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Final FY 2012 Agriculture Funding Levels Agreed Upon

November 15, 2011

On Tuesday, November 15, House and Senate negotiators reached a compromise deal on a fiscal year (FY) 2012 appropriations “minibus” (H.R. 2112) which includes the FY 2012 agriculture appropriations bill.  The minibus will now be sent back to both chambers of Congress for a final vote before being sent to the President for his signature by week’s end.

In addition the agriculture appropriations bill, the minibus includes the Commerce-Justice-Science and the Transportation-Housing and Urban Development funding bills as well as a new continuing resolution, which extends FY 2011 funding levels through December 16, 2011 for programs that have not received an FY 2012 appropriation.  The current continuing resolution keeping the government funded expires on November 18.

The final FY 2012 agriculture appropriations bill provides for $19.8 billion in discretionary spending, which is $350 million below last year’s level and $2.5 billion below the President’s request.

For a comparison of the negotiated bill, known as a Conference Report, with the original House and Senate bills, you can download the latest version of our annual appropriations chart.

Raid on Conservation Programs

The final FY 2012 bill cuts more than $927 million from farm bill mandatory conservation, on top of the half billion dollar cut contained in the FY 2011 agriculture appropriations bill.  If we include the renewable energy programs, this number jumps to approximately $1.2 billion.  Conservation and renewable energy were the primary farm bill mandatory programs cut.  Commodity, crop insurance, and export subsidies were left unscathed, as was the SNAP (food stamps).

The final FY 2012 agriculture appropriations bill cuts the Conservation Stewardship Program (CSP) by $75.5 million, roughly 9 percent, relative to its FY 2012 farm bill-mandated level.  This cut will reduce the size of the 2012 CSP sign-up by more than 30 percent.

The final bill also cuts the Environmental Quality Incentives Program (EQIP) by $350 million, or 20 percent.  The Wetlands Reserve Program (WRP) and Grasslands Reserve Program (GRP) are cut by roughly $200 million (32 percent) and $30 million (25 percent), respectively, while the Farm and Ranch Lands Protection Program (FRPP) and the Wildlife Habitat Incentives Program (WHIP) are cut by $50 million (25 percent) and $35 million (41 percent), respectively.  As in both the House and Senate bills, the Voluntary Public Access and Habitat Incentive Program (VPA-HIP) was zeroed out.

Taken together with what is rumored to be at least a $6 billion 10-year cut to conservation programs, the cuts to farm bill conservation programs would total $9 billion, or nearly 15 percent, considerably more than the proposed 10 percent cut to commodity and crop insurance subsidies in the pending farm bill deal.  NSAC has consistently said it will oppose a farm bill with a disproportional cut.

If one assumes that continued pressure on the agricultural appropriations bill from the $1 trillion reduction in appropriations over the next ten years approved by Congress in August will tend to keep forcing cuts to mandatory conservation, and if one further assumes that  the lackluster performance of the Agriculture Committees in defending their own mandatory spending during consideration of the FY 2012 appropriations bill will continue, it would then appear safe to say, based on the evidence at hand, the actual cut to conservation programs being contemplated now by the combined forces of the Appropriations and Agriculture Committees would be vastly higher, closer to $15 to $20 billion of ten years, or approaching a 30 percent cut.

In addition to the cuts to mandatory conservation funding, the bill cuts the Natural Resources Conservation Service’s (NRCS) conservation operations budget that pays for technical assistance by $44 million to $828 million.  NRCS uses conservation operations money to provide technical assistance to farmers and ranchers in the development of conservation plans and enrollment in conservation programs.  Lack of adequate technical assistance funding has become a chronic problem at USDA.

Energy Programs Slashed Too

A number of mandatory renewable energy programs were also cut in the conference bill.  Spending on the Biomass Crop Assistance Program (BCAP) is capped at $17 million, which is a 62 percent cut below the $45 million in remaining (unobligated) FY 2012 funds.  The Renewable Energy for America Program (REAP) received only 31 percent ($22 million) of its farm bill-mandated funding.

