Wednesday, June 25, 2014

2014 Farm Bill

After nearly three years of development and deliberations, Congress passed and the President signed the Agricultural Act of 2014 in February. Commonly known as the “farm bill,” this bill should probably be viewed as more of a “food bill.” While the bill’s provisions clearly impact many aspects of agricultural production, nearly 80% of the funding in this legislation is going towards the Supplemental Nutrition Assistance Program (SNAP or food stamps). 

The final 2014 Farm Bill is projected to spend $956 billion over a ten year period, with $756 billion for nutrition. Passage of this farm bill was far more difficult than others as competing interests and viewpoints on policy and spending priorities collided making it difficult to muster the necessary votes. Whether or not this is the last of the “farm bills” that couple farm and nutrition programs will be a topic of much debate going forward.

From an agricultural perspective, a few things stand out in this bill:
  • This farm bill leaves the producer with far more decisions to make regarding participation in farm programs. Producers will have to consider various options in determining their approach on farm programs.
  • Crop insurance is now the dominant farm program in the bill. While farm support programs become less significant, crop insurance becomes more important as risk management takes a higher priority.
  • As a whole there is far more diversity in the programs representing the wide diversity of agricultural production and marketing. 


Northeast Agriculture Highlights

Trying to develop a short summary of key provisions in a 949 page bill will inevitably leave something out that is important to many readers. A full copy of the bill or summaries can be found on various sites, including the House Agriculture Committee at agriculture.house.gov. For most programs, USDA needs to promulgate rules and establish procedures. With those limitations, here are some key provisions: 
Farm Programs

Significant changes are made to farm programs: row crops (corn, soybeans and others) and wheat. The direct payment and counter-cyclical programs are repealed. Producers will now have a one-time option to choose between two programs – the Price Loss Coverage (PLC) or Agricultural Risk Coverage (ARC) program for 2014 to 2018 crop years. Each producer will have to evaluate the benefits of the two programs. PLC is intended to complement crop insurance and help producers to address multiple-year price declines. The ARC program requires a producer to have a 14% loss (so-called shallow loss) in comparison to historical average revenue and coverage is 75 to 85% of the benchmark revenue.  

Under the 2014 Farm Bill there is one payment cap set at $125,000 ($250,000 for married couples). An income test is also established at $900,000 of Adjusted Gross Income (farm and non-farm) for participation in farm commodity programs (this limit does not apply to crop insurance).

Dairy Program

The farm bill eliminates the Dairy Price Support Program and the Milk Income Loss Contract Program (MILC) and establishes a Margin Protection Program. This is a voluntary program that provides dairy producers with payments when dairy margins are below the margin levels selected by the producer on an annual basis. The margin is the difference between the all milk price minus the average feed cost. The minimum margin level is $4.00, which producers can have covered if they pay a $100 annual administrative fee. To protect a higher margin level, producers pay depending on the level of protection, the amount of milk they want to protect (note also - marketings in excess of four million pounds pay higher premiums). Production history is defined by the highest production in 2011, 2012 or 2013 and future growth applied to the individual farm in based on the national average – growth on a farm beyond that level is not protected by the margin insurance. Also included in the dairy program is a dairy donation program in which USDA is authorized to purchase and donate dairy products when dairy margins are under $4.00. 

The MILC program will be effective until the Margin Protection Program is in place or September 1, 2014, whichever occurs first.

Crop Insurance

While farm support programs continue to shrink in this farm bill, the crop insurance program takes a more prominent role. A new condition for crop insurance is compliance with conservation requirements for wetlands and highly erodible land. For specialty crops, there is a phase in period, and for permanent crops (orchards, vineyards, etc.), this conservation compliance provision does not apply. There is no adjusted gross income limitation or higher premium level for higher income operations that applies to crop insurance.

There are a number of provisions designed to expand coverage, including allowing a revised value of crop insurance to reflect prices of organic crops. USDA is also required to conduct more research on whole farm revenue insurance with higher coverage levels. Another study is required to consider insuring specialty crop producers for food safety and contamination-related losses.

Another key provision that producers of row crops will need to consider is that those who elect to use the Price Loss Coverage (PLC) program are eligible to purchase additional crop insurance policies to protect against ‘shallow losses.’  

