Minn. farmers get lost in budget standoff; crop policies revert to '49

When the clock struck midnight on Tuesday, ushering in a massive federal government shutdown, the calendar also flipped back to 1949 for Minnesota farmers like Kevin Paap.

Overshadowed by the politics of the shutdown, the deadline for passing a new farm bill also brought with it the expiration of many federal farm programs, leaving in their place something called "permanent law," or the status quo of 1949.

That was the year Frank Sinatra and Doris Day were singing "Let's Take an Old Fashioned Walk," and former Minneapolis Mayor Hubert Humphrey was taking a seat in the U.S. Senate, where he would go on to join the Agriculture Committee.

What farm policies developed in the 1930s and '40s mean in the context of 21st century mechanized agriculture is anybody's guess. "Nobody really knows," said Humphrey protégé Amy Klobuchar, one of the Senate negotiators in the stalled farm bill talks. "There are so many new programs that have been developed since that time."

The post-World War II period was a time of crop allotments and marketing quotas set by farmers who got to vote on them. It was a system with little relevance for modern farmers, few of whom even know how they worked.

Paap, president of the Minnesota Farm Bureau Federation, knows this much: "In the 1940s, everybody had some cows. I'm sure we, at our farm, had some wheat 'allotments.' But we probably haven't grown wheat in almost 20 years. So it's much different agriculture, just like it was a much different world in 1949."

If there's one upside to the bureaucratic chaos amid programs that are supposed to smooth out farm economics and protect producers from natural and financial disasters, it's that the specter of 1949 law is supposed to push Congress to act. So far, it hasn't.

"The theory is that this would get people to be sensible," said Minnesota Democrat Collin Peterson, one of the most influential leaders on the House Agriculture Committee. "I think everybody is seeing there's nothing you can do to make some of these people sensible."

The Agricultural Act of 1949 is called permanent law because that was the last time Congress passed a farm bill with non-expiring provisions. Modern farm bills essentially are multiyear extensions, usually five years in duration. The 2008 farm bill expired a year ago but was extended until Sept. 30.

Now, with Congress still at loggerheads over Republican efforts to cut $40 billion from the food stamp program — the biggest and most controversial component of any farm bill — it's back to 1949.

Paap said it's bad enough for farmers, who have little idea what kinds of price supports, conservation and nutrition programs a deadlocked Congress might produce by next spring's planting season. "We're already making plans for next year's crop," he said. "We're making those decisions now."

Come January, consumers could feel the bite. Some agricultural economists are predicting a doubling of dairy prices at the grocery store, owing in part to the mothballed provisions of 1949 law.

That's because the small-scale farms of 1949 received much higher subsidy levels — adjusted for inflation — than today's big farming operations, which benefit from 60 years of productivity gains and technological advances. Permanent law guaranteed farmers "parity prices" for crops based on their production costs. The ratios were based on historic benchmarks set during the progressive movement that swept rural America in the early 1900s.

"If the whole thing got implemented today, it would be unreal what it would cost," Peterson said, laughing. "It would cost a fortune."

There are no recent budget estimates of the potential cost to taxpayers, but the Congressional Research Service offered one illustration in 2012, when the market price for wheat was $6.37 a bushel: Under the $2.94 support level of the 2008 farm bill, no government subsidy was needed. Under permanent law, the floor price would have been $13.58, requiring a substantial federal subsidy.

If Congress doesn't cut a deal on the farm bill by Christmas, some economists predict consumers will feel it first when they buy milk, butter, cheese and ice cream. That's because under 1949 law, the support prices for dairy are more than double recent market prices. Peterson predicts that would require the Agriculture Department to artificially raise the market price of dairy products through a massive government buying program — akin to the quantitative easing the Federal Reserve has used to prop up the prices of financial assets and stimulate the broader economy.

This might make producers happy in the short term, but it's generally assumed in farm country that 1949 support prices are unrealistic, and therefore politically unsustainable.

Over the intervening decades, the threat of 1949 permanent law has always produced a deal. But in the current stare-down over President Obama's health care law and the government shutdown — and the threat of debt default — frustrated farmers wonder if they've fallen off the congressional agenda altogether.

"It seems like we've dropped down on the priority list underneath Syria, the debt ceiling and those kinds of things," said Doug Peterson, president of the Minnesota Farmers Union. "It's been can-kicking, it's been ignoring … We're one of the biggest pieces of the economy in Minnesota and the Midwest. Should we receive some priority? I think so."

After seeing the farm bill implode in the House earlier this year in a partisan battle over food stamps, Peterson and Klobuchar say there's no assurance Congress will arrive at a new farm bill, or even a stopgap one- or two-year extension.

The only alternative, they say, is farming like it's 1949.

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