Rural Development and Farm Loans

The final bill makes significant cuts to a number of critical programs that create jobs and help rural communities thrive.  The bill cuts the Value-Added Producer Grants (VAPG) program to $14 million, roughly 35 percent of its authorized level and 26 percent less than what went out the door in 2011.  Surprisingly, the conferees chose to adopt the House proposal to zero out the Rural Micro-entrepreneur Assistance Program (RMAP) completely in FY 2012, despite existing grantees being due technical assistance funding based on their micro lending to date.  The Rural Business Enterprise Grants program was cut by 37 percent to roughly $24 million, while the Rural Business and Industry (B&I) loans program was cut by 17 percent relative to FY 2011.  With the B&I cut, approximately $41 million will be available in FY 2012 for loan guarantees for local and regional food enterprises.

The final bill funds direct operating loans at close to $1.05 billion, as requested in the President’s budget.  Unfortunately, it also matches both bills’ funding for direct farm ownership (DFO) loans at $475 million, which is 27 percent lower than 2010 levels.  The FY 2011 agriculture appropriations bill first reduced the DFO loan program level from $650 million to $475 million.  Not surprisingly, this has resulted in a $129 million backlog of approved applications for DFO loans, nearly half of which are beginning farmers.  The chances of real estate deals remaining in play after long delays in receiving approved loans are slim, resulting in the loss of new farming opportunities.

Research, Education, and Extension

Fortunately, the conference report maintains level funding for the Sustainable Agriculture Research and Education (SARE) program at $19.2 million.  As has been the case for many years, this does not include the $10 million requested by USDA to launch the SARE federal-state matching program.

Funding for the Organic Transitions Research Program and the Agriculture and Food Research Initiative (AFRI) was also maintained at FY 2011 levels.  Farm bill mandatory funding for the Organic Research and Education Initiative (OREI), Specialty Crop Research Initiative (SCRI), and Beginning Farmer and Rancher Development Program (BFRDP) were left intact.

Finally, the bill funds the National Sustainable Agriculture Information Service program (popularly known as ATTRA) at $2.25 million in FY 2012.  While not the $2.8 million funding level the program has maintained for many years, it is $2.25 million more than the zero dollars the program received in FY 2011 and thus an important step forward.  We are glad to see that this incredibly important program has been revitalized.

GIPSA Rule Travesty

One of the biggest travesties of all in the conference report is the Conference Committee’s handling of the livestock and poultry fair competition and contract reform rule, widely known as the “GIPSA rule” after the name of the agency (Grain Inspection, Packers and Stockyards Administration) that issued the proposal.  The rule was mandated by the 2008 Farm Bill.

The final appropriations bill bars any rule to eliminate the activist court-fashioned requirement that farmers and ranchers prove an injury to market competition from unfair or deceptive practices used against them as individuals by packers and processors; proposed rules that give definitions to unfair, unjustly discriminatory and deceptive practices or abuses; proposed rules to give definition to the prohibition on undue or unreasonable preferences; and proposed rules requiring packers and processors to make available sample production contracts.   The bill also prevents any final rule or interim rule from being published or otherwise implemented if the rule concerns the poultry tournament system.

The conference bill also prohibits the implementation of any of the proposed rules if the annual cost to the economy of such rules exceeds $100,000,000, while potential benefits will not be considered.  If its costs do not exceed $100,000,000, the bill allows the remaining poultry rules to be implemented, if the rules are published in the Federal Register no later than December 9, 2011.  This means if OMB can get its act together in time, anything left by the Report of the Final Rule sent to OMB for consideration by USDA might squeak under the wire.  The Report requires a 60-day delay after publication before this rule could be become effective.

