April 2014
In the News

Farm Bill Pleases Some, Annoys Others

 

Farmers lose commodity program direct payments and gain risk management tools.

It runs nearly 1,000 pages, has content that pleases some and infuriates others, and comes with an almost a $1 trillion price tag over 10 years.

It’s the Farm Bill, of course, aka the Agricultural Act of 2014. And even though its recent passage by the U.S. Congress and being signed into law by President Obama came more than a year after previous farm legislation expired, the fact such a far-reaching measure received final approval is nothing short of amazing in today’s polarized political environment.

The 2014 Farm Bill includes major changes from past policies. As Debbie Stabenow (D-Mich.), who chairs the Senate Agriculture, Nutrition and Forestry Committee, observed in an online Huffington Post article, "This isn’t your father’s Farm Bill."

For most farmers, the most significant aspect of the new law is that direct payments are repealed in Title 1’s commodity program provisions, said Patrick Westhoff, co-director of the Food and Agricultural Policy Research Institute. The repeal includes the Average Crop Revenue Election program, counter-cyclical payments and the Supplemental Revenue Assistance payments.

The only exception involves smaller transition payments to cotton for the 2014 crop and further reduced payments under limited conditions in 2015.

New safety net features give farmers access to risk management tools complementing crop insurance and protecting against price, crop and yield losses.

Crop producers have a one-time, irrevocable choice of selecting Price Loss Coverage, county Agricultural Risk Coverage for each type of crop grown, or individual farm Agricultural Risk Coverage applying to the entire farm - not individual crops. The choice applies to all producers on a farm, but, if no choice is made, the Price Loss Coverage option applies by default.

Under PLC, farmers receive payment if the U.S. average market price for the crop year is less than the crop’s reference price. Those prices include $3.70/bu. for corn, $8.40/bu. for soybeans, $20.15/cwt. for other oilseeds, $5.50/bu. for wheat, $535/ton for peanuts, $3.95/bu. for grain sorghum, $2.40/bu. for oats and $4.95/bu. for barley.

County ARC payments apply when actual crop revenue is less than the program’s revenue guarantee for a crop year. Individual farm ARC 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 that crop, plus any generic base acres (former cotton base acres) planted to the crop. Individual ARC payment acres are 65 percent of the sum of the farm’s total base acres and any generic base acres planted to covered crops.

The legislation’s commodity title also calls for extending the previous farm bill’s non-recourse marketing loan and loan deficiency program, along with related loan rates. An important exception is cotton, whose loan rate now can vary between 45-52 cents/pound.

For dairy farm operators, the Dairy Product Support, Milk Income Loss Contract, Dairy Export Incentive programs and Federal Milk Marketing Order Review Commission are repealed, replaced by the new Margin Protection Program.

The new plan is based on the difference between the all-milk price and the average feed cost for producing one hundredweight of milk, as established by USDA and calculated for a consecutive two-month period. USDA is charged with getting the program up and running no later than Sept. 1 and MILC payments will be available until then.

To receive margin protection payments, dairymen must annually select a coverage level threshold between $4-$8/cwt in 50-cent increments and a percentage of coverage from 25-90 percent in 5 percent increments. Producers pay premiums based on what they select.

The 2014 Farm Bill also establishes a permanent Livestock Indemnity Program for producers who incur losses in excess of normal mortality due to adverse weather or attacks by federally re-introduced predatory animals. The measure also sets up a Livestock Forage Disaster Program providing financial help due to losses from drought or fire.

However, any person or entity with an adjusted gross income of more than $750,000 will be ineligible for payments from Title 1 programs.

Crop insurance basically continues as in previous years, but conservation compliance is required to receive cost sharing for the coverage. Also, producers in the PLC program can purchase a Supplemental Coverage Option with a 65 percent cost share on the premium.

Beginning farmers and ranchers will receive premium assistance 10 percentage points greater than would otherwise be available.

The bill’s conservation title cuts maximum enrollment in the Conservation Reserve Program to 24 million acres while adding flexibility for haying and grazing. Also, a new Agricultural Conservation Easement Program will consolidate farm/ranch land and wetland easement programs.

Popular programs to boost agricultural trade such as the Market Access, Foreign Market Development, Food for Peace, Emerging Markets and exports credits (GSM-102) are reauthorized.

One of the more controversial provisions in the new Farm Bill closes a loophole related to how Low Income Home Energy Assistance Program payments affect Supplemental Nutrition Assistance Program (aka food stamps) benefit calculations. And while some sources say this and other SNAP-related provisions aimed at stopping fraud and misuse mean that people will be cut from the program, Stabenow maintains $8 billion in savings are achieved without removing anyone from the program and that all families will get 100 percent of the benefits they are intended to receive.

Regardless of how that plays out, nutrition program expenditures account for 79 percent of authorized Farm Bill outlays during the next 10 years.

Other titles in the legislation deal with: credit; rural development; research, Extension and related programs; forestry; energy; horticulture; and miscellaneous programs.