Improving commodity market prices are always welcome news. While the potential impact of the change in the political climate in Washington has yet to be determined, the surge in prices and the change in the leadership in Congress may have a significant impact on Farm Bill 2012 negotiations, which should start in 2011.

Opinion of potential changes to agriculture policy vary widely: from maintaining the status quo to some reductions in subsidy payments to putting pressure on federal agencies to reduce regulations (such as putting pressure on the EPA not to tighten regulations on farmers and agricultural businesses). Although changes are not expected to be immediate, many are hopeful heavy regulations will be relaxed.

The mood in the new Congress, which will take over in January, is to cut spending, reduce the deficit, reduce the role of government and extend all the tax cuts scheduled to expire in 2010, at best a very difficult task.

With commodity prices high and a strong new objective in Congress to cut costs, some contend Congress may negotiate a farm bill that would focus more on the market place, probably similar to the Freedom-to Farm Act of 1996. This sentiment was recently expressed by the outgoing House Agriculture Committee Chairman, Colin Peterson. As commodity market prices have increased significantly, it may be very tempting for Congress to end or dramatically reduce price-triggered payments on the theory that they will no longer be needed because world crop prices remain high. Only peanuts and cotton received counter-cyclical payments in 2009 and early estimates indicate that counter-cyclical payments will not be made for the 2010 crop year. The 1996 Farm Bill was negotiated under a similar market situation. It was designed to phase out some farm payments over a transition period as farmers managed financial risk from the market. The program was abandoned as commodity prices weakened and the farm sector was left with substantial financial risk without a market price safety net in place.