The Farm Bill is Dead! Long Live the Farm Bill! – Part Two
November 22nd, 2011
In part one of this post, we discuss what might be next for the ongoing congressional budget debate and in turn for the new farm bill. In part two we turn to details about what was in the short-lived and now dead 2011 Farm Bill deal.
What We Know About the Farm Bill that Did Not Happen – The Basic Outline
The basic cost-cutting outline of the farm bill deal did not change in gross terms from the time the Agriculture Committee leaders signaled to the Super Committee that they would aim to cut a net of $23 billion over the next decade. The final deal tracked the original numbers – a $15 billion net cut in commodity programs, a little over $6 billion net cut in conservation programs, and a $4 billion slice from the largest of all farm bill programs, the SNAP or food stamp program. About $2 billion was thereby freed up to help fund farm bill programs that lacked secured budget baseline after the current farm bill expires in 2012 and to fund new programs.
In round numbers, the combined commodity and crop insurance subsidy programs would therefore be cut by 10 percent, the conservation programs by 10 percent, and the food stamp program by a small fraction of one percent. The conservation cut, however, would be considerably larger if the “changes to farm bill mandatory spending programs” in the agricultural appropriations bills are added, bringing the total to 15 percent, and much more than that if the appropriations bill continues in the same direction as this year.
Based on the best information available to us, the following should be a fairly accurate summary of some key provisions in the new proposed farm bill. We stress, however, that without access to the bill itself or even an up-to-date detailed summary, we cannot be absolutely sure about each and every detail.
What We Know About the Farm Bill that Did Not Happen – Some Highlights
Local Food and Nutrition — The proposed bill adopted the policy provision contained in the Local Farms, Food, and Jobs Act (LFFJA) for a competitive grants program that combined direct marketing promotion (formerly Farmers Market Promotion Program) and scaling up of local food systems for larger scale retail and institutional markets. Called the Farmers Market and Local Food Promotion Program (FMLFPP), the proposed bill would have funded the program at $100 million in mandatory money over five years. The LFFJA advocates for $30 million a year, or $150 million over five years.
The Community Food Projects, a competitive grants program that aims to fight food insecurity by supporting the development of community-based food projects in low-income communities, would have received an increase in funding from $5 million a year to $10 million a year. The LFFJA also includes this policy provision.
The proposed bill would have created a new nutrition incentives program, called Hunger Free Communities Incentive Grants. Advocated for by the Fair Food Network, Wholesome Wave, and others, and modeled after already-existing state and regional examples, this new program was slated in the proposed bill to receive $100 million in mandatory funding over five years and would have incentivize purchases of fresh produce by SNAP participants at farmers markets and other direct marketing outlets.
Beginning Farmers — The Beginning Farmer and Rancher Development Program (BFRDP) provides grants to institutions and organizations that offer education, training and outreach to beginning farmers and ranchers. This program was slated to receive $50 million over the next five years, which is a significant decrease from its current mandatory funding levels of $75 million, and far less than the $125 million included in the Beginning Farmer and Rancher Opportunity Act and advocated by NSAC. However, BFRDP has no baseline after fiscal year 2012, so although funding is less than current levels, it nonetheless represented $50 million in new money over the next five years.
Organic Agriculture — The Organic Agriculture Research and Extension Initiative (OREI), which provides competitive grants to fund public research on organic production systems, was slated to receive renewed mandatory funding of $80 million over five years, with an authorization for an additional $25 million in annual appropriations. This is a slight increase in funding from its current mandatory funding of $78 million during the life of the 2008 Farm Bill. However, per year funding levels would have decreased slightly from $20 million to $16 million, since OREI was funded at lower levels in fiscal year 2008.
The Organic Data Initiative (ODI), which facilitates USDA data collection efforts for the organic sector, would have also received a renewed $5 million in mandatory funding, plus an authorization for annual appropriations, in the proposed bill.
The National Organic Program (NOP), which administers the USDA organic certification program, was slated to receive first-time ever $5 million in mandatory funding, plus authorization for appropriations up to $15 million per year.
Specialty Crops — The Specialty Crop Block Grant (SCBG) program provides grants annually to assist State Departments of Agriculture in enhancing the competitiveness of specialty crops (fruits, vegetables, tree nuts, and nursery crops). The program would have received an increase in mandatory funding from $55 million a year to $70 million a year. On the negative side, though, the policy provisions for this program contained in the Local Farms, Food, and Jobs Act (LFFJA) were not included. LFFJA includes set-asides of program funds for local and regional specialty crop market development and research and includes a more equitable division of program funds across the specialty crop sector.
