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Finally, A Farm Bill
SARA WYANT
WASHINGTON, D.C.
After over three years of watching and waiting for lawmakers to craft a new, comprehensive farm bill, your elected representatives will finally be able to say they delivered for America’s farmers and ranchers.
House Agriculture Committee Frank Lucas, R-Okla., said getting the legislation through was “amazingly close” to a miracle, but acknowledged that many policy differences remain among lawmakers.
“It may not have everything my friends on the right may and it may not have everything my friends on the left may want,” Lucas said. “But, it's a compromise.”
The Senate approved the bill by a 68-32 margin last week, following approval in the U.S. House of Representatives by a sound margin of 251-166. And President Obama signed the 949-page package during a special signing ceremony on the Michigan State University.
The Congressional Budget Office (CBO) released a score for the bill, estimating that direct spending for authorized programs would total $956 billion over 10 years, of which $756 billion would be for nutrition programs. Relative to spending and revenues projected under CBO's May 2013 baseline, CBO said it estimates that enacting the legislation would lower budget deficits by $16.6 billion and increase revenues by $100 million over 10 years. This came in below the $23 billion in possible savings being touted by bill supporters, but they noted that the farm bill baseline had already been reduced by $6.6 billion.
So now the next stage begins: Handing the bill over to the U.S. Department of Agriculture for rulemaking and decisions on thousands of new rules and regulations. The department has already started the process of thinking through farm bill implementation, with Deputy Secretary Krysta Harden taking the lead. But it could be months before you start to see programs rolled out to the county level.
In the meantime, here are a few of the changes you can expect in three of the 12 titles that make of the Agricultural Act of 2014, authorizing new programs and funding from 2014-2018.
Commodity programs
Direct payments, first enacted with the 1996 “Freedom to Farm” legislation will be repealed, with the exception of stepped down transition payments to cotton growers under specified, limited conditions. Cotton growers will be eligible for a new Stacked Income Protection payments (STAX), once USDA gets their new program up and running.
Farmers who grow program crops will have a choice, albeit a complex one. You will have a one-time, irrevocable opportunity to elect either Price Loss Coverage (PLC) or county Agricultural Risk Coverage (ARC) on a crop by crop basis. A grower may also elect individual farm ARC, but this election applies to the entire farm. If no choice is made, the farm defaults to PLC. All producers on a farm must make the same election or face potential loss of payments for the 2014 crop.
The PLC program with its new “reference” prices work pretty much like the target price programs of old– paying only If U.S. average market price for the crop year is less than the crop's reference price. One big difference is that most of the targets have been increased substantially.
Reference prices are: wheat, $5.50/bushel; corn, $3.70/bushel; grain sorghum, $3.95/bushel; barley, $4.95/bushel; oats, $2.40/bushel; long grain rice, $14.00/hundredweight (cwt).; medium grain rice, $14.00/cwt.; soybeans, $8.40/bushel; other oilseeds, $20.15/cwt.; peanuts $535.00/ton; dry peas, $11.00/cwt.; lentils, $19.97/cwt.; small chickpeas, $19.04/cwt.; and large chickpeas, $21.54/cwt.
The ARC program, advanced by many corn and soybean growers, is a different type of animal. County ARC payments would be triggered when actual crop revenue is below the ARC revenue guarantee for a crop year. The county ARC guarantee is 86 percent of county ARC benchmark revenue. Coverage is capped at 10 percent, meaning coverage is between 76 percent and 86 percent of the county ARC benchmark revenue. County ARC benchmark revenue is based on the Olympic average of county yields and U.S. crop year average prices for the 5 preceding crop years – removing the highest and lowest values.
However, you can also select the Individual farm ARC, which is a whole farm program, rather than a crop by crop program. In essence, it is based on the average covered commodity experience on the farm.
For both PLC and county ARC, payment acres for a crop are 85 percent of the farm's base acres for the crop plus any generic base acres planted to the crop. Generic base acres are formerly cotton base acres. Individual ARC payments acres are 65 percent of the sum of the farm's total base acres and any generic base acres planted to covered crops on the farm.