Background Maneuvering by USDA on GIPSA Rule

To understand the complex nature of the stipulations in the appropriations bill it helps to know what USDA proposed last week.  Just as the appropriations conference was about to start, USDA announced that it had sent some of the GIPSA rules proposed by the agency in June 2010 to the Office of Management & Budget (OMB) as a Final Rule.  These rules focus on the poultry sector and include provisions in the 2008 Farm Bill concerning suspension of delivery of birds by poultry processors, measures addressing additional capital requirements, such as improvements to poultry houses, required after growers enter producer contracts with poultry processors, measures concerning notice for breach of contract, and requirements for processors to provide sample swine and poultry contracts.

USDA also sent to OMB, as an Interim Rule open to additional comment, the provision from the proposed rule on poultry tournament systems, which are used by the processors to compare poultry growers against each other in determining payment for their birds.

USDA decide to completely drop several provisions from the fair markets for livestock portion of the proposed rule, including a ban on packer-to-packer sales and the use of a single buyer at livestock auctions, as well as requirements for packers to retain records about the basis for pricing.

Finally, USDA announced it was still considering and, therefore, delaying finalization of other measures in the proposed regulations including eliminating the need for farmers and ranchers to prove injury to competition in markets for their products in addition to showing that they had been injured by a deceptive or unfair practice.  These core sections of the rule would be revised and issued as new proposed rules, starting the long rulemaking process all over again.

The conference agreement follows the USDA announcement closely, with the major change being upending the reform of the tournament system.  Otherwise, the agreement allows for the contract reform provisions that are in the process of becoming final to proceed, and then effectively kills everything else.  Many observers feel this is not a coincidence but rather something orchestrated ahead of time by the Administration and the industry giants, though we are unaware of any specific evidence of such collusion.

Local and Regional Food Systems

As we previously reported, the House bill contained an amendment offered by Virginia Foxx (R-NC) to strip all FY 2012 funding for USDA’s Know Your Farmer, Know Your Food Initiative (KYF2).  This was a misguided attack on an initiative that does not even have its own budget, but rather coordinates various programs and activities across multiple USDA agencies that work with farmers and ranchers producing for local and regional markets.  We are happy to report that the Conference Report does not include the Foxx amendment.

At the same time, however, it does retain some anti-KYF2 language that first showed up in the House agriculture appropriations report.  The Conference Report directs USDA to post on its website prior to any travel primarily related to KYF2, information including the agenda and the cost of such travel.  It also directs USDA to submit to Congress, within 90 days of enactment of the bill, a report on the impacts of KYF2 over the previous two years, as well as justification for spending on the initiative in the fiscal year 2013 budget explanatory notes.

As we reported when the House language was first released earlier this year, we are increasingly concerned about this ideologically driven and misguided attack on a growing and increasingly popular segment of American agriculture.

We hope that USDA goes one step beyond the new Conference Report requirement and also documents agendas and travel costs for all USDA travel primarily related to conventional national and multinational commodity markets as well.  Such a dual track reporting system would actually be quite educational!

Earlier Appropriations Actions

The House passed its agriculture appropriations bill in June of this year.  That bill included a $3 billion, or 14 percent, cut to discretionary spending for U.S. Department of Agriculture (USDA) and the Food and Drug Administration (FDA).  The House bill also included a $1 billion cut to mandatory conservation programs.

The Senate passed its agriculture appropriations bill in early September, proposing to cut $192 million from discretionary programs and taking roughly $742 million, or 12 percent, from farm bill mandatory conservation programs, on top of the half billion dollar cut contained in the FY 2011 agriculture appropriations bill.

Our previous reporting included full descriptions of the funding levels for conservation, rural development, credit, and research programs contained in the House bill and in the Senate bill.

After the Senate completed its bill, the House and Senate conferees were selected and the two sides went to work on a negotiated bill.  The Conference Report must now be sent back to both the House and Senate for a final vote before FY 2012 funding levels are set.

Categories: Beginning and Minority Farmers, Budget and Appropriations, Commodity, Crop Insurance & Credit Programs, Competition & Anti-trust, Conservation, Energy & Environment, Farm Bill, Local & Regional Food Systems, Organic, Research, Education & Extension, Rural Development

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