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Finally…A Farm Bill

July 29, 2008
By: Roger Bernard, Farm Journal Policy and Washington Editor
 
 


A push-me/pull-you couldn't have experienced more stops and starts than what transpired during the process to get the Food, Conservation and Energy Act enacted into law. Several of the key issues that dogged the bill from the word "go” were ever-present until the completion—funding in particular.

Despite those hurdles, in the end lawmakers bridged their differences and put together a bill most were pleased with. "I think the art of legislation is patience, compromise and bipartisanship,” says Senate Ag Committee Chairman Tom Harkin (D-Iowa).

Patience was put to the test during the process. "There were many times that I wasn't sure we were going to make it,” was the view of a tired House Ag Committee Chairman Collin Peterson (D-Minn.). "It's a bill that I'm proud of, given all the circumstances.”

It took months for a House–Senate conference committee session to take place, and a final package took more closed-door sessions between the farm bill writers and key players of the House and Senate tax-writing committees.

As House Ways & Means Committee Chairman Charlie Rangel (D-N.Y.) relates: "It was like a jigsaw puzzle. When we put one piece in, another would fall out.”

Lawmakers managed to put all of the pieces together and pass a bill that gathered more than enough support to override a presidential veto—twice!

The counting should have started with counting pages. That's because once a bill is approved by both the House and Senate, it is printed on parchment paper and carried over to the White House. In the process, one of the 15 titles of the bill was left out—Title 3 dealing with trade. The missing title wasn't discovered until after President George W. Bush had already vetoed the bill. When the measure arrived back on Capitol Hill, the House proceeded with an override vote despite the missing title.

That set off another flurry of activity, culminating with the Senate overriding the veto and 14 of the 15 farm bill titles becoming law. The House then voted on the entire farm bill package (it had a different bill number) and so did the Senate, sending the measure to the White House for a second time. President Bush once again vetoed the bill and—once again—Congress handily overrode the veto.

When vetoing the bill, President Bush noted that Congress had the opportunity to modify "certain objectionable, onerous and fiscally imprudent provisions. Unfortunately, the Congress chose to send me the same unacceptable farm bill provisions.”

Bush's decision made him the first president since Dwight Eisenhower to veto a major farm bill. "President Eisenhower wrote in his veto message, ‘Bad as some provisions of this bill are, I would have signed it if in total it could be interpreted as sound and good for farmers and the nation,'” Bush said. "For those reasons, I am vetoing the bill.”

Here's a snapshot of what policy makers are proud of in the law:

Average Crop Revenue Election (ACRE): Despite heavy criticism from the administration that the ACRE program could pay farmers billions of dollars should prices plummet, lawmakers mostly like the plan. "This moves us in the direction I have been advocating for some time, to put things more in a counter-cyclical program, rather than just give farmers money when they're doing well,” Harkin says.

But even Rep. Peterson has his concerns: "One of the problems I have with the ACRE program is that it's going to overcompensate or overprotect during times of high prices and underprotect during times of low prices because of the rolling average of prices.”

Nutrition: Harkin hails the expansion of a pilot project he started in the 2002 farm bill to provide fresh fruits and vegetables in schools.

"They get a snack in the morning of fresh fruit or vegetables to munch or carrots, celery or little baby spinach packed with dip they eat. Kids just calm down. They're not rushing to a vending machine and sneaking candy bars or anything like that.”

House Ag Committee Ranking Republican Bob Goodlatte (R-Va.) likes the increase in funding for food banks. "With rising food prices, food processors and grocers and others who have traditionally supplied them are no longer able to do that. The food bank program has been able to buy less food. The $100-million-per-year increase is something I'm supportive of.”

Conservation: A great deal of attention was put on conservation programs. The changes made in this area primarily involved increasing the funding for programs, such as the Environmental Quality Incentives Program (EQIP) and the now-badged Conservation Stewardship Program (CSP).

These type of programs are ideal examples of where lawmakers like Harkin think things are headed in the future. "The pathway is to move more and more to payments to farmers being good conservationists,” he stresses.
While Harkin and others want to move in that direction, as a budget-saving maneuver, lawmakers reduced the acreage allowed in the Conservation Reserve Program (CRP).

Basking in the glow of the new farm bill will be short-lived for at least Peterson. "There are things we discovered in writing this bill that we're going to be looking into the rest of the year,” he points out. "Some conservation issues, crop insurance…so we're going to continue to work.”

Peterson won't stop there. "I intend to start a discussion with agriculture on where we ought to go to in the future after this farm bill,” he notes. 



Fast Facts
 

  • Lots of support. Not only did the farm bill pass with veto-proof majorities in both the House and Senate but it garnered the support of more than 1,054 farm, specialty crop, conservation, nutrition, consumer and religious groups.
  • Boost for fruits and veggies. The bill provides $3.5 billion of extra funding for ag research, marketing programs and fruits and nuts for the school snack program.
  • Keeping offices open. The bill prohibits closure or relocation of Farm Service Agency county or field offices for 2 years.
  • Presidential politics. Neither Sen. Barack Obama (D-Ill.) nor Sen. John McCain (R-Ariz.), the presumptive presidential nominees, voted on the farm bill or the veto override.
  • Cotton price projections return. A provision in the bill ended the 79-year-old prohibition on USDA publishing cotton price projections; USDA published its first projections June 10. 


