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Trump's Lack of Regulation May Make Some Farmers Very Rich

If the farm bill isn't renewed, the U.S. government will wind up paying farmers a pretty penny. But renewing the bill conflicts with President Trump's executive order for agency deregulation. What's Congress to do?
A farm worker in Bakersfield, California

Huge government payouts to farmers. That's what happens if Congress doesn't reauthorize the farm bill by 2018. The bill, which legislates the nation's nutrition and agricultural program, is intended to be reauthorized every five years. Yet early looks at the White House's proposed budget already suggest that reauthorization for the bill is not going to be an easy, routine matter.

Trapped between a divided Congress and an executive branch loathe to institute or uphold governmental bureaucracy, a farm bill that isn't renewed would instead revert to the 1949 Farm Bill language, which was passed as "permanent legislation."

"[If this happens], agricultural support prices would be much higher for many commodities," says Monte Vandeveer, an agricultural economist at Kansas State University. The ironic result? It would "result in much higher program costs to the government."

The 1949 law required the federal government to support prices for the major crops of the day at parity prices in time of surplus. Parity prices are agricultural price controls that rely on a price index calculation that uses the World War I period as its reference for determining how much the federal government would have to pay out to farmers who harvest commodities like wheat, soybeans, and corn, Vandeveer says.

The United States Department of Agriculture calculated the parity support prices and found that, without a reauthorization of the farm bill next year, the government would be paying out $17.70 per bushel for wheat, $12.70 per bushel for corn, and $30.50 per bushel for soybeans. That's an enormous price increase compared to the price at which those same commodities are currently traded for at the Chicago Mercantile Exchange: In July of 2016, wheat traded for about $4.32 per bushel; corn at $3.70 per bushel; and soybeans in July of 2016 traded for about $9.48 per bushel.

In other words, as crop prices become depressed by surpluses, the federal government will essentially pay the difference in loss of revenue to farmers if there is no reauthorization of the farm bill before the end of the 2018 crop season.

"That would call for some pretty big checks being written to farmers," says Richard Oswald, farmer and president of the Missouri Farmers Association. "Parity prices are probably close to three times the current prices of grains and oilseeds today."

The farm bill renewal faces a new wrinkle this year as well. Every time a farm bill is enacted into law, the USDA is charged with writing the rules that implement it, says Ferd Hoefner, senior strategic advisor with the National Sustainable Agriculture Coalition. This is true of most bills passed by Congress and signed into law by the president. But complicating matters these days is President Donald Trump's January executive order that requires agencies such as the USDA to repeal two regulations or rules for every new rule written. The executive order presents practical and legal challenges to any agency wanting to implement laws passed by Congress and signed into law by the president.

"That would call for some pretty big checks being written to farmers."

Hoefner says the executive order would dramatically affect the farm bill. The Congressional Budget Office projected that the total cost of the new farm bill would be just under $500 billion over a five-year period when the farm bill was reauthorized in 2014. The issues covered by the farm bill run the gamut from nutrition assistance to conservation programs to crop insurance. Hoefner estimates anywhere between 30 and 50 new rules would need to be written to implement the bill once passed by Congress and signed into law by the president.

But Trump's executive order threw that rule-making process into chaos. A week after Trump signed the executive order, the White House released a memo containing a question and answer leaflet attempting to clarify the vagueness associated with the existing executive order, pointing to an exemption under a new category called "transfer rules."

Transfer rules, Hoefner says, exempt agencies from having to scrap two regulations to implement the new regulation if the rule requires spending money for its own implementation. Simply, the basic farm bill spending regulations to implement Supplemental Nutrition Assistance Program, farm subsidies, or conservation programs would be exempt from the two-for-one executive order, which Hoefner says would greatly reduce the order's effect on the farm bill.

But there are also situations where regulations must get written and no spending would be required. Regulations that do not result in spending would be the most vulnerable under the executive order as it is written, and, according to Hoefner, how spending is defined isn't always so clear.

