Published: July 01, 2008 05:24 pm            

Farm Programs: Farm bill is passed; now the real questions start to come

Originally published in the June 27, 2008, print edition.

The “Food, Conservation, and Energy Act of 2008,” which is more commonly known as the new farm bill, is now law.

The new farm bill passed both the U.S. House and the U.S. Senate by wide margins. As expected, President Bush vetoed the farm bill that was passed by Congress, citing higher that 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 U.S. House and U.S. Senate passed an override of the presidential veto to enact the farm bill into law, by margins that were similar to the original vote. The U.S. Department of Agriculture has now begun the enormous task of implementing the new farm bill.

Following are some common questions and answers regarding the farm bill.

Q: What years are covered by the new farm bill?

A: The new farm bill will govern farm commodity, conservation, food and nutrition and other USDA-administered programs for the next five years (2008-12). Funding allocations under the farm bill are based on a 10-year cycle (2008-17). The 2008 crop in the field will be under the new farm bill.

Q: How many titles are there in the new farm bill (and can you name them)?

A: There are a total of 15 titles in the new farm bill, which compares to 10 titles in the 2002 farm bill. I. Commodity Programs; II. Conservation; III. Trade; IV. Nutrition; V. Credit; VI. Rural Development; VII. Research and Related Matters; VIII. Forestry; IX. Energy; X. Horticulture and Organic Agriculture; XI. Livestock; XII. Crop Insurance and Disaster Assistance; XII. Commodity Futures; XIV. Miscellaneous; XV. Trade and Tax Provisions. Farm bills are encompassing, affecting all programs that are administered by the USDA, many of which have an impact on a large percentage of the U.S. population beyond farmers.

Q: What role does funding for food stamps and nutrition programs play in funding for the new farm bill, compared to funding for commodity programs?

A: Most of the national media attention regarding passage of the farm bill has been focused on programs and spending related to the Commodity Title of the farm bill, which governs most USDA farm-related programs and payments. However, spending under the 2008 farm bill on programs in the Commodity Title will only be about 16.1 percent of the $289 billion total farm bill spending over the next five years.

By comparison, spending on food and nutrition programs in the farm bill over the next five years will utilize approximately 73.1 percent of the total farm bill spending. Conservation programs will be allocated about 7 percent of farm bill spending, while all other programs under the farm bill will receive less than 4 percent of the total farm bill spending.

Q: Which programs received the biggest increases in funding under the new farm bill?

A: The final version of the farm bill that was passed by Congress contained approximately $11.3 billion in extra funding over 10 years above Congressional Budget Office baselines that were established in March 2007. The program areas receiving increases above CBO baselines were an extra $10.4 billion for food and nutrition programs, and extra $4 billion for conservation programs, and an extra $2.3 billion on programs for specialty crops.

Total spending on all programs under the Commodity Title were decreased by $3.6 billion compared to the CBO baseline established in 2007. Total federal spending under the new farm bill over the next 10 years (2008-17) for food and nutrition programs is estimated at almost $574 billion, compared to $126 billion on all farm-related commodity programs.

Q: What is the expected timeline for implementing the farm bill?

A: The USDA has begun the task of implementing the farm bill. The first priority in the Commodity Title will be to make necessary adjustments, so that producers can enroll in the 2008 farm program to be eligible for direct payments, counter-cyclical payments and commodity marketing loans on their 2008 crops.

Sign-up for the 2008 farm program is likely to begin around Aug. 1 at local Farm Service Agency offices (watch for notices from the FSA offices). The new Average Crop Revenue Election program will not be implemented until the 2009 crop year. The only new program being implemented for the 2008 crop year is the Permanent Disaster Program.

Q: What payments can farmers expect in 2008 from the farm bill?

A: Once farmers are signed up for the 2008 farm program they will be eligible to receive the guaranteed direct payments for the 2008 crop year. The USDA will likely issue an advance payment of 22 percent after farm program sign-up is completed, and will issue the final 2008 direct payment after Oct. 1.

Producers are also eligible for CCPs for the 2008 crop year; however, no CCPs are expected at this time for 2008 corn, soybeans or wheat, due to the high commodity prices. CCC marketing loans will also be available for crops grown in 2008; however, there will not likely be any loan deficiency payments available, again due to the high commodity prices.

Q: Will direct payment rates be cut under the new farm bill?

A: No. The direct payment rates will remain at the 2007 payment rates for 2008-12, which are $0.28 per bushel for corn, $0.44/bu. for soybeans and $0.52/bu. for wheat. Crop base aces and payment yields will also be continued at 2007 levels for 2008-12, except for changes due to land additions or subtractions from year-to-year. After 2008, the payment percentage will be reduced from the current level of 85 percent of crop base acres to 83.3 percent of base acres in 2009, 2010 and 2011. There will continue to be a 22-percent advance payment in 2008-11, but no advance payment in 2012.

Q: What about changes in target prices and Commodity Credit Corp. loan rates?

A: The corn target price will continue at the current rate of $2.63/bu. for 2008-12; the soybean target price will stay at $5.80/bu. for 2008 and 2009 and will increase to $6/bu. for 2010-12, and the wheat target price will stay at $3.92/bu. for 2008 and 2009 and then increase to $4.17/bu. for 2010-12.

National CCC loan rates for corn and soybeans will stay at the current loan rates for 2008-12, which are $1.95/bu. for corn and $5/bu. for soybeans. The wheat loan rate will stay at $2.75/bu. for 2008 and 2009, but will increase to $2.94/bu. for 2010-12.

Q: Were there any changes to “beneficial interest” requirements for claiming LDPs?

A: No. Producers may claim an LDP on grain as long as “beneficial interest” in the grain is still maintained (same as current LDP procedures). The only change relative to CCC marketing loan and LDP procedures is that the USDA will replace the daily “posted county price” with a 30-day moving average price, which will be used for LDP determination.

Q: What are the changes in the new farm bill regarding planting flexibility for fruit and vegetable acres?

A: The new farm bill includes a provision adding planting flexibility on program acres for peas, sweet corn and other fruit and vegetable crops. Starting in 2009, these crops can be planted on a limited number of farm program acres without penalty. 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.

Q: What are the payment limit provisions in the new farm bill?

A: Beginning in 2009, 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); and no limit on gains from marketing loans and LDPs. 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 fewer than 10 crop acres are no longer eligible for farm program payments, unless they are poor or disadvantaged producers.

Q: Please explain the new ACRE program option in the new farm bill.

A: 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” CCPs, 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 CCC 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. I will have much more on the ACRE program CCP alternative and comparisons to the current CCP program in future columns.

Q: Will the new Permanent Disaster Program be available for the 2008 crop year?

A: Yes. The new Permanent Disaster Program will be initiated for the 2008 crop year, and is intended to replace the need for passage of frequent ad-hoc disaster programs after a natural disaster occurs. This should make it much easier for affected producers to apply for disaster assistance through the USDA. Producers will be required to carry Federal Crop Insurance or Noninsured Assistance Program Insurance to be eligible for the new disaster program.

For 2008, producers without insurance will have an opportunity to pay the NAP enrollment fee at their county FSA office, in order to become eligible for the new disaster program. Final payments under the new disaster program will not be finalized until after the completion of the crop marketing year, which is Aug. 31, 2009, for the 2008 crop year. It is possible for the USDA to issue advance disaster payments after the 2008 harvest, with final payments coming after Oct. 1, 2009. Producers in the Midwest who are facing significant crop losses in 2008, will want to watch for notices from their FSA office regarding the new Permanent Disaster Program.

        

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