• Total base acres on a farm are the same as current base acres. But you can also choose to reallocate base acres among the farm's covered crops according to each covered crop's share of the farm's total acres planted to covered crops over the 2009-2012 crop years.
• PLC payment yields can be updated to 90% of the farm's average planted yield over the 2008-2012 crop years.
• The 2008 Farm Bill's nonrecourse marketing loan and loan deficiency payment program and associated loan rates are extended, except for modifications to the loan rate for cotton, which now can range between 45 and 52 cents per pound.
• The Dairy Product Support and MILC programs are replaced with a Dairy Production Margin Protection, which makes payments based on the difference between the price of milk and feed costs.
Producers elect a coverage level between $4 and $8 per cwt. There’s no payment for the $4 coverage level, but premiums are required for higher levels of coverage. Premium schedules are specified for production of 4 million or fewer pounds and for production greater than 4 million pounds.
A Supplemental Agriculture Disaster Assistance program is permanently authorized and it includes a long-overdue Livestock Indemnity Program for livestock losses from adverse weather or attacks by federally reintroduced animals; a Livestock Forage Program for losses resulting from drought or fire; a program of emergency relief to producers of livestock, honey bees, and farm raised fish not covered by the two previous programs; and a Tree Assistance Program for natural disasters.
The payment limit for all commodity programs is $125,000 per person or $250,000 per couple.
There is a 3-year Adjusted Gross Income (AGI) limit on on-farm or off-farm income of $900,000. If the AGI exceeds that level, program benefits are not allowed.
Language that would have reformed and restricted the “actively engaged” eligibility criteria, was included in both the House and Senate versions of the farm bill, but removed as part of the conference agreement. Instead, USDA will have the authority to undertake a rulemaking to define the management criteria and potentially address the number of individuals per entity that can qualify based on providing management.
Crop insurance
The new farm law makes several improvements and changes in the federal crop insurance program. Once the rules are written, growers will be eligible for a new Supplemental Coverage Option (SCO), providing farms the option to purchase county level insurance that covers part of the deductible under their individual yield and revenue loss policy. Coverage level cannot exceed the difference between 86 percent and the coverage level in the individual policy. Subsidy rate is 65 percent.
However, the SCO is not available if enrolled in ARC. A slightly different Stacked Income Protection Plan (STAX) is offered for cotton. Implementation is not expected on STAX until the 2015 crop year.
• Insurance plug yields are increased from 60 percent to 70 percent. A producer may exclude a yield for a crop year in which the county planted acre yield was at least 50 percent below the average county yield over the previous 10 consecutive crop years.
• Insurance benefits are reduced if a farm tills native sod for production of an annual crop.
• Insurance coverage is to be offered by dryland and irrigated acres of a crop.
• Beginning farmers and rancher are eligible for a higher subsidy rate on insurance.
Conservation
Producers who already meet conservation compliance guidelines will not be required to implement any new practices, but producers who are subject to conservation compliance requirements for the first time as a condition of purchasing crop insurance will have a period of five years to move into compliance before losing crop insurance subsidies. Producers who are currently out of compliance on wetlands regulations will have two years to comply.
In the case of wetland conversion, a person will be considered ineligible for crop insurance premium subsidies during the following reinsurance year, unless certain exemptions apply. In cases where the violation involves less than five acres, a producer can pay a portion of the wetlands restoration and remain eligible for crop insurance.
The bill consolidates 23 previous conservation programs into 13 programs and directs USDA to prioritize assistance to veteran farmers and ranchers. Technical assistance to farmers and ranchers are provided without additional fees.
Enrollment in the Conservation Reserve Program – which once allowed up to 32 million acres – is capped at the following levels: 27,500,000 acres in fiscal year 2014; 26,000,000 acres in fiscal year 2015; 25,000,000 acres in fiscal year 2016; 24,000,000 acres in fiscal year 2017; 24,000,000 acres in fiscal year 2018.
Within the overall acreage cap, the bill allows for two million acres of grasslands to be enrolled in the CRP, and authorizes the Secretary to give priority to lands expiring from current CRP contract that retain grass cover.∆
SARA WYANT: Editor of Agri-Pulse, a weekly e-newsletter covering farm and rural policy. To contact her, go to: http://www.agri-pulse.com/
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