Farm Bill Message From Bob Sutter

— Written By

E-mail Note from Bob Sutter relative to Farm Bill, January 27, 2014.

Looks like we will have a farm bill this week.

Subject to some last-minute changes and additional decision making, the following are likely key features of the forthcoming farm bill:

Duration: Crops years 2014-2018.
Direct Payments: Eliminated, although there will be so-called “transition payments” for 2014 cotton producers due to the cotton program safety net, called STAX, being unable to be implemented until at least 2015.
Basis for Payments: Base acres, with a yield update option for producers impacted by consecutive very low yield years.
Chance to reallocate bases: A one-time option based on 2009-2012 plantings. Cotton base acres: Generic base — Annual option to plant other crops on cotton base acres and qualify for safety net provisions (ARC or PLC) for that crop, but not STAX for those acres.
Conservation compliance/crop insurance linkage: Yes – but no adjusted gross income test, or cap on crop insurance payouts.
Farmer safety net program choice: Producers will have a one-time chance to choose between a revenue (Ag Risk Coverage, ARC/Shallow Loss) or Price Loss Coverage (PLC, target/reference price) program.
Marketing loan eligibility: Yes for both ARC and PLC.

ARC PROVISIONS – Payments triggered once prices fall 14 percentage points below the prior five-year average. Subsidy covers a narrow 10-point band – from 86 percent to 76 percent of revenues.

  • Band or range: 86% to 76%
  • Payments: 5-year rolling Olympic avg. revenue, with an optional yield/price plug.
  • Payment factor: 85% – County level. 65% – Farm level

PLC PROVISIONS – Fixed, government-set target prices paid on 85 percent of base acres. Farmers who sign up for PLC will also have available to them a new lower-cost version of revenue insurance based on countywide losses called Supplemental Coverage Option (SCO), designed to parallel ARC in that it also will have a 14 percent deductible and is intended to cover only that band of losses down to where the farmer has more conventional buy-up crop insurance coverage.

  • Payment factor: 85% of base.
  • Reference/Target Prices:
    • Corn $3.70/bu.
    • Wheat $5.50/bu.
    • Soybeans $8.40/bu.
    • All rice $14/cwt.
    • Japonica rice $16.15/cwt.
    • Sorghum $3.95/bu.
    • Barley $4.95/bu.
    • Other oilseeds $20.15/ton
    • Peanuts $535/ton

SUPPLEMENTAL COVERAGE OPTION (SCO)

  • Availability: Begins with 2015 crop for those choosing PLC but not ARC.
  • Coverage: Up to 86%
  • Premium subsidy: 65%

STACKED INCOME PROTECTION PROGRAM – STAX

  • Availability: Cotton only. Begins with 2015 crop year.
  • Coverage band: Not less than 10%, nor more than 30% of expected county revenue in increments of 5%.
  • Reference price: None.
  • Premium subsidy: 80%
  • Payment limit: None.
  • Transition payment: Yes, for 2014 crop year – 2015 crop for counties where STAX is unavailable.

CROP SUBSIDY PROVISIONS

  • Payment limit: $125,000 individual- double for spouse or $250,000 total. Within that number there would be no fixed apportionments of what could be received from ARC and PLC vs. marketing loans.
  • Unified adjusted gross income: $950,000
  • Actively engaged: Subject to last-minute changes, but Focus on multiple growers who qualify for management only option. The goal is for “rational reform, targeted at abusers.”

CONSERVATION

  • Conservation Reserve Program (CRP): Acreage cap lowered to 24 mil. by FY 2018 (about 1.6 million fewer acres than currently in CRP). Will include carve out for grasslands as Grassland Reserve Program eliminated.
  • Conservation Stewardship Program (CSP): Maximum acres cut to around 10.3 mil. ac., or 2.4 mil. fewer than enrolled in recent years.
  • Environmental Quality Incentives Program (EQIP): Continued, carve out for wildlife habitat. The FY 2014 omnibus appropriations bill reduced funding for the program.
  • “Sod saver” program in six Midwest states would greatly reduce the level of subsidies afforded farmers who choose to plow up native prairie lands.

DAIRY POLICY – Subject to change due to last-minute alterations. No supply management language.

USDA Secretary authority: Authority to annually adjust premium paid by plus or minus 5%. Blended indemnification payment: Gross margin insurance indemnification would be blended payment when a producer exceeds historical (base) production – full payment on historical prod., lower payout on production exceeding base.

FOOD STAMPS

  • Funding cuts: $8.8 billion to $8.9 billion in funding cuts over ten years.
  • Program reform: Most of the funding reductions would come in altering a program in states that distribute token amounts of low-income fuel assistance to food stamp households to help them gain higher benefits. Under this practice, known as “heat-and-eat,” as little as $1 per year in fuel aid can be used to claim a higher utility deduction and leverage far more in monthly food stamp benefits, especially in high-cost cities like New York. The new farm bill specifies the fuel aid be no less than $20. A portion of the resulting savings would then be plowed back into 10 pilot programs to test new ideas to help jobless beneficiaries receive training and find employment.

SUGAR PROGRAM No changes from current policy.

Article first appeared as North Carolina Peanut Note (PNNC-2014-018)