The Specialty Crop Research Initiative (SCRI), which funds research on fruits, vegetables, and other non-commodity crops, was slated to receive renewed funding at $40 million per year, over ten years – a slight decrease from its current annual funding levels of $50 million. The SCRI has no baseline for funding beyond fiscal year 2012, so this would have represented $400 million in new money over the next ten years and ensured funding would be available for this program in the following farm bill.
Crop Insurance — The proposed bill’s crop insurance title included a provision in the Local Farms, Food, and Jobs Act (LFFJA) that would have authorized the Risk Management Agency (RMA) to develop a whole farm revenue insurance product for diversified operations, including specialty crops and mixed grain/livestock or dairy operations. As in the LFFJA, the proposed bill would have set the coverage level at 85 percent, provided a bonus for diversification, and classified costs necessary to get products to market (e.g. the cost of packing materials) as allowable costs. Unlike the LFFJA, in the proposed bill, RMA would have had the option of contracting out the development of the new product if it decided not to do it in-house.
The proposed bill would also have increased the incentive for private consulting firms to develop new risk management products for specialty crops, and would have returned to RMA the general authority to develop products in-house.
Renewable Energy — As far as we know, only one program within the Energy Title of the proposed bill was slated to receive renewed mandatory funding. The Rural Energy for America Program (REAP), which has been funded in the current farm bill cycle partly by mandatory funds and partly by appropriated funds, would have continued down that path, though with a very significant reduction in mandatory funds.
The mandatory funding for the controversial Biomass Crop Assistance Program (BCAP) would have been allowed to expire in the proposed bill, but the program would be authorized to receive up to $75 million in annual appropriations for projects and for collection, harvest, storage, and transportation.
What We Know About the Farm Bill that Did Not Happen – Conservation Title
If the proposed farm bill had become law, the total cut to the Conservation Title would be $6.3 billion over ten years. Roughly 60 percent of the cut to conservation ($3.8 billion) would come from the Conservation Reserve Program (CRP). The program’s total acreage cap would be ratcheted down over 3 years from its current level of 32 million acres to 25 million acres. To a significant degree, this reduction would track changes in CRP enrollment expected as a result of market forces, though with the declining cap the opportunity for new general sign-ups would be small.
Related to CRP, $25 million in renewed funding would have been retained for the CRP-Transition Incentives Program (CRP-TIP), which offers a special incentive of two years of extra CRP rental payments to owners of land that is currently in the CRP but returning to production, who rent or sell to beginning or socially disadvantaged farmers and ranchers who will use sustainable grazing practices, resource-conserving cropping systems, or transition to organic production. The bill would not have expanded CRP-TIP to cover intra-family deals under certain circumstances, as had been proposed in the Beginning Farmer and Rancher Opportunity Act (BFROA).
The proposed bill would have cut the Conservation Stewardship Program (CSP) by $2 billion, or approximately 10 percent. The average payment rate would have remained at $18 per acre, however the acreage cap would be reduced to 10.34 million acres a year from 12.769. The proposed farm bill also included a number of positive substantive changes to CSP beyond the numbers.
The proposed bill would have combined the Environmental Quality Incentives Program (EQIP) and the Wildlife Habitat Incentives Program (WHIP) into a single program and cut total funding by $1.865 billion, or approximately 10 percent. As has always been the case for EQIP, 60 percent of the consolidated program’s funding would go to livestock operations. The program would have also included a 5 percent set aside for wildlife in lieu of WHIP. The statutory language that led to creation of the EQIP Organic Initiative would not change. Both the Beginning Farmer and Rancher and Socially Disadvantaged Farmer and Rancher set asides within EQIP would have been retained at 5 percent. The advanced EQIP cost share for Beginning, Socially Disadvantaged, and Limited Resource Farmers and Ranchers would have also been retained at 30 percent, as opposed to 50 percent proposed by the Beginning Farmer and Rancher Opportunity Act.