Conservation Programs

The Farm Bill consolidates 23 conservation programs into 13 programs. Historically the Environmental Quality Incentives Program (EQIP) is the program that results in the most conservation funds coming back into the Northeast. EQIP is continued without major changes. 60% of the EQIP payments must go to livestock production. The EQIP payment limit is raised from $300,000 to $450,000 (over a six-year period). Funding for EQIP increases from $1.35 billion to $1.75 billion during this farm bill.

The amount of land to go into the Conservation Reserve Program is reduced from 32 million acres to 24 million by 2018. The Farmland Protection Program is consolidated into the Agricultural Conservation Easement Program and provides for easement programs that protect wetlands and agricultural land from non-agricultural uses.

Credit Programs

The farm bill reauthorizes FSA direct and guaranteed loan programs and, to some extent, broadens eligibility to include trusts and limited liability companies. A provision included in this farm bill eliminates the 15-year eligibility term limits for participation in the guaranteed farm operating loans.

The farm bill also puts into law a program that USDA had established by regulation – this is a microloan for up to $50,000 for both direct and guaranteed loans. The language also allows USDA to contract with community based, state entities and other intermediaries to carry this out.

Specialty Crops Block Grants

The farm bill continues the Specialty Crop Block Grants program, with funding increased from $72.5 million to $85 million over the next five years. The program will be focused on food safety, plant pest and disease, research and crop-specific projects. A change to this program allows for multi-state projects.  

Value-Added Agricultural Product Grants

Northeast farms venturing into value-added operations have successfully obtained value-added marketing grants over the years. The Value-Added Agricultural Product Grants program is continued with annual appropriations of $63 million.

 Energy Related Grant Programs

This is the third farm bill that contains an energy title. In total, the farm bill provides $694 million over the next five years for energy programs. The Renewable Energy for America Program (REAP), which has funded various biofuels-related projects, including many in the Northeast, is continued with $50 million annually. 

Maple Syrup – Acer Access and Development

The Farm Bill includes a new grants program to promote the maple syrup industry. The grants, which would be made to states, may be used to promote research and education, resource sustainability and marketing, to encourage expansion of maple sugaring activities on privately owned land. The bill allows appropriations of $20 million for this initiative.

Export Apple Act

The Farm Bill provides that apples shipped to Canada in bulk bins are exempt from the Export Apple Act that provides for inspection and certification before US apples enter a foreign country.

Hemp Production

For the first time that I am aware of, the Farm Bill provides for two provisions relating to industrial hemp – allows an institution of higher education to grow industrial hemp for research purposes (if the state allows the product to be grown) and allows for an agricultural pilot program to study growth of industrial hemp.

Farmers Market Promotion Program

The Farmers Market Promotion Program authorizes grants to promote farmers’ markets and other direct producer-to-consumer marketing opportunities. The farm bill continues this program with $30 million annually. The bill does changes this to some extent in that it provides that 50% of the funds should go to local and regional food enterprises that process, distribute, aggregate, store and market locally or regionally produced food products. This is essentially supporting the food hub concept that has received more attention over the past five years. 

National Organic Program

The National Organic Program is reauthorized in this farm bill with appropriations of $15 million annually.

Market Access Program

The Farm Bill includes numerous trade related provisions. The Market Access Program (MAP), which provides funds for export-related promotional activities, focused for both generic and branded U.S. agricultural products, continues to be funded at $200 million annually. 

Final Note: In the coming months USDA will promulgate regulations providing greater program details and eligibility. All readers are encouraged to be on the watch for additional details.

How Did They Vote? The region served by Yankee Farm Credit includes 6 US Senators and 3 House members. Senators Leahy (D-VT), Sanders (I-VT), Shaheen (D-NH), Schumer (D-NY) voted in favor and Senators Ayotte (R-NH) and Gillibrand (D-NY) voted against the bill. On the House side the bill was supported by Representatives Owens (D-NY), Welch (D-VT) and Kuster (D-NH).

Article written by Robert A. Smith, Senior Vice President, Public Affairs and Knowledge Exchange who works with Yankee Farm Credit on public affairs related issues.