WITH automatic budget cuts, i.e., sequestration, looming, Senate Agriculture Committee chair Debbie Stabenow (D., Mich.) thought she helped broker the right deal -- one that would eliminate direct payments in the farm bill to contribute the needed non-defense spending cuts -- but her counterpart in the House as well as many farm groups remain opposed to her tactic.
In a letter to Senate majority leader Harry Reid (D., Nev.), 14 national farm groups called the approach lopsided because it takes all of the cuts entirely from the commodity title of the farm bill.
The groups added that, within the context of the farm bill, the suggested cuts were spread out among the entire farm bill, and savings from the elimination of direct payments could be reinvested into other risk management tools.
"Your proposed legislation seriously undermines efforts to advance much-needed reforms to meet the long-term risk management needs of America's family farms," the groups wrote. "The prospect of multiyear crop disasters coupled with projections of sharp declines in commodity prices over the next few years are widely acknowledged as serious threats to the stability of farm income.
"With an appropriate level of resources, more efficient and market-oriented risk management tools can better address the gaps in protection not covered by crop insurance. Conversely, inadequate funding to restructure the farm bill commodity title will almost certainly eliminate options to reform the farm safety net in a long-term, fiscally responsible manner," the farm groups added.
House Agriculture Committee chairman Frank Lucas (R., Okla.) said the elimination of direct payments is the "resource base" that will be used to craft the next farm bill in 2013.
"Literally, if the Senate gets their way, I don't know what we have left to write a farm bill with this summer," he said.
The groups noted that the agriculture industry has been willing to accept its fair share of cuts to help reduce the nation's unsustainable deficits, citing last year's House and Senate farm bill proposals that provided $23 billion to $35 billion in savings.
"While the $27 billion in reductions in your bill are in the same ballpark as the cuts achieved by both of those bills, both farm bill proposals spread the pain among various titles rather than requiring all of it to be shouldered by just one title of the respective bills," the groups wrote to Reid.
There is also a concern that if the proposal is adopted, it would simply delay sequestration until January 2014 in hopes that a larger long-term deal could be reached. The action has the groups "very concerned that agriculture is the only non-defense budget sector being cut while other sectors are not touched."
The U.S. Department of Agriculture continues to claim that food safety officials will have to be furloughed if sequestration does go into effect March 1. Reports indicate that if the government is forced to absorb the $85 billion in spending cuts, federal workers will begin to take unpaid leave by late March or early April since they must be given an official 30-day notice.
The American Meat Institute had asked Secretary of Agriculture Tom Vilsack to find a way to avoid furloughing meat inspectors, which would account for $51 million in cuts to USDA's food safety branch.
In a response letter, Vilsack said furloughing meat inspectors would be the "last option" but, ultimately, an unavoidable one if a deal isn't struck.
In a letter to customers Feb. 21, CME Group explained that the possible mandatory spending cuts could have an impact on the physical delivery and cash settlement mechanisms of certain CME livestock and dairy products.
In addition, the budget cuts could result in the disruption of USDA reports that are used in the daily calculation of the CME Feeder Cattle Index and CME Lean Hog Index and the monthly calculations used to determine settlement prices for CME dairy futures products, CME said.
Since the CME live cattle contract utilizes USDA grading/inspection in the delivery process, a furlough of USDA staff may require the exchange to modify, in accordance with exchange rules, the current operational process surrounding the delivery/settlement of these products, CME said.
In addition, CME's cash-settled livestock and dairy products could be affected in the event that the data used to compile these indexes are unavailable.
Finally, CME's spot call dairy markets could be affected if USDA grading/inspection staff are unavailable starting March 1.
According to CME, the list of CME livestock and dairy contracts that may be affected include: the February 2013 live cattle futures contract; April 2013 and subsequent lean hog futures and options contracts; March 2013 and subsequent feeder cattle futures contracts; March 2013 and subsequent contracts for milk (Class III and IV), butter, cheese, nonfat dry milk and whey, and spot call for butter, cheese and nonfat dry milk on March 1 and subsequent trading days.