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Tuesday, January 28, 2014

Farm Bill Finally!


Congratulations, agriculture! If all of the planets line up as expected, a new 5-year Farm Bill will soon be in place to provide needed risk management and a safety net should the world collapse.  Although the legislation needs House and Senate approval, the biggest hurdle is expected to be crossed Wednesday when the House is set to vote.  Speaker John Boehner, who has never supported Farm Bills, despite early membership on the House Agriculture Committee, says he will urge Republican support of the legislation. Announcements of the completion of the legislation were made late Monday by the four members of the Conference Committee who did all of the work.  All stressed their bi-partisan effort to succeed and expressed hope the bipartisanship could continue as the House and Senate vote on the measure.


So what is known about the contents of the Farm Bill proposal?  The issues that farmers are most interested in are also the issues that draw significant criticism. Consequently, the critical article in the Washington Post newspaper gives a cursory glance at farm programs and crop insurance.  The article is entitled “Subsidies in the Farm Bill,” and outlines payment limits, farm safety net programs, and crop insurance funding.


“— Stricter limits on how much money an individual farmer can receive — $125,000 annually on all payments and loans, when some were previously unrestricted. The agreement is less strict than either the House or Senate bills, which had put limits on how much a farmer could receive from individual programs.”

“--Language that would limit how many people in a farm operation may receive such payments was also passed by both chambers but taken out of the compromise bill, which would kick the issue to the Agriculture Department.”

“-- A new revenue insurance subsidy that would pay farmers in the event of “shallow losses,” or revenue losses incurred before their paid crop insurance kicks in. That program might kick in sooner than previously thought as some crop prices have dropped in recent months.”

“-- A separate subsidy program would trigger payments when crop prices drop. This is similar to current subsidies, though the new programs would kick in sooner, especially for cotton and rice, the crops that depend the most on the direct payments that would be phased out. Producers would have to choose between these subsidies or the revenue insurance.”


With the help of the House Majority Leader and the House Rules Committee, the Farm Bill has been cleared for a vote of the full House on Wednesday.  Majority Leader Eric Cantor, who had be a key block for Farm Bill progress last spring due to the lack of substantial cuts in USDA nutrition programs, cited the cuts made by the Conference Committee as the key part of the agreement.  Cantor said, “Despite the Senate’s unwillingness to challenge the status-quo and include all of the critical reforms to important programs like the Supplemental Nutrition Assistance Program, the finalized Farm Bill will include a new initiative that allows states to implement work requirements for able-bodied adults as well as initiatives to help move individuals from dependence to self-sufficiency and independence."


In support of passage of the Farm Bill proposal is the American Soybean Association, which provides details about choices for safety net programs that will be available for farmers.  ASA said, “The bill includes a choice between an ASA-supported revenue program that covers both price and yield losses with county and farm level options, and a price support program which allows the optional purchase of insurance coverage under a Supplemental Coverage Option (SCO). The bill also eliminates controversial Direct Payments while maintaining decoupled farm support programs that will minimize the possibility of planting and production distortions that could trigger new WTO challenges. The language in Title 1 allows producers to choose between maintaining existing crop acreage base or reallocating their current base acreage to reflect average acres planted to covered commodities in 2009-2012. On crop insurance, the bill makes enterprise units permanent, allows growers to purchase enterprise unit coverage for both irrigated and dryland crops, authorizes a new Supplemental Coverage Option (SCO), and will help to strengthen the next generation of agriculture by providing a 10 percent increase in premium support to beginning farmers and ranchers.”


On the issue of payment limitations, which had been reduced in both the House and Senate versions, the Conference Committee ignored the restricted levels and kept the $125,000 per person ($250,000 per couple) levels from the 2008 Farm Bill.  However, the USDA is expected to redefine who is actively engaged in farming and that will reduce payments for some farming operations.


As indicated in the comments by the American Soybean Association, farmers would be able to make choices of the type of safety net program they want, which was the compromise that keeps Southern Farmers happy with target prices, and Northern farmers happy with a revenue risk management program that rolls with year to year changes. The target prices put into the legislation are $3.70 for corn, $8.40 for soybeans, and $5.50 for wheat.  Marketing loan rates (which require conservation compliance) are $1.95 for corn and $5.00 for soybeans.


The alternative program, Agricultural Risk Coverage, uses a five year rolling average of prices to provide a producer with a minimum of the national average price for a commodity.  For the current year, that would likely guarantee a corn support level of $5.18 and soybean support level of $11.55 based on recent annual price averages


The Farm Bill itself is 949 pages long and is available for reading


The House and Senate conferees have assembled a 17 page summary of programs that remain in the Farm Bill with limited descriptions.  It is also available for reading.


Posted by Stu Ellis on 01/28 at 12:42 AM | Permalink

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