The proposed bill would also have combined the Cooperative Conservation Partnership Initiative (CCPI), Agricultural Water Enhancement Program (AWEP), Chesapeake Bay Watershed Initiative (CBWI), and Great Lakes Restoration Initiative (GLRI) to create a single regional partnership program. While the CBWI and AWEP had a combined baseline of $1.1 billion through 2012, the new regional partnership program would have had a $1 billion baseline, equating to a $100 million or slightly less than 10 percent cut. Like the current CCPI, 6 percent of EQIP and CSP funds would be reserved for the regional partnership program. However, unlike the current CCPI statute, which splits funding authority between the states (90 percent) and national (10 percent), the new bill would have split the authority between national (50 percent), states (25 percent), and “critical areas” (25 percent), which would include the Chesapeake Bay, Puget Sound, Ogallala Aquifer, Red River, Great Lakes, Everglades and other areas determined by the Secretary. The regional partnership program would also have had an easement option through existing programs, such as the Conservation Reserve Enhancement Program (CREP).
On the easement side of the Title, three programs–the Wetlands Reserve Program (WRP), Grasslands Reserve Program (GRP), and Farm and Ranch Lands Protection Program (FRPP)–would have been combined into a single easement program with two branches. The first branch would combine FRPP and GRP into an ‘agricultural lands easement program.’ The second branch would consist of wetlands easement program very similar to the WRP. Nationally, the split between wetland easements and agricultural land easements would be 60/40, respectively; however, each state conservationist would be able to request an adjustment to that split to better reflect the needs of their state. Perhaps most importantly, the easement program would have had a 10-year baseline of $3.2 billion. The WRP and GRP have been funded one farm bill at a time, so while the funding available, especially for WRP, would be lower, the tradeoff was to create a permanent, more secure baseline.
The bill would have made no changes to the Agricultural Management Assistance (AMA) program. It would have funded the Voluntary Public Access (VPA) program at $30 million and the Watershed Rehabilitation Program at $150 million over the course of the farm bill. The VPA program and Water Rehabilitation Program previously had $50 million and $100 million, respectively, and both lack baseline funding after 2012 if not renewed.
Finally, under the proposal, all conservation programs would now be “no year funding” programs, which means that unused money in a given year does not revert back to the general treasury. Under current law, if a conservation contract is broken, for example, because a contract holder dies or just decides not to go through with a conservation project, that money must be sent back to the treasury. A significant amount of mandatory conservation money is lost from the Conservation Title through this process. Instead, under a situation like the one described above, the money would be retained within the Conservation Title.
What We Know About the Farm Bill that Did Not Happen – Some Lowlights
Commodity Payments – The commodity title of the proposed farm bill would have replaced direct payments (payments based on historical base acres and paid each year regardless of market price or farm income conditions) with a “grab bag” of commodity support options. Producers would be able to decide which program to enroll in.
One option included a farm-level shallow loss program to pay commodity crop producers when they experience small but long-term losses in revenue. Payments would cover losses between 13 and 25 percent, would be triggered by revenue circumstances at the individual farm level, and would be made on 60 percent of planted and prevented planted acres. It was expected that many corn, soy, and wheat producers would choose this option, though likely a considerably smaller percentage than if it were the only option available.
A second option was substantially higher target prices with ongoing receipt of counter cyclical payments when prices fall below the target, expected to be of most interest to rice, peanut, and sorghum producers, but perhaps many corn, soy, and especially wheat producers as well.
A third option was a special revenue insurance program for cotton (only) known as the Stacked Income Protection Plan or STAX. The movement of cotton’s share of commodity title funding to the crop insurance side of the ledger, via STAX, would have moved cotton out of adjusted gross income eligibility standards, payment limitations, and conservation requirements.
Due to the proposed termination of direct payments, saving nearly $5 billion a year, and to the relatively rosy projections of future commodity prices over the next decade, all of these commodity options could be put in the bill and estimated to result in a $15 billion savings over the next decade, or about $1.5 billion a year. If, however, a substantial price drop occurred outside the predicted range, the taxpayer exposure could be very high, easily wiping out any savings.
Payment Limits and Adjusted Gross Income (AGI) — The new payment limitation for the shallow-loss revenue program option and counter-cyclical program option would have been $210,000 for a married couple. This is significantly higher than the current $130,000 payment limit for counter-cyclical and revenue insurance payments. The new higher payment limit is the result of adding the current $80,000 payment limit for direct payments to the total. This outcome is baffling, given that direct payments were being proposed for elimination.