Key Farm Bill Provisions

Supplemental Ag Disaster Assistance Program

This program provides payments to farmers and ranchers who suffer losses in areas designated a disaster by USDA. The trust fund created under this provision would make payments under five programs: Supplemental Revenue Program (SURE), Livestock Forage Disaster Program (LFP), Livestock Indemnity Program (LIP), Tree Assistance Program (TAP) and Emergency Assistance Program for Livestock, Honey Bees and Farm-Raised Fish (EALHF).

Payment limit: $100,000 for all forms of assistance under the program (TAP has a separate $100,000 limit).

SURE: Available for disaster counties and contiguous counties with production or quality losses due to the weather or on farms with greater than 50% production losses. (In general, this means the sum of all crop acreage in all counties that is planted or intended to be planted.) Payments are issued on 60% of the difference between the disaster assistance program guarantee and total farm revenue. SURE covers 2008 to 2011 crop years.

Guarantee (insured crop): Multiply the crop insurance price election by the acres planted or prevented planted by the percentage of crop insurance yield elected by the higher of the Adjusted Actual Production History (APH) yield or the counter-cyclical payment (CCP) yield by 115%. The guarantee cannot exceed 90% of the expected revenue from the whole farm.

Total farm revenue: Add the estimated value of each crop produced (multiply actual harvested acreage by estimated yield by national average market price for each crop), 15% of direct payments, total of all CCP or Average Crop Revenue Election (ACRE) payments, marketing loan proceeds, crop insurance or Non-Insured Crop Disaster Assistance Program (NAP) indemnities and any other natural disaster assistance payments for the same loss.
 

  • You must have purchased at least Catastrophic (CAT) coverage or the NAP program for uninsurable crops. For 2008, USDA will waive the purchase requirement if you pay a fee equal to the CAT administrative fee ($100); but USDA has to receive the payment no later than Aug. 20, 2008.
  • The crop insurance purchase requirement may be waived for limited resource, minority or beginning farmers.


Note:
Any 2008 losses will not be paid until fall 2009 because USDA needs marketing-year prices to calculate benefits.
LFP: Available to eligible livestock producers who suffered grazing losses on grazing land due to drought and rangeland lost to fire. There is no provision for flood-damaged grazing land.

Eligibility: You must have purchased a policy or plan of insurance under Federal Crop Insurance or NAP coverage. This requirement is waived for 2008 if you pay the administrative fee for NAP or CAT risk protection by Aug. 20, 2008.

Payment: Your pasture/grazing land must be in a county rated by the U.S. Drought Monitor as having:
 

  • Severe drought (D2) for at least eight consecutive weeks during the normal grazing period; equals one monthly payment.
  • Extreme drought (D3) at any time during the normal grazing period; equals two monthly payments.
  • Extreme drought at least four weeks during the normal grazing period or an exceptional drought (D4) during the normal grazing period; equals three monthly payments.


LIP:
Covers livestock death losses above normal because of disease and adverse weather, including hurricanes, floods, blizzards, wildfires and extreme heat and cold. No state, county or other trigger will be used to define an eligible LIP area.

Payment: Based on 75% of fair market value for each livestock category and individual producers' eligible losses.

EALHF: Emergency relief to cover disasters not adequately covered by any other disaster program. USDA is still developing the regulations for these programs but has provided some information to state and county FSA offices.

Direct Payments

Per-unit rates are unchanged from the 2002 farm bill, but the payment is reduced by cutting the percentage of base acres on which you get a direct payment to 83.3% for the 2009 to 2011 crop years (goes back to 85% in the 2012 crop year so the budget baseline is restored).

Advance payments of 22% of the total payment will be available to producers for 2008 to 2011 crops; no advance direct payment for 2012.

Payment and AGI Limits

Adjusted Gross Income (AGI) Limits:

Farm programs: Producers with a three-year AGI of more than $750,000 in farm income lose direct payments. Those with a three-year AGI of more than $500,000 in non-farm income lose eligibility for all farm programs.

Conservation programs: Producers with an AGI greater than $1 million are ineligible unless 66.66% is from farming, ranching and forestry operations. Persons with a nonfarm AGI greater than $1 million are not eligible for conservation program benefits.

Direct attribution: Three-entity rule eliminated but spouse can qualify for a separate limit with verification.

Direct payments: $40,000 limit unless in the Average Crop Revenue Election (ACRE) program, then limit is $32,000.

Counter-cyclical program (CCP) or ACRE:: $65,000, but for those in ACRE, the limit is $65,000 plus the amount of direct payments you surrender. Maximum payments under ACRE: $73,000.

Loan deficiency payments (LDP)/marketing loan gains: Certs eliminated; no limit.

What is farm income?

  • The production of all types of livestock and products produced or derived from livestock.
  • The production of farm-based renewable energy.
  • The processing, packing, storing, shedding, and transporting of farm, ranch and forestry commodities, including renewable energy.
  • Any activity related to farming, ranching or forestry, as determined by the Secretary.


