture Committees voted to eliminate direct payments from their suite of safety-net programs, even leading to declarations that the era of direct payments had ended. Yet, with no final version of a new farm bill the direct payments survived, much to the displeasure of some groups as other, smaller programs lost their funding in the final rush of a nine-month extension.

If Congress again opts for a new farm program rather than carry on with direct payments, it would also need to happen fast enough for USDA to draft rules to avoid being disruptive to producers.

Sen. Charles Grassley, R-Iowa, a member of the Senate Agriculture Committee, told reporters in a conference call Tuesday that the farm bill could still get caught up in the sequester debate and eliminate or reduce the funds available for direct payments later this year. The running theory is that the farm bill offers a pot of money to be used for offsetting cuts in the upcoming sequester and debt-limit debate.

Congress could also move a farm bill fast enough to complete a farm bill, yet recent history would suggest Congress will unlikely complete a new five-year legislation by Sept. 30.

The status of the Average Crop Revenue Election program also remains unknown. ACRE had a limited life to expire Sept. 30, 2012. The extension was silent over whether ACRE is extended. If it is deemed legal, Vilsack said farmers should be given an option to decide whether to stay in the program. USDA 's general counsel office and FSA are still working to determine if they can offer farmers that kind of flexibility or if land must stay in the program until a new farm bill is law.

"They are still in the process of analyzing all aspects and making sure they understand fully and completely what the law is," Vilsack said.

Roughly 40 programs were extended without mandatory funding ranging from the Grassland Reserve Program to beginning farmer programs and others for specialty crops, organics and areas such as rural development. These programs lost funds even though USDA is already halfway through its fiscal year."Absent a supplemental appropriations, which is unlikely to happen, there's not much you can do," Vilsack said.

Further, USDA programs still face possible cuts of more than 8% through the sequester provisions if Congress is unwilling to change the dynamics of those budget cuts at federal agencies.

Some programs got mandatory money from funds that had not yet been spent from previous years. Others, however, are effectively dormant through the rest of fiscal 2013. Some groups, such as organic-farm organizations, are expressing angst over the situation. Vilsack said he met with some organic producers Tuesday to discuss their programs, such as elimination of funds for cost-share to help farmers convert to organic crops. "They are deeply concerned about that," he said.

Follow me on Twitter @ChrisClaytonDTN

Posted at 2:19PM CST 01/08/13 by Chris Clayton
Comments (1)
Not that I am a firm believer in the need of DCP, the article raises questions in my mind. DC payments have been made in Oct. of each year lately. Oct. 2013 is after this extension will expire. Will USDA have authority or funds under this extension to distribute funds after Sept. 30, 2013? Also if distribution is made prior to Sept 30, 2013, the USDA books will indicate a 10 billion expenditure per year rather than a 5 billion expense. Just some food for thought.
Posted by Bonnie Dukowitz at 8:28AM CST 01/09/13
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