Farm Programs: New farm bill passes after long, eventful process

June 06, 2008 03:04 am

— The “Food, Conservation and Energy Act of 2008,” which is more commonly known as the new farm bill, passed the U.S. House by a vote of 318 to 106, or a 73 percent “yes” vote, and also passed the U.S. Senate by a similarly wide margin of 81 to 15.
As is typical with farm bill legislation every five or so years, the supporters of a new farm bill are bipartisan, with Senators and House members looking at the impact on their state and their own Congressional district, as opposed to voting strictly along party lines. The fact that a farm bill is so encompassing, ranging from commodity to nutrition programs, from conservation to trade programs, from rural development to renewable energy programs, etc., helps garner a wide range of support for most farm bills.
This has been a long process for Congress to pass a new farm bill, considering that Congress has been discussing it for nearly two years, and that the U.S. House passed their original version in late July of 2007.
As expected, President Bush vetoed the bill that was passed by Congress, citing higher-than-warranted budget increases, lack of reform in payments and payment limits, some increases in target prices and loan rates, and other issues as reasons for the veto. Also as expected, both the House and Senate passed an override of the presidential veto to enact the bill into law, by margins that were similar to the original votes.
However, there was a slight problem, the version of the bill that was vetoed by President Bush was missing the entire Trade Title (34 pages out of the total of more than 2,000 pages). It would appear that the rest of the bill other than the Trade Title, is now enacted into law, with follow-up action required only on the Trade Title.
The Trade Title will likely not become law until after June 1, because Congress is on recess from May 27-30.
Following are some key provisions in the massive new farm bill that was approved by Congress, and enacted into law.
Farm bill cost and structure
• The new farm bill will govern farm commodity, conservation and other U.S. Department of Agriculture programs for five years, from 2008-12.
• There are 15 titles in the new farm bill, compared to 10 titles in the 2002 bill. The new farm bill titles include renewable energy and livestock.
• Overall cost the new farm bill is $289 billion over five years.
   • Approximately 73.5 percent will be spent on food and nutrition programs.
   • Approximately 16.1 percent will be spent on farm commodity programs.
   • Approximately 7.0 percent will be spent on conservation programs.
   • Less than 4.0 percent will be spent on the other farm bill programs.
• Extra funding in the new farm bill includes $10.4 billion for food and nutrition, $3.85 billion for a permanent disaster program, $6 billion for conservation and approximately $2.5 billion for horticulture and specialty crops.
• Cost savings include $6 billion from crop insurance and a 2-percent reduction in direct payment amounts for 2009-11.
New farm bill programs
• The Average Crop Revenue Election will be a new farm program option for farmers beginning with the 2009 crop year. (ACRE enrollment will be optional.)
   • The ACRE program will offer potential “revenue-based” counter-cyclical payments, which will be initiated in 2009 as an alternative to target prices and traditional “price-based” CCPs that existed in the 2002 farm bill, and will be continued for 2008.
   • The ACRE program will have a revenue guarantee of 90 percent of the five-year state average yield for a given crop (excluding the high yield and low yield year) times the national seasonal average price for the commodity for the previous two crop years. The actual state revenue will be based on actual state yield for a given year times the actual national average price for that year. If the actual revenue is lower than the guarantee, farmers would be eligible for potential ACRE CCPs on all acres of that crop that were raised for that year, provided that their farm meets the ACRE CCP eligibility criteria. ACRE CCPs will be paid on 83.3 percent of planted acres in 2009-11 and 85 percent of planted acres in 2012.
   • The ACRE state revenue guarantee cannot vary by more than 10 percent up or down from year-to-year.
   • If a producer chooses the ACRE program in 2009, they must accept a 20-percent reduction in direct payments, a 30-percent reduction in Commodity Credit Corp. loan rates, and will not be eligible for any price-based CCPs. Once a producer chooses the ACRE program, they must remain with the ACRE alternative through the 2012 crop year.
Note: We will have much more on the ACRE program alternative, and comparisons to the current CCP program, in future columns.