(Note: The proposal to the Super Committee from Senators Grassley (R-IA) and Johnson (D-SD), which had NSAC’s support, would have established a $100,000 per farm annual limit on revenue and counter-cyclical payments. In June, Grassley and Johnson introduced the Rural America Preservation Act of 2011 to lower the per farm cap on farm commodity program payments, simplify eligibility, and ensure that payments flow to working farmers. Visit our blog on the bill to read more about their effort to build a reasonable payment limit into the new farm bill.)
The proposed bill would have done nothing to close the biggest legal loophole that has been built into the support system over the last two decades, a loophole that allows individual farming interests to secure nearly unlimited taxpayer support. The loophole — allowing people to dodge the requirement to be “actively engaged in farming” to be eligible for support — allows mega farms to capture multiples of the nominal payment limit. These taxpayer-provided funds in turn can be used to bid land away from young, beginning farmers trying to get a start in farming. Unlimited payments over-inflate land values, increasing the land carrying costs for all farmers.
The proposed bill included no limit at all on marketing loan gains or loan deficiency payments, no limit at all on STAX subsidies, and no limit at all on highly subsidized crop insurance premiums. For each of those, the sky was the limit.
Finally, the adjusted gross income (AGI) limit for eligibility for commodity and conservation program payments was proposed to be $950,000, including both farm and non-farm adjusted income (generally multiplied times two if married). This is down $50,000 from the $1 million limit that was included in the FY 2012 agriculture appropriations bill that became law last week. The AGI test excludes from income all regular business expenses including the costs of renting or purchasing additional land or equipment; hence the AGI test encourages farm expansion by anyone who receives commodity subsidies and makes more than a million dollars a year, or a couple of million in the case of married persons.
For more information on payment limits, visit NSAC’s commodity program payment limitations and adjusted gross income limitations page.
Conservation Compliance — Despite the call of 56 national farmer and conservation organizations, including NSAC, to maintain and strengthen conservation compliance provisions in the farm bill, the bill would neither reattach conservation compliance to crop insurance nor establish a nationwide Sodsaver provision. Conservation compliance helps ensure that producers do not farm the most environmentally sensitive land, primarily highly erodible land and wetlands. In 1985, conservation compliance requirements have applied to commodity, crop insurance, and conservation program payments, but since 1996 it has not applied to receipt of crop insurance subsidies.
With direct payments gone, the proposed new farm bill would have only applied this minimum standard of environmental protection to counter-cyclical payments and the shallow-loss revenue insurance program. There would be no conservation compliance requirements for those who choose to receive STAX benefits or those who receive crop insurance subsidies only. NSAC has consistently advocated that crop insurance, which is the single largest farm subsidy, should be part of the same social contract that applies to commodity, credit, and conservation programs.
The agreement also did not include a nationwide “Sodsaver” provision. Sodsaver would have strengthened existing compliance rules by prohibiting all commodity and insurance subsidies on all native prairie and permanent grasslands and other remaining native land that does not have a cropping history if such land were to be cropped. In doing so, it would have protected prairie, critical habitat and biodiversity, reduced the cost of subsidy programs, and taken the pressure off of already over-subscribed conservation incentive programs. This Sodsaver provision was included in the last farm bill, but only as a voluntary pilot project that never got off the ground.
The bottomline is the proposed bill’s commodity and crop insurance titles would have encouraged and subsidized farm consolidation and diminish economic opportunity for young and beginning farmers. It would have created a “too big to fail” protection that could have left the taxpayer with a huge new exposure should the market tumble. Despite an ongoing economic crisis and need to spur rural job growth, the bill would have maximized payments and insurance subsidies to the nation’s largest farms while putting almost no money into rural economic development. There would have also been no improvements at all to the existing weak set of conservation conditions required as a condition of being eligible for production subsidies, and no re-linkage to crop insurance subsidies. These are all very major failings that need to be addressed when farm bill consideration resumes.
Rural Development –The Rural Development business programs did not fare well in the bill from a funding standpoint. The Value-Added Producer Grant (VAPG) program, which provides competitive grants to create or develop value-added producer-owned businesses, would have been the only rural development program to receive farm bill funding. The VAPG program, however, would have received only $15 million in mandatory funding over five years, a very nominal amount. This is the same amount of funding from the 2008 Farm Bill, which was used up entirely in the first year of that farm bill cycle. In LLFJA and the BFROA, NSAC is advocating for $30 million per year in mandatory funding for the program, which has a proven track record in boosting farm income and creating rural jobs. The proposed bill would have authorized up to $40 million a year in discretionary funding, the same as under current law, but current appropriations are at only 40 percent of that level and the pressure on appropriations bills from discretionary cuts already approved by Congress will grow each year.
