As part of the congressional agreement that was passed to avoid the fiscal cliff, the 2008 Farm Bill was extended through the 2013 crop year, and will now expire on Sept. 30, 2013. The extension of the current farm bill was viewed as a big disappointment to several members of Congress from both parties, as well as by many agricultural organizations and other groups that were hoping for reform in ag policy with a new bill. In June 2012, the U.S. Senate passed a version of the new Farm Bill, which was followed by the U.S. House Agriculture Committee passing a new Farm Bill out of Committee in July. However, the House failed to take up the new farm bill on the floor prior to the end of the 2012 congressional session, resulting in the one-year extension of the current bill.
Direct payments for corn, soybeans, wheat and other crops were scheduled to be discontinued in both the U.S. Senate and House versions of the new farm bill. However, direct payments will now be continued for 2013 as part of the extension. Direct payments total approximately $20-25/acre for many Upper Midwest corn and soybean farmers. The current CCC commodity loan program, counter-cyclical program and ACRE program will also be continued for 2013; however, it is not clear whether producers previously enrolled in ACRE will need to continue in the program for 2013, or if they can opt out.
The SURE program for disaster assistance, as well as various livestock assistance programs, did not receive funding for 2012 and 2013, even though we are coming off one of the worst droughts in decades, including large financial losses in the livestock industry. Over 30 other farm-related USDA programs were kept active by the extension, but were not authorized to be funded, meaning separate funding legislation is needed to activate these programs in 2013. Given the tight Federal budget situation, funding for SURE, livestock assistance programs or other unfunded USDA programs for the coming year seems unlikely at this time.
The potential impacts of reverting to required dairy legislation that was passed decades ago was the catalyst that pushed congress to include a farm bill extension in the fiscal cliff legislation. Without a new farm bill in place or an extension, the U.S. dairy support program would have reverted to a 1949 law, which would have set the milk support price at approximately $38/hundredweight, more than double the current support price. Some experts estimated that consumer milk prices could increase to as high as $7-8/gal. at the retail level. This potential caused national media attention and lead to many consumer groups calling for congressional action.
The Farm Bill Extension will continue payments under the Milk Income Loss Contract (MILC) program retroactive to Oct. 1, 2012, through Sept. 30, 2013. The MILC program payments were discontinued under the current farm bill after Sept. 30, 2012, which is a major issue to dairy producers who are suffering large financial losses due to the 2012 drought. While dairy producers are glad to have the safety net of the MILC program payments restored, many farm organizations and dairy groups are very disappointed that a revised dairy support program was not implemented. Both the U.S. Senate and the U.S. House Agriculture Committee had included the “Dairy Security Act” in the new proposals, which had the support of most farm organizations and of many dairy producers. Many experts felt that the revised dairy pricing system would be more equitable for most dairy producers across the country.
Fiscal Cliff Tax Package Favorable to Farmers
Most farm operators are pleased with the tax package that was included as part of the fiscal cliff legislation that was passed by congress and signed by President Obama. Some highlights from the tax package that affect farm businesses include:
Farm operators are encouraged to contact their tax accountant for a full understanding of the financial implications of the fiscal cliff tax provisions on their farm business.
Editor’s note: Kent Thiesse is a former University of Minnesota Extension educator and now is Vice President of MinnStar Bank, Lake Crystal, MN. You can contact him at 507-726-2137 or via e-mail at email@example.com.