Interpreting how land-grant universities get funded has become more difficult. Such institutions are a key player in the world of agricultural science. Whether the transfer rules exception applies to land-grant universities is a hotly debated issue since the institutions receive federal funding only after submitting a five-year plan, which must, in turn, be approved by the USDA in order to get federal funding.

"Is a rule to implement a five-year plan a cost to the university that would then trigger the two-for-one?" Hoefner asks. "Or is it a transfer amendment because eventually they're going to get money for it. There are so many permutations. It's hard to wrap one's head around it, and all we have to go on is a Q&A document that has a dozen questions and a dozen answers, and the answers are somewhat vague."

Not all farmers view the regulations in a negative light. For a farmer like Oswald, regulations provide accountability to everyone involved in the business of agriculture. "We all have to live within laws," he says. "I don't personally know anyone who has been impacted by regulations."

Harvesting corn on October 4th, 2008, near Carmi, Illinois.

Harvesting corn on October 4th, 2008, near Carmi, Illinois.

In fact, a little regulation can be a good thing, he says. He points to Missouri's recent restriction of a popular herbicide, dicamba. Oswald says the dicamba misapplication problem killed thousands of acres of crops and orchards, proving "that sometimes you just have to have rules."

Between July 1st, 2016, and February 27th, 2017, the Missouri Department of Agriculture received 164 alleged dicamba-related complaints. "The complaints allege herbicide drift damage to more than 41,000 acres of soybeans as well as peaches, tomatoes, watermelons, cantaloupe, rice, purple-hull peas, peanuts, cotton, and alfalfa," according to the Missouri Department of Agriculture.

In response to these complaints, the Missouri legislature came up with a bipartisan law that authorizes a $10,000 fine for every violation of illegal pesticide use.

"So there is a very conservative state legislature that [regulated] farming in the state simply because you have to protect people from misdeeds," Oswald says.

As Oswald sees it, the federal government isn't much different from the state ."You just [have to] have some rules, because if you don't somebody is going to overstep, and it's going to hurt somebody else," he says. "And that's not really what America is about."

In addition to SNAP and other food assistance programs that benefit both rural and urban communities, the USDA, via farm bill spending, also plays a significant role providing funding for areas that are not as apparent to the general public—specifically, rural development. In 2011, Rock Port, Missouri, was hit with a major flood. The rural water district in Oswald's home town benefited from a $20 million loan from the USDA to install a new water system and get the town off the flood plain, all while securing Rockport's clean water supply from the Missouri River when it floods.

Attempts to strip these types of programs worry Oswald, because "it's happening at a time when rural communities are really struggling."

Hoefner says the reality of the law right now is that outdated rules aren't just sitting around waiting to be eliminated. Elimination of surplus rules, he says, happens as a matter of course when an agency updates, revises, and gets rid of the rules that are no longer operative. That makes it very difficult to implement any new farm bill.

"If [Trump] signs [the farm bill] into law, I don't know how in the same breath you can then say to every agency, 'in order to implement this law, you're going to have to go find other things [to cut].' It's not clear that there are many of those other things," he says.

The memo released by the White House does propose a solution, however. According to the document, an agency can ask the White House Office of Management and Budget for a waiver to take the two potentially eliminated regulations from a different agency because it is untenable to repeal any more regulations. But the waiver doesn't have to be granted, and the donor agency does not have to agree to donate two rules.

"What agency is going to say, 'Oh, yeah, use up our two, because we have a surplus'? I don't think that's going to happen," Hoefner says.

The burden to make the existing executive order work could end up falling on the shoulders of the federal employee or appointee tasked with implementing the laws passed by Congress. Significant challenges are in store for those charged with writing the regulations necessary to implement any new laws enacted by Congress. Regulators, who are constitutionally obligated to implement duly enacted laws, will have to figure out which old duly enacted laws to ignore when new duly enacted laws come along.

"Can I say we're going to stop implementing the law of the land in these cases so we can implement the new thing that Congress has just asked us to do?" Hoefner asks. "To me that just says, whoever's ox is gored by dropping the regulations imposed by some previous law is going to go to court, and I would not want to be that federal employee whose name will be on the lawsuit as the defendant."