The Rural Microenterprise Assistance Program (RMAP) provides entrepreneurs in rural areas with the skills necessary to establish new businesses and continue operation of existing rural microenterprises. While the 2008 Farm Bill included $15 million over four years in mandatory funding for the program, the proposed new bill would have included no mandatory funding for the program at all and authorized only $20 million a year in discretionary funds compared to $40 million a year last farm bill cycle.
Additionally, many of the policy proposals included in the Local Farms, Food, and Jobs Act (LFFJA) that would bolster “food hub” and value chain activities are not found in the new bill. For instance, the Business and Industry (B&I) Direct and Guaranteed Loan Program bolsters rural businesses and industries and includes a minimum five percent set-aside for local and regional food system activities including aggregation, storage, processing, distribution, and marketing. LFFJA proposes an increase of this set-aside to ten percent and makes other improvements; however, the proposed new bill did not adopt this proposal.
Local Food and Nutrition – The proposed new bill did not contain any of the EBT or school food provisions contained in the LFFJA. The LFFJA includes a leveling of the playing field so that direct marketing outlets such as farmers markets and CSAs can serve as SNAP vendors just as wired retail outlets do. The LFFJA’s school food provisions includes a “local food credit program” that would allow School Food Authorities to use up to 15 percent of their commodity dollars for making purchases of agricultural products from local and regional farmers and ranchers. Not only would this foster economic development but it would also bolster farm to school relationships. Additionally, while the proposed new bill would have maintained funding for the Department of Defense Fresh program, which gets produce into schools, the bill would not have allowed schools to use these dollars for their own purchases of more fresh, local food. On a positive note, the proposed new bill would have allowed USDA’s Agricultural Marketing Service to continue to pursue a pilot program that explores avenues for local sourcing in the program.
Organic Agriculture — The National Organic Certification Cost Share Program (NOCCSP), which assists producers in 34 states and handlers in all 50 states with the regulatory costs of entering into organic production, was left in tatters in the proposed new bill. It would have ended any farm bill mandatory funding for the program and placed a five-year benefit limit on each farmer if, as is unlikely, the program were to shift from the farm bill to the appropriations bill. The proposed bill would have allowed farmers in the 12 Northeastern states plus HI, NV, UT, and WY to receive mandatory funding from a different source for organic certification cost share. The result would have been an absurd situation where eligibility for a farm program benefit depended on which state one resides in. For comparison, imagine if corn program subsidies were available only in 16 out of 50 states – it would not have passed the smell test.
The proposed bill also did not include the provisions in the Local Farms, Food, and Jobs Act (LFFJA) regarding organic crop insurance. The LFFJA would eliminate the organic premium surcharge and would direct RMA to complete development of an organic price series to allow organic policies to pay out at the organic price.
Minority Farmers and Ranchers
The proposed bill left the Outreach and Technical Assistance for Socially Disadvantaged Farmers and Ranchers program (also known as “Section 2501” program) high and dry. The program received $75 million in mandatory funding under the current farm bill, but was left unfunded in the proposal.
Beginning Farmers and Ranchers
The Beginning Farmer and Rancher Individual Development Accounts (BFRIDA) Pilot Program also was not provided with farm bill funding under the proposal. The Beginning Farmer and Rancher Opportunity Act proposes to fund the innovative pilot program at $5 million a year in mandatory funding.
Many credit programs that are essential to helping beginning farmers start farming, would have been reauthorized, including the Conservation Loan Program, the Down Payment Loan Program, and funding set-asides for beginning farmers within the guaranteed farm ownership and direct operating loan funds. None of the important policy changes that are needed and are contemplated by the Beginning Farmer and Rancher Opportunity Act were included, however.
Research and Extension
While the proposed bill would have provided important renewed mandatory funding for the Specialty Crop Research Initiative, Organic Agriculture Research and Extension Initiative, and Beginning Farmer and Rancher Development Act, it contained no policy changes that we know of to other programs and offices with the research area.