After giving Southern senators more money for big farms and adding a dairy program that would set a minimum price for milk in all regions of the country, the Democrats were able to gather enough support — a vote of 12 to 9 — to pass the farm bill out of committee.

The five-year bill increases the loan rates for most crops, but otherwise has much in common with the House version passed last month. Senator Tom Harkin, D-Iowa estimated his bill would spend $40 to 41 billion through 2006, and if it stayed in effect for 10 years the cost would be about $174 billion. “We’re within budget,” he said.

Harkin described the bill as a “nudge” in farm policy that would improve the safety net for growers while encouraging conservation and development of bio-energy crops. “We’re not going to make any sharp turns,” said Harkin. “We have to keep our farmers going.”

Sen. Pat Roberts, R-Kan., said the bill was a “step back to the past.” Critics of farm subsidies, including the Bush administration, say that subsidies encourage overproduction and drive up land rents, which they contend make it difficult for small farms to survive.

As part of the compromise process, Harkin dropped his effort to cap subsidy payments to big grain and cotton farms. Under the bill, farms will still be allowed to collect crop subsidies in unlimited amounts, and they could get up to $200,000 in payments under two additional income-support programs.

Both the Senate and House bills set up new “countercyclical” subsidy programs with payments that kick in when commodity prices fall below target levels. The Senate bill would guarantee wheat farmers $3.45 per bushel, corn growers $2.35 per bushel, cotton growers 68 cents a pound and soybean farmers $5.75 per bushel.

Other key components of the legislation include:

  • Increases subsidies for grain, cotton and soybeans and provides new subsidies for honey, wool, mohair, peanuts, dry peas, lentils and chickpeas.
  • Sets up a minimum price program for dairy producers using fees levied on milk processors. The program is similar to the pricing system used in the Northeast Dairy Compact before it expired.
  • Creates a new “conservation security” program that would reward farmers for reductions in erosion and environmental improvements.
  • Increases the total acreage in the Conservation Reserve Program from 34 million to 40 million acres.
  • Increases funding for the Environmental Quality Incentives Program from $300 million in 2002 to $1.25 billion in 2006, and allows large livestock operations to qualify for assistance for manure management.
  • Establishes new grant programs to finance rural businesses and development of fuels made from crops.
  • Would require country of origin labels on meat, fish, fruits and vegetables.

The legislation could go to the Senate floor for debate the week after Thanksgiving. Many expect the bill will face a series of amendments there, including one that would shift billions in crop subsidies into conservation programs.

Sen. Dick Lugar, R-Ind., who had authored a plan to phase out crop subsidies and replace them with an annual voucher of up to $30,000 per farmer lost his battle in the Senate Agriculture Committee but plans to take it up again with the full Senate. “By the time we finish debate, I hope it has majority support in the Senate,” said Lugar.

In addition, many Senators have argued that the bill which relies heavily on countercyclical subsides linked to average prices could violate U.S. trade agreements.

Reuters, Associated Press