Senate Farm Bill Summary

June 22, 2012 04:35 AM

via a special arrangement with Informa Economics, Inc.

Safety-net program reform | Crop insurance focus | Dairy policy changes | Conservation policy changes

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

The Senate on June 21 gave final approval to their version of the farm bill on a 64-35 vote after considering more than 70 amendments to the bill over a three-day period.

The vote count showed 48 Democrats and 16 Republicans voting for the measure. Both Independents who caucus with the Democrats, Sens. Joe Lieberman (Conn.) and Bernie Sanders (Vt.), voted for it. Thirty Republicans voted against the measure. Democratic Sens. Mary Landrieu (La.), Frank Lautenberg (N.J.), Mark Pryor (Ark.), Jack Reed (R.I.) and Sheldon Whitehouse (R.I.) voted against it. Under the agreement, 60 votes were needed for passage.

The vote tally for the bill reflected relatively balanced support for the bill, but southern lawmakers were clearly not pleased with the bill as most senators from southern states opposed the bill. While the measure reduces nutrition spending by around $4.5 billion, most Democrats supported the bill, including Sen. Kirsten Gillibrand (D-N.Y.) who voted against the bill in the Senate Agriculture Committee due to those nutrition spending reductions.

Budget-saving estimates could be modified. Initial estimates were that the bill would spend $969 billion over 10 years ($498 billion over five years), while saving at least $23.6 billion. Amendments to the bill have changed that spending scorecard somewhat with expectations that the savings could now be above $24 billion over 10 years.

Major changes for safety-net policy. The legislation would end direct payments, the Average Crop Revenue Election (ACRE) and counter-cyclical payment (CCP) programs, and replace those with the Ag Risk Coverage (ARC) program which would cover revenue losses at either the farm or county level of between 11 percent and 21 percent. The balance of losses would be expected to be covered by crop insurance. The bill sets a $75,000 payment cap for marketing loan gains. The bill sets $50,000 payment cap for an individual or a $100,000 cap for a married couple. The bill also includes a more restrictive definition of who qualifies for farm program payments.

Of note, safety-net payments would be based on planted and not base acres as is currently the case.

Southern-based producers of rice, peanuts and cotton have indicated they find the ARC wanting and will put their focus on the coming House farm bill. The switch from direct payments to the revenue (shallow) loss subsidy was welcomed by Northern and Midwestern corn and soybean farmers but strongly opposed by Southern rice and peanut growers. They traditionally have relied more on direct payments and targeted prices and will now push for higher target prices as part of the House farm bill.

Crop insurance: Several changes were made, including a reduction in the premium subsidy for those with adjusted gross income over $750,000. But that reduction of 15 percentage points would only kick in following a study that USDA and the Government Accountability Office (GAO) are to conduct on the impact of the provision. That shift would generate savings of $1 billion over 10 years and would impact an estimated 1,500 farmers. Currently, the government subsidizes about 62 percent of crop insurance premiums, with policies typically guaranteeing 75 percent to 85 percent of a farmer's revenue. The Congressional Budget office (CBO) estimates crop insurance spending at around $95 billion over ten years.

The bill also creates the Supplemental Coverage Option, or SCO – an insurance program. USDA would pay 70 percent of the premium for an SCO policy. The policy would have a 10 percent deductible of expected revenue for farmers who choose not to participate in the ARC; for farmers enrolled in ARC, the deductible for the SCO insurance would be 21 percent as well.

Also, conservation compliance would now be required for crop insurance participants, a linkage that several farm-state lawmakers and leaders of the Senate Ag Committee had argued against and incorrectly predicted would fail.

In addition, organic crop producers utilizing the program would receive benefits similar to their conventional crop counterparts. The language directs USDA to develop the means with which to pay organic farmers at organic rather than conventional prices in the event of a disaster that triggers insurance payments.

Cotton producers would see their program shift to the crop insurance title of the bill via the Stacked Income Protection (STAX) program, devised to help the US blunt a ruling by the WTO against US cotton subsidy programs. There are no payment limitations in place for STAX. Under STAX, USDA would pay 80% of the premiums. The CBO estimates the program would cost $912 million through 2017, and would jump to $3.2 billion over 10 years.

No changes for sugar policy. Despite several defeated attempts via close votes, there were no changes to the existing sugar program.

Nutrition policy and spending: Program spending would be reduced by around $4 billion due to shifts contained in the original bill as efforts to restore those cuts and to make further cuts were rejected by Senators. The largest item in the Senate measure is a projected $768 billion 10-year outlays for food stamps. The new legislation makes some reforms in the program via preventing lottery winners and certain college students from collecting benefits. Of note, the bill takes steps to improve accountability and rein in states that have been leveraging food stamp benefits by distributing token amounts of home heating assistance to hundreds of thousands of households – but some observers signal that states will adjust programs to work their way around the Senate language. The CBO estimates 45 million people received nearly $80 billion of food stamp benefits in 2011, up 70 percent from 2007.

