Arkansas Agriculture - Edition 44

Policy Update

Brandy Carroll 2017-02-07 02:57:43

Plan for Farm Bill Now Farmers encouraged to engage It seems like yesterday we were in the thick of the battle that created the Agriculture Act of 2014, but it’s already time to do it again. The 2014 bill doesn’t expire until the end of 2018, but Congressional leaders are already talking about starting the hearings process early in 2017. Their reasoning is three-fold: start early in order to finish on time; the farm economy has changed dramatically since the 2014 bill was passed; and there are some complex problems with the 2014 bill that need to be addressed. The 2014 bill was written in a time of high commodity prices and large budget deficits. The redesigned bill cut $16.5 billion out of the baseline over 10 years. Of course, the farm bill is really a food bill, as nearly 80 percent of total expenses are for nutrition programs like SNAP (food stamps). Crop insurance accounts for the next largest piece of the pie at 9 percent, and conservation and commodity programs make up the rest at 6 percent and 5 percent, respectively. The 2014 bill continued the trend of shifting funding to crop insurance. Farmers must share in the cost of premiums in order to participate. Thanks to increases in premium subsidy levels during the past few farm bills, 90 percent of eligible acres are now covered by some level of crop insurance. It’s these increases in subsidy levels and the related increases in outlays that are targets for groups opposing farm programs. Commodity programs under the 2014 bill moved away from direct payments in favor of giving farmers the choice between two risk management programs. The shallow-loss Agriculture Risk Coverage (ARC) program protects against revenue losses. And the Price Loss Coverage (PLC) program triggers when prices fall below a set reference price. It was a one-time program choice that locked farmers in through the end of the bill. Farmers and Congressional leaders have already identified areas of the 2014 bill that aren’t working as intended. Those choosing ARC also had to decide whether to use the county crop yield or use their proven individual crop yield but cut the percentage of their yield that was covered. More than 90 percent of farmers opting for ARC chose the county option. The program, however, has seen wide discrepancies in payment rates to farmers across county lines. Many want a program redesign to make it more equitable and effective. After losing a hard-fought battle in the World Trade Organization with Brazil, cotton was eliminated from traditional commodity programs. However, cotton fiber is still eligible for marketing loans and marketing loan gains. A risk management program called the Stacked Income Protection Program (STAX) was crafted to help cotton farmers manage risk. However, adoption of STAX has been slow, and the cotton industry has gone back to the drawing board to find a more effective way to protect cotton farmers from market fluctuations. The Dairy Margin Protection Plan (MPP) is a voluntary risk management program to indemnify producers when the national income over feed ratio falls below the selected coverage level. The program requires farmers pay premiums for coverage. MPP has collected nearly $100 million in farmer premiums and administrative fees during the first 18 months of the program. Indemnities and payments have been approximately $12 million for the same time period. Since the farm bill was written, net farm income has declined $52 billion annually according to USDA. At the same time, the farm bill baseline has declined significantly. Now is the time for the farming community to take a hard look at the present bill and prioritize its needs for future programs.

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