There was considerable optimism as Congress adjourned for a mid-January break that a compromise agreement on a new farm bill may finally occur, once Congress returns on Jan. 27. A struggle over finalizing future dairy policy, rather than provisions for the Nutrition Title, has stalled the farm bill process in recent weeks, as the U.S. Senate and House Conference Committee attempted to reach a final farm bill agreement for consideration by both houses of Congress.
The struggle over dairy policy is not new, and has been ongoing over the past two years of debate surrounding a new farm bill, even though commodity programs for crops, the Nutrition Title and conservation programs have attracted more of the headlines. The U.S. Senate version of the farm bill passed in 2013 contained a new dairy price insurance program, which includes some dairy supply management (market stabilization) provisions when milk prices reach certain levels. The version of the new farm bill passed by the U.S. House did not include these provisions, and would continue dairy policies that are more similar to the current Milk Income Loss (MILC) program. As of this writing, it appears that a compromise may be in the works that would eliminate the MILC program, and replace it with a tiered dairy price insurance program, excluding the supply management provisions.
The 41 members of the U.S. Senate and U.S. House Conference Committee, who are designated to determine a new farm bill, have been meeting since Oct. 30, 2013. The Conference Committee is charged with finding a compromise on the versions of the new farm bill that were passed earlier this year by both the U.S. Senate and House. The extension of the last farm bill expired on Sept. 30, 2013, with many programs and provisions expiring on Dec. 31, 2013. USDA has delayed action on some of these provisions until at least the end of January 2014.
Much of the focus going into the Conference Committee for the new farm bill centered on the Supplemental Nutrition Assistance Program (SNAP), which includes the food stamp program, the women, infants, and children (WIC) program and the school lunch program. Approximately 79% of the proposed funding for the new farm bill will go to the SNAP-related programs. One of the biggest differences in the U.S. Senate and U.S. House versions of the new farm bill is in the proposed future funding for SNAP programs. The new farm bill passed by the U.S. Senate would cut the spending on SNAP programs by about $400 million per year (0.5%), or $4 billion over 10 years. By comparison, the U.S. House proposal would cut SNAP funding by about $3.9 billion per year (5.1%), or approximately $39 billion over 10 years. Some analysts have indicated that the Conference Committee has reached a compromise on the Nutrition Title of the new farm bill, which would reduce SNAP funding by about $900 million per year, or $9 billion over the next 10 years.
As of this writing, there has been no formal announcement of provisions in the Commodity Title of a new farm bill; however, many analysts feel that the Conference Committee has reached agreement on the provisions related to crop production. Most analysts feel that producers will be given a choice between a new Ag Risk Coverage (ARC) program and a new Price Loss Coverage (PLC) program. Both programs will likely be based on crop base acres, rather than on actual planted crop acres, which was an option in the Senate version of the new farm bill. It is not known if producers will be given an opportunity to update their crop base acres under a new farm bill. The current direct payments, as well as the ACRE and SURE programs would be eliminated with a new farm bill.
It appears that the federal crop insurance program will likely remain largely intact with the new farm bill, with some minor adjustments and possible enhancements. Most likely producers will have the opportunity to opt for new Supplemental Crop Option (SCO) insurance coverage, which would allow up to 90% insurance coverage, with some added premium paid by the farm operator. The current maximum coverage level is 85% of crop APH (yield) times the crop insurance price for a year. The SCO program will likely not be implemented until the 2015 crop year. It appears that future crop insurance participation will require conservation compliance by participating farm operators, similar to participation in other government farm programs.
The new farm bill will likely lower 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 very small levels over the next few years. Expiring CRP acres for the next five years are 2.0 million acres in 2014, 1.7 million acres in 2015, 1.2 million acres in 2016, 2.6 million acres in 2017, and 1.5 million acres in 2018. Enrollment into the Continuous CRP program, which targets the most environmentally sensitive crop acres, would continue under the new farm bill, as well as other special CRP initiatives.
There are some other provisions yet to be worked out in the Conference Committee for the new farm bill, including possible modifications to the Country of Origin Labeling (COOL) legislation, finalizing payment limits, revised definitions of “actively engaged in farming”, and a proposal to prevent States from banning imports from another State, through legislation. While there is still reasonable hope that the Conference Committee can reach a compromise on a new farm bill by the end of January or early February, there are still several hurdles to cross before the farm bill becomes law. Once the new farm bill passes out of the Conference Committee, it must then be passed by both the full U.S. Senate and the U.S. House, which could be difficult to achieve. The longer that farm bill passage is delayed, also raises concerns as to whether the new farm program commodity provisions can still be implemented in time for the 2014 crop year, or if another modified extension of the last farm bill will be necessary.
Farm operators can rest assured that there will likely be some type of farm program in place for the 2014 crop year, whether it is a new commodity program under the new farm bill, or continued programs under the last farm bill. Crop insurance programs and alternatives will remain largely the same for 2014, regardless of what happens with the new farm bill. Given the tight margins in crop production for 2014, it is extremely important for producers to closely analyze their crop insurance alternatives for the coming year, before the March 15 enrollment deadline.