Conservation policy: The bill would gradually reduce the maximum acreage allowed in the Conservation Reserve Program (CRP) to 25 million (by 2017) from the current 32 million acres.

An amendment to the bill also would remove USDA’s ability to waive the limit of $1 million in AGI in order to qualify for payments under the program. Efforts to eliminate CRP were rejected.

Also, the bill consolidates 23 existing conservation programs into 13 programs with four fundamental program functions, achieving $6 billion in deficit reduction.

Dairy policy provisions: Two new programs would replace existing dairy programs. The Dairy Production Market Protection Program (DPMPP) is a voluntary program that protects producer margins equal to the difference between the all-milk price and a national feed cost. For small and medium-sized farms, additional margin protection is offered on the first 4 million pounds of milk marketed (the annual production of approximately 200 cows). The Dairy Market Stabilization Program (DMSP) would encourage producers who participate in DPMPP to scale down production when the market is oversupplied. These programs replace the Dairy Product Price Support Program (DPPSP) and the Milk Income Loss Contract Program (MILC). USDA is given more authority and resources for transparency measures to make sure reported dairy prices are accurate. Amendments which cleared the Senate would require milk marketing order reform, eliminate the use of end-product price formulas for setting prices for Class III milk and require handlers to report, maintain, and make available all information and records for the administration of any milk marketing order.

Fruit and vegetable provisions: The bill maintains 2008 levels of funding for the Fresh Fruit and Vegetable Program (FFVP), a program in which more than 3 million school children receive a fresh fruit or vegetable snack from the program each day. The bill also includes a provision which calls for a feasibility study of insurance products that could cover recalls, quarantines and market disruptions.

Beginning farmer provisions: Beginning Farmer and Rancher Development Program Beginning Farmer and Rancher Development Program is reauthorized. Adds dedicated funds to military veterans and provides definition of military veteran. Provides for a one-time allocation of $50 million in mandatory funding to be available until expended.

Credit: Expands eligibility for farm ownership loans for new and beginning farmers by replacing "median" with "average" farm size.

Crop Insurance: Amends section 502(b) of the Federal Crop Insurance Act by adding the definition of "beginning farmer or rancher". Amends section 508 of the Federal Crop Insurance Act to allow:

(1) beginning farmers or ranchers to receive premium assistance 10 percentage points greater than premium assistance that would be otherwise is available;

(2) a beginning farmer previously involved in a farming operation to use the previous producer’s production history or assigned yield in determining yield coverage; and

(3) beginning farmers or ranchers to replace each excluded yield with a yield equal to 80 percent of the applicable transitional yield.

Military Veterans Agricultural Liaison: Establishes a military veteran liaison to connect returning veterans to with beginning farmer training and help veterans access USDA programs.


Extends the EQIP and CSP 5 percent set aside for beginning and socially disadvantaged farmers and ranchers to 2017 and adds priority for eligible producers who are also veterans.

CRP: Provides for a reduction of not less than 25 percent in the annual rental rate for authorized harvesting or grazing activity, or in the case of grazing by livestock of beginning farmers or ranchers, no reduction in rental rate.

Continues the language for transitioning lands for a retiring farmer and rancher to a beginning farmer or rancher, or socially disadvantaged farmer or rancher with conforming changes to other sections.

EQIP: Allows limited resource farmers, socially disadvantaged farmers and ranchers, beginning farmers and ranchers, and veteran farmers or ranchers advance payments and up to 90 days to implement practices from the date of the advance.

Transportation: The Senate agreed on an amendment which requires USDA to update the rural transportation study every three years and updates an existing provision requiring USDA participation in freight rail policy proceedings of the Surface Transportation Board (STB). The 2008 Farm Bill authorized a joint study of rural transportation issues by the Secretaries of Agriculture and Transportation. The study was published in April 2010 and provides information regarding transportation issues in rural America, many of which are freight rail transportation issues. The amendment also provides that the study of rural transportation issues by the Secretaries shall be updated not less than every three years. The amendment also updates Section 1655(j) of the Agricultural Marketing Act by replacing "Interstate Commerce Commission," a federal agency that has not existed since 1995, with the "Surface Transportation Board," which currently oversees the freight railroads of the nation.

Bottom line: The next step is House Ag Committee markup, which is scheduled to take place July 11. The question then will be whether and when House GOP leaders will schedule floor debate. The House farm bill proposals are expected to include a farmer-choice safety net option between an Ag Risk Coverage program or a revised target price/counter-cyclical payment program, with somewhat higher target prices from current levels.

As for the Senate bill, the process on the Senate floor received high marks from both sides of the political aisle. Of note, Senate Republican leader Mitch McConnell (R-Ky.) called it "one of the finest moments in the Senate in recent times in terms of how you pass a bill." While it took days to get the agreement on unanimous consent on amendments to be considered for the farm bill, it showed that a host of amendments can be considered for a bill despite a rushed Ag Committee process that saw few of these issues addressed there, and none in subcommittee.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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