Focus on Ag

House, Senate pass new farm bill


Table of Contents:

The Commodity Title of the new farm bill will eliminate the guaranteed direct payments, which have existed since the 1996 farm bill, as well as eliminating counter-cyclical payments, the average crop revenue (ACRE) program, and the permanent disaster program (SURE), which were all part of the last farm bill. The new legislation will give crop producers a one-time choice between the revenue-based Ag Risk Coverage (ARC) program, and the Price Loss Coverage (PLC) program, based on revised target prices for the eligible crops. Both the ARC and PLC programs will be calculated on crop base acres, rather than on year-to-year planted crop acres.

Crop producers will have several other choices to make with the new farm bill. Producers will be given a one-time opportunity to update crop base acres, based on average planted acres from 2009-2012, or can choose to continue with the crop base acres that existed under the last farm bill. Producers that choose the ARC program, will have a choice of basing potential payments on county data or individual farm data. If they choose the County level, potential ARC payments will made on 85% of crop base acres, as compared to a payment level of 65% of crop base acres with farm-level data calculations.

County ARC payments will made when the actual crop revenue falls to 86% or lower of the county benchmark ARC revenue guarantee. Payments will be made on actual revenue levels between 76 and 86%, up to a maximum of 10%. The ARC guarantees will be updated each year, and will be based on the “olympic” average (high year and low year removed) county benchmark revenue, which is calculated by taking the average county yield times the national average price for each year, for the preceding five years.

The PLC program option will be based on set reference (target) prices. Reference price levels for major crops were raised to the following levels for the next five years (2014-2018): corn - $3.70 per bushel; soybeans - $8.40 per bushel; and wheat - $5.50 per bushel. If the 12-month national average price for a commodity falls below those levels, payments will be made on 85% of eligible crop base acres. Crop payment yield levels will be based on the counter-cyclical payment yields that existed under the previous farm bill. Beginning in 2015, producers that enroll in the PLC program can also enroll in supplemental crop option (SCO) program, which will allow the purchase of additional subsidized county-level crop insurance coverage to cover part of the deductible under their individual crop insurance policy. Producers will pay additional crop insurance premiums for the SCO coverage.

Overall, crop insurance provisions under the new farm bill remained largely the same as current provisions, with continuation of the higher subsidy levels for enterprise crop insurance units. The new farm bill will require producers that purchase subsidized crop insurance policies to meet federal conservation compliance policies, similar to other participation in farm programs. The new farm bill lowers the maximum amount of acres in the Conservation Reserve Program (CRP) to 24 million acres, as compared to a maximum of 32 million acres in the last farm bill. As of October 31, 2013, there were a total of 25.6 million acres in the CRP program, so total CRP acreage will likely decline at fairly small levels over the next few years.


2014 farm program sign-up under the new farm bill will likely not begin until April of this year, and will likely continue into the summer months. This will allow farm operators plenty of time to research and evaluate the various options and alternatives that will be available under the new farm bill. The implementation of the new farm bill will involve big decisions for crop producers, so farm operators will want to take the time necessary to get informed about the various program options, and to make the best choices for their farms.

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