NSAC's Blog


2018 Farm Bill Drilldown: Commodity Programs and Crop Insurance

December 14, 2018


A producer in Stanly County, North Carolina mows down a cover crop just minutes before planting corn. Photo credit: NRCS.
A producer in Stanly County, North Carolina mows down a cover crop just minutes before planting corn. Photo credit: NRCS.

Editor’s Note: This is the sixth post in a multi-part blog series analyzing the final 2018 Farm Bill, which was released on December 11, 2018 by the leaders of the Farm Bill Conference Committee. Previous posts focused on local and regional food and beginning/socially disadvantaged farmersorganic agriculture, conservation, and research and plant breeding. The bill was passed by the House and Senate this week and sent to the President for his signature.

Many farm bill watchers, and even some Members of Congress, have referred to the new 2018 Farm Bill as a status quo bill. While that may not be universally accurate, it is generally so with respect to the farm bill’s twin safety net elements – commodity programs and federal crop insurance. Despite relatively low commodity prices and declining farm income, there were surprisingly no major reforms or dramatic funding increases in either of these two areas.

In one very major way, however, the 2018 Farm Bill did take a huge step backward.  House Agriculture Committee Chairman Michael Conaway (R-TX), having lost nearly all of what was in his House bill (which sought to eliminate core conservation programs, restrict SNAP eligibility, and weaken environmental regulations), came away with a giant concession prize. Instead of closing egregious subsidy loopholes, the compromise farm bill ensured that huge commodity subsidy checks will continue to flow to the nation’s largest farms in an unlimited fashion – despite long standing statutory payment limits. 

“Status quo” farm bill or not, there were still many important provisions to note in the 2018 Farm Bill’s Titles 1 (commodity programs) and 11 (crop insurance). Below, we include a summary of the key takeaways on how the final conferenced bill approaches programs and policies on commodity programs and crop insurance:

Highlights

  • Improves Whole Farm Revenue Protection (WFRP), a risk management policy for diversified farms of all types. WFRP’s inclusion in the 2014 Farm Bill was a major victory for the National Sustainable Agriculture Coalition (NSAC), and we have been working hard to continue improving the program ever since. The 2018 Farm Bill supports these continued efforts by:
    • Directing the Risk Management Agency (RMA) to engage with WFRP stakeholders to improve the program. As part of that process, RMA is directed to consider removing caps on livestock and nursery production coverage, reduce paperwork and simplifying record keeping, find better options for moderating the impact of disaster years on coverage, and improve insurance agent training to better reach the small farm sector and underserved regions.
    • Increasing from 5 years to 10 years the period of time that beginning farmers have to access WFRP’s beginning farmer 10 percent premium discount.
    • Directing RMA to investigate how and whether WFRP could better serve farmers engaged in local food markets.
  • Adds a Local Food Policy to the list of new policies that RMA should develop in the coming years. The local food policy would be oriented toward livestock, poultry, and specialty crops in urban, suburban, and rural settings. This would include direct-to-consumer and farm-to-institution programs, community supported agriculture, as well as greenhouse/rooftop/hydroponic production. The policy would direct that local price premiums be included in revenue determinations.
  • Mandates that RMA produce an Underserved Producer Report every three years, which must include recommendations for improving participation by beginning, socially disadvantaged, and veteran producers. The report must also include plans for administrative reforms and recommendations for congressional action.
  • Improves the Noninsured Crop Assistance Program(NAP), which provides insurance coverage through the Farm Service Agency (FSA) to producers and crops not otherwise eligible under federal crop insurance, in several ways:
    • The “buy-up” coverage added by the 2014