The U.S. Senate’s proposed two-year budget deal contains important improvements for cotton growers and dairy producers and also gets two controversial budget issues out of the way before Congress begins to tackle the farm bill. However, it left out any fix for Section 199A, which has created an uneven playing field among cooperatives and private grain companies.

While other deals have been discussed in the past to provide support for dairy and cotton, this is the first one that will actually increase the baseline for the farm bill and essentially take the pressure off the agriculture committees to do more with less.

The Senate proposal would fix problems with the dairy Margin Protection Program, provide a pathway to new, customizable insurance tools and set the stage for additional improvements in the farm bill. Specifically, it will provide more than $1 billion to support dairy farmers. The deal strengthens disaster assistance for livestock and specialty crop producers.

The bill includes language to make cotton eligible for the Price Loss Coverage program beginning with the 2018 crop year and returns cotton to the commodity safety net. This action would address ongoing and disaster-related economic challenges facing cotton producers and allow them to participate in the program, just like all other major U.S. commodity producers can.

Related:Budget deal includes dairy, livestock indemnity assistance

Sen. Debbie Stabenow (D., Mich.) worked with appropriations leaders Sens. Thad Cochran (R., Miss.) and Patrick Leahy (D., Vt.) to improve both the dairy and cotton safety nets and led the effort to provide immediate relief for dairy producers.

“I look forward to building on this progress in the 2018 farm bill,” Stabenow said.

House Agriculture Committee chairman Mike Conaway (R., Texas) has not been a fan of Stabenow hijacking past discussions that offered a fix for cotton but did not do the same for dairy.

Conaway still hopes the farm bill will receive a vote in the House before the end of March. Conaway, who addressed the crop insurance industry’s annual convention earlier in the week, said that would leave plenty of time to work out differences with the Senate's version of the bill and ensure that new legislation is finalized before the farm bill expires at the end of September.

“We will have difficult decisions to make,” he said, noting that there is “no reason to put it off just because (the debate) will be hard.”

Section 199A fix left out

Legislators are still “working on” a fix to rectify the unintended consequences related to Section 199A included in the tax reform bill.

Currently, Section 199A provides an advantage to cooperatives over non-cooperative farmers. This could disadvantage small, independent grain elevators and large companies like Archer Daniels Midland (ADM) and Cargill. The law has tipped the scales heavily for producers to sell to cooperatives, and the marketplace has even seen a significant slowdown in forward-marketing contracts.

The Senate legislation filed Wednesday night to avert a government shutdown sets the stage to complete the fiscal 2018 appropriations process in the coming weeks. The Senate bill includes a continuing resolution (CR) to fund government operations from Feb. 8 through March 23, providing time for completion of fiscal 2018 appropriations bills.

The new hope is that the Section 199A fix will find its way into that final package.

Randy Gordon, president and chief executive officer of the National Grain & Feed Assn., said the group was disappointed that a solution to correct the unintended consequences of Section 199A could not be completed in time to be included in the continuing budget resolution being considered by Congress this week. Considerable progress has been made during the last several weeks of intensive effort toward reaching an equitable solution.

“The two fundamental goals of these efforts remain to replicate the tax treatment accorded to cooperatives and their farmer-patrons under previous Section 199 of the tax code and to do so in a way that restores the competitive landscape of the marketplace that existed prior to the enactment of Section 199A on Dec. 22, 2017,” Gordon said.

The National Council of Farmer Cooperatives (NCFC) president Chuck Conner said in a statement, “As the appropriations committees begin work on their late March legislation to fund the federal government through the end of the fiscal year, NCFC will work to include several other issues important to co-ops and their members. … Of special importance will be resolving the unintended impacts of Section 199A in a way that maximizes farmers’ economic returns during these trying times in rural America while maintaining the competitive balance that existed before passage of the tax reform bill.”