A one-year farm bill extension to 2024 would remove critical uncertainty from agriculture

The 2018 Farm Bill expires at the close of September this year. Failure to replace that law with a new package puts a number of agricultural programs in limbo. Expiration of the farm bill leaves some programs with no authorization while others would revert to archaic permanent laws established before 1950. The close of the 2023 fiscal year is not just a deadline for replacing the current farm bill. In any year, those final weeks represent a legislatively tense period of government negotiations. With a new U.S. House majority splitting the political leadership in Congress and competing agendas within each political caucus the timeline for delivering replacement farm legislation is incredibly short. An early, pre-emptive extension of the 2018 Farm Bill’s authority for one additional year could be pursued to offer a degree of policy certainty to decision-makers and agricultural markets while gaining the necessary time to deliver transformative farm legislation for a policy era that requires it.

The role of policy uncertainty has become increasingly important in economic life. Recent research points to sub-optimal investment as the primary cost of policy uncertainty with reduced output and earnings as secondary effects. In a relatively volatile agricultural economy that has weathered significant trade shocks, the COVID-19 pandemic and the highest inflation of the century in rapid succession removing policy uncertainty should be a priority for leading agricultural lawmakers. The 118^th Congress features narrow majorities in both chambers. Recent history shows that this empowers relatively small groups to halt legislative progress if they do not approve of a particular compromise.

The portion of the farm bill allocated to nutrition spending has surged from 76 percent to 84 percent between 2018 and 2022’s Congressional Budget Office( CBO) baseline estimates. That surge is driven by increase in overall spending, with the 10-year projection growing from $870 billion to nearly $1.3 trillion. The nutrition title is always a target for cuts by budget hawks and the narrow majority of the House presents the opportunity for a small group to take a hardline on the cost of the nutrition title. The 112th Congress (sworn in January 2011) serves as a model for the current Congress. Then as now, a newly elected Republican majority took power while a Democrat Senate and White House remained. That Congress failed to pass replacement farm legislation before its September 2012 expiration triggering extensions until a compromise bill could be completed in February 2014.

The spending level in the nutrition title was the primary stumbling block at that time, with the Republican House attempting to split the nutrition title from the remainder of farm programs. Agricultural groups have been proactively advocating for maintaining nutrition and farm programs in combined omnibus legislation. They also have a strong preference for a 2023 Farm Bill to be completed during this calendar year. This dovetails other priorities of securing the large expected baseline spending total and would favor maintenance of the status quo of popular crop insurance policies even as they continue to draw criticism for the size of premium subsidies and design inefficiency.

However, the abbreviated timeline would also promote the status quo in areas where current policy has fallen short. The past five years have seen billions in emergency and ad hoc spending in agriculture driven by trade and pandemic shocks. The lack of mechanisms in the farm bill to foster greater resilience in the agricultural economy is evident in the need for supplemental support and the development process of the next farm bill should address this. Current reference prices that trigger payments in the farm bill are pegged to output and do not take into account inflationary pressures on farm inputs that drive costs. Trade promotion programs that expand agricultural export options for U.S. sellers have been continually underfunded relative to their economic potential. In addition to careful reconsideration of existing programs, an expanded timeline could be used to consider the scope of the farm bill and the ability to generate farm income through the production of environmental service.

More broadly, in a time when agriculture’s fortunes are so attuned to broader economic policies in trade, environment, climate, migration and health, taking the time to find the “best fit” for a new farm bill is critical. The 118th Congress will feature 179 lawmakers that were not serving when the 2018 Farm Bill was passed. That number represents many new voices and perspectives ready to learn about the bill’s importance and contribute to its successful passage and performance.

In what promises to be a rocky legislative year banking a one-year extension well in advance of any farm bill expiration would be a short run boon to the agricultural economy by removing a key uncertainty. Moreover, it opens the door to multiple long run benefits of more carefully measured policy that better meets the challenges facing agriculture today.

Roman Keeney, Ph.D., is an associate professor of Agricultural Economics at Purdue University and in the Center for Global Trade Analysis. He teaches and conducts research on farm and trade policy of the United States. His published research and outreach appear in leading agricultural economics journals and conference reports. Follow him on Twitter @GTAP_Purdue.

These views are his own and do not necessarily reflect those of affiliated organizations.