A looming government shutdown is delaying passage of a new Farm Bill. What that means for farmers, food prices.

As Congress remains divided and locked in stalemate over budget negotiations to avert a federal government shutdown, the chances of getting a new Farm Bill passed on time continue to evaporate.

Congress is staring down a deadline this Saturday for spending measures to keep the government running and to pass new legislation supporting farmers and ranchers.

If the government shuts down, so too would progress toward passing the next Farm Bill, said Chad Hart, an economist and crop markets specialist for Iowa State University Extension and Outreach.

“The government shutdown possibility sucks all of the oxygen out of the room,” Hart said. “So until that is taken care of, you really can’t make forward progress on any other piece of legislation, including a Farm Bill.”

The sprawling legislative package that’s reauthorized every five years supports several key farm and safety net programs, like crop insurance, as well as agriculture research, rural development, conservation, SNAP benefits — once called food stamps — and more.

What happens when the farm bill expires?

The current Farm Bill expires Saturday. However, expiration of the legislation would not truly be felt until the beginning of next year, when some farm policies would revert to controls on production and costly price supports adopted in the 1930s and 1940s.

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Some U.S. Department of Agriculture programs, including some conservation programs, may cease at the end of the federal fiscal year at the end of this month. Other programs, such as crop insurance and food assistance programs, are permanently authorized and would not be affected by expiration of the Farm Bill, according to the Congressional Research Service.

But while funding is mandatory, the actual issuance of food assistance benefits can be affected by a government shutdown, according to the Committee for a Responsible Federal Budget. Continuing resolutions generally have authorized the USDA to send out benefits for only 30 days after a shutdown begins. After that, benefits become dicey.

Additionally, stores are not able to renew their Electronic Benefit Transfer — or EBT — card licenses, so those whose licenses expire would not be able to accept SNAP payments from consumers during a shutdown.

Funding for commodity support programs run on crop years. Government supports for crops harvested during the 2023 calendar year and marketed following harvest would continue despite expiration of the legislation. For corn and soybeans, commodity payments and obligation would end in September 2024 if no new bill is passed.

Disruptions caused by the expiration of commodity support programs for the dairy industry would begin Jan. 1, since some cows are milked every day of the year. New plantings of other commodities, such as wheat, corn, and rice, would not affected until harvest in the summer or fall of next year.

The programs provide farmers payments when crop prices or revenues decline for major crops and provide cash assistance to livestock producers who face losses due to natural disasters or periods of economic downturn.

Once those programs expire, the USDA would be on the hook to pay out commodity support as governed by the 1938 and 1949 Farm Bills, which could increase overall food prices and significantly strain the federal budget, according to an August report from the Congressional Research Service.

Dairy industry could see a ‘cliff’

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In the dairy industry, farmers would lose the support and protection offered by the Dairy Margin Coverage Program, which could have farmers facing a “dairy cliff.”

If policies revert to the ‘30s and ‘40s, the law would require the federal government to stabilize prices by taking milk off the market through milk purchases. The research service calculated the government would be required to purchase milk at a price that is more than double the current market price, which could cost the federal government billions of dollars and could result in price increases for consumers.

The availability of milk and dairy products could also be affected, meaning consumers could see fewer options — including for baby formula — in stores.

While commodities such as wheat, rice, cotton and corn would get higher payments, other crops not mentioned in the 1938 and 1949 laws — such as soybeans, peanuts and sugar — would lose support.

What will this mean for food prices?

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While a shutdown and expiration of the Farm Bill could remove price and revenue safety nets for farmers, ISU’s Hart said food prices shouldn’t be affected near-term.

"Consumers will see less of an impact than producers will,“ Hart said. ”It would only impact food pricing inasmuch as it affects producers’ decisions over what they’re going to produce over the next few months. Most of our producers have already set those business plans in place. They’re not going to adjust their production practices based upon these probably temporary swings of government support.“

Hart expects, as in years past, Congress will pass a stopgap measure or an extension of the existing Farm Bill should lawmakers fail to pass new bill by the end of the crop year on Dec. 31.

“Now, the longer this goes on and we don’t have some sort of harder guidance on federal support for agriculture, the more you can see some changes in producer decisions,” which could cause food prices to increase, Hart said. “But it’s literally going to take months for that to occur.”

Regardless, nonessential government services stop after Saturday if there is no funding bill passed to avoid a shutdown. That includes the Farm Service Agency, Natural Resource Conservation Service and the Rural Development Centers — meaning farmers would be unable to sign up for programs administered by those agencies.

Additionally, USDA reports and data collection on crop yields, cattle and hog summaries and U.S. export sales on which markets rely will cease.

“For farmers it means a lot of uncertainty,” Hart said. “People will be guessing more and you get more volatility in the markets” at a critical time for farmers as they harvest.

“Which could be both a blessing or a curse to farmers, because it depends upon which way the volatility it showing up in the marketplace,” Hart said.

What are members of Iowa’s delegation saying?

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Iowa U.S. Rep. Ashley Hinson expressed optimism a Farm Bill would emerge this fall.

“I believe that we will still be able to move forward with a Farm Bill after we get through the challenge that we are facing right now, but I obviously do not want to see a government shut down,” Hinson said during a call with reporters Thursday. “I don’t think this is good for anybody.” The Marion Republican reiterated that her goal is to pass the most conservative spending bills possible.

But it’s unlikely a new Farm bill will be passed before Saturday. Iowa U.S. Sen. Chuck Grassley, a Republican, said he expects Congress would pass a one-year extension of the existing Farm Bill if unable to pass new legislation by Christmas.

“That's been done before. But the five year is a better certainty for the farmers,” Grassley said during a Sept. 15 recording of “Iowa Press” on Iowa PBS.

Comments: (319) 398-8499; tom.barton@thegazette.com