Important notes:

Those with less than a combined 10 acres of program crop bases no longer get payments, unless they are poor or disadvantaged producers.

Changes are effective in 2009 and beyond.

USDA will publish an interim rule with a comment period in 2009 and a final rule for 2010 and beyond.

Bottom line: A husband/wife combo can earn up to $2.5 million (farm and nonfarm) without losing eligibility.


ACRE Program

 

  • In exchange for a 20% reduction in direct payments and a 30% reduction in loan rates, you can enroll in the Average Crop Revenue Election (ACRE)—a state-level revenue counter-cyclical program—beginning in 2009.
  • ACRE provides payments for a commodity when the actual state revenue for the commodity is less than the revenue guarantee.
  • Benchmark yield is the Olympic average of the state's yields for the five most recent crop years.
  • Price guarantee is a simple average of the U.S. market year price for the two most recent crop years.
  • Separate state revenue guarantees created for irrigated and nonirrigated land if a state's planted acres are at least 25% irrigated and at least 25% nonirrigated.


Payment to a farm equals:

1. Lesser of ACRE state revenue guarantee minus state actual revenue or 25% of ACRE state revenue guarantee.

2. Times 83.3% of acres planted/considered planted to a crop (becomes 85% for the 2012 crop).

3. Times farm's Olympic average yield (removes high and low yield) for the most recent five years, divided by the state's ACRE benchmark yield.

Important notes:

  • Once you choose the option, you are in ACRE for the duration of the bill.
  • Once the ACRE guarantee is set, it cannot vary by more than 10% from the previous year's guarantee.
  • Payment acres are 83.3% of acres planted or considered planted for the 2009 to 2011 crop years and 85% of those acres in 2012.


Target Price and Loan Rate Adjustments

Target price adjustments:

2008: Target prices unchanged, except cotton is cut to 71.25¢/lb.

2009: Unchanged from 2008, except target prices are established for dry peas ($8.32/cwt.), lentils ($12.81/cwt.), small chick peas ($10.36/cwt.) and large chick peas ($12.81/cwt.).

2010 to 2012: Target prices increase for wheat to $4.17, grain sorghum to $2.63, barley to $2.63, oats to $1.79 and soybeans to $6. Corn, dry peas, lentils, small and large chickpeas and cotton remain at 2009 levels.

Loan rate adjustments:

2008: 2007 rates apply (county rates may change).

2009: Dry peas are reduced to $5.40/cwt., lentils to $11.28/cwt. and a loan program for large chickpeas is created at $11.28/cwt.

2010 to 2012: Increases for wheat to $2.94/bu., barley to $1.95/bu., oats to $1.39/bu., other oilseeds to $10.09/cwt., graded wool to $1.15/lb. and honey to 69¢/lb. No changes for corn, grain sorghum, upland cotton, extra long staple cotton, rice or soybeans.

Conservation
 

  • Conservation Reserve Program (CRP): Authorizes a maximum of 32 million acres to be enrolled from 2010 to 2012. A new provision allows retired landowners to modify their CRP contracts if the land is being transferred to a beginning, limited resource or socially disadvantaged farmer or rancher. Excludes CRP payments to retired or disabled individuals from self-employment taxes.
  • Wetlands Reserve Program (WRP): Provides funding to re-establish a baseline of $1.3 billion, extends the program through 2012 and increases the maximum enrollment to 3,041,200 acres.
  • Environmental Quality Incentives Program (EQIP): Increases funding by $3.4 billion and makes conservation practices related to organic certification and transition eligible for payments.
  • Conservation Stewardship Program (CSP): Provides $1.1 billion in new funding to enroll 13 million acres per year. Expands eligible lands to include private forests, and restructures the program to provide conservation stewardship payments to encourage producers to implement more conservation practices. Provides $1.9 billion for the Farmland Protection Program, which gives matching funds to help purchase development rights to keep productive farm and ranchland in agricultural uses.
  • Annual limits for CRP, Agricultural Management Assistance, Grassland Reserve (short-term contracts and restoration agreements), Wildlife Habitat Incentives and Wetlands Reserve (restoration agreements) programs are set at $50,000. No maximum payment level under the easement purchase provisions of the Wetlands Reserve, Grasslands Reserve and Farmland Protection programs.


Livestock

 

  • Implements mandatory Country of Origin Labeling (COOL) for meat and produce by Sept. 30, 2008.
  • Increases livestock market transparency by providing online market information thanks to the Livestock Mandatory Reporting Act.
  • Protects producers in contracts with livestock and poultry companies by giving producers the ability to decline arbitration before entering into the contract.
  • Allows establishments in state inspection programs to receive federal inspection from state inspectors to allow interstate shipments of meat and poultry.
  • The Milk Income Loss Contract (MILC) program is extended until 2012.
  • Government purchases will be used to support the price of cheddar cheese, butter and nonfat dry milk.
  • Dairy Forward Pricing Program is re-established.


 

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FEATURED IN: Farm Journal - Summer 08
RELATED TOPICS: Policy, Magazine Features, USDA

 
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