• A permanent ag disaster program will be initiated in the 2009 crop year. This program is intended to replace the need for passage of frequent ad-hoc disaster programs after a natural disaster occurs. The application process for the new program should be more streamlined, and producers should be able to receive federal disaster payments on a more timely basis.
Commodity programs
• Direct payment rates for 2008-12 will be the same as current rates, which are $0.28 per bushel for corn; $0.44/bu. for soybeans; and $0.52/bu. for wheat. Direct payments will be determined by calculating 85 percent of the crop base acres in 2008 and 2012, but will be reduced to 83.3 percent of base acres in 2009, 2010 and 2011, in order to generate a 2 percent budget savings in direct payments. Existing crop base acres and payment yields will be used to calculate direct payment amounts. Advance direct payments of 22 percent will be made in 2008-11, with the final payment after Oct. 1. There will be no advance payment in 2012.
• The target prices for the major crops are as follows.
Corn: $2.63/bu. (current) for 2008-12.
Soybeans: $5.80/bu. (current) for 2008 and 2009; $6/bu. for 2010-12.
Wheat: $3.92/bu. (current) for 2008 and 2009; $4.17/bu. for 2010-12.
• The CCC national loan rates for the major crops are as follows.
Corn: $1.95/bu. (current) for 2008-12.
Soybeans: $5/bu. (current) for 2008-12.
Wheat: $2.75/bu. (current) for 2008 and 2009; $2.94/bu. for 2010-12.
• A new provision adding planting flexibility on program acres for peas, sweet corn and other vegetable crops was added. This new provision is for up to 75,000 acres nationwide, including 34,000 acres in Minnesota. Planting flexibility for planting other crops on crop base acres is continued similar to the current farm bill.
Payment limits
Farmers with a three-year average adjusted gross income of more than $750,000 will be denied eligibility for direct payments, while non-farmers with an AGI of more than $500,000 will be denied any farm program payment eligibility.
• Payment limits for 2008-12 will be:
   • $40,000 for direct payments (same as current limit).
   • $65,000 for CCPs (including ACRE payments)
   • No limit on gains from marketing loans and loan deficiency payments.
• Spouses may still qualify for a separate payment limit, provided that they meet requirements to be considered “actively engaged in farming.” However, the so-called “triple entity” rule was eliminated, as was the use of generic certificates for CCC loan repayment.
• Producers with less than 10 crop acres are no longer eligible for farm program payments, unless they are poor or disadvantaged producers.
Dairy and livestock
• Makes some modifications in the federal milk price support program.
• Continues authorization for the Milk Income Loss Contract program through 2012, and makes some adjustments in MILC payment calculations.
• Creates language and makes technical adjustments to allow for full implementation of the Country-of-Origin requirements for food labeling and interstate shipment of meat by Sept. 30. The new farm bill did not include a ban on packer ownership of livestock prior to slaughter.
Conservation
• Conservation Reserve Program: Maximum CRP acreage is reduced from the current 39.2 million acres to 32 million acres in 2010. CRP land that is in continuous CRP and state CREPs will be exempted from county CRP acreage limits, if the county agrees.
• Wetlands Reserve Program: $1.3 billion authorized to add new WRP acreage.
• Environmental Quality Incentives Program: $2.4 billion authorized in new funds to fund more EQIP projects. Efforts will be made to streamline the EQIP application process.
• Conservation Stewardship Program: $1.1 billion authorized in additional CSP funds to allow the addition of millions of more CSP acres in the coming years. CSP rules for producer eligibility, land eligibility, production practices will be revamped for future years.
What’s next?
Now that the farm bill is passed by Congress and will become law, the emphasis shifts to the USDA implementation. The first priority for the USDA will be to develop revised rules and regulations for the DCP program, so that the 2008 DCP advance direct payments (22 percent) can be issued to eligible producers.
The next priority will be to revise CCC loan programs and provisions, so producers can place 2008 crops under CCC marketing loans, which is important since the harvest of 2008 winter wheat has already begun. Adjustments in the MILC program for dairy producers will also be a priority for the USDA. The ACRE program alternative for potential CCPs and the permanent disaster program do not go into affect until the 2009 crop year, so the USDA still has some time to develop those rules and regulations.
The USDA will develop rules and regulations for many other farm bill provisions in the coming months, with enactment and sign-up for these programs announced at various times.

Copyright © 1999-2008 cnhi, inc.