Farm Bill Next Steps and Impact from Debt Ceiling Agreement
As we reported here in the last update, the most pressing matter for Congress was to address the debt limit increase and the potential implication the legislation could have on the nutrition programs in the Farm Bill. Following weeks of negotiations, Congress and the President reached an agreement to raise the debt limit through January 2025 in exchange for spending reductions and caps on major areas of Federal spending for the next two years. As part of this agreement, the Supplemental Nutrition Assistance Program (SNAP) was amended to expand the age range of individuals without dependents that are subject to work requirements and limitations on how long they can receive SNAP benefits if not working. The fact that this issue was addressed in the debt limit bill should help remove one obstacle to developing and approving the 2023 Farm Bill. The leadership of the House and Senate Agriculture Committees have stated that the debate over work requirements in SNAP should now be off the table for the Farm Bill. This is not to say there won’t be other attempts to modify or reduce funding for SNAP, but we expect the Committee leaders to largely resist those efforts.
The Congressional Budget Office (CBO) budget estimate (baseline) for the Farm Bill was released last month, and this update from the February estimate reflects cost increases for the commodity and crop insurance programs, partly due to lower prices for dairy and cotton, while higher prices for some grain crops are increasing the cost outlays for the Agriculture Risk Coverage (ARC) program. As the below graph shows, now over 80% of Farm Bill spending is for nutrition assistance programs, primarily SNAP.
The graph below depicts the amount of projected spending by commodity within the ARC/PLC and other price/revenue support programs in Title I of the Farm Bill, not including crop insurance. One of the key areas being considered for the next Farm Bill is how to pay for an increase in reference prices in PLC to better align those support levels with today’s elevated production costs. A 10% increase in reference prices is estimated to cost around $20 billion.
At this time, we expect Committee-level work to continue through the summer with both the House and Senate Agriculture Committees potentially being prepared to introduce their version of the Farm Bill in the September timeframe. Our view remains the best-case scenario on timing is for the Farm Bill to be approved by the end of this year, but there is still a significant chance that the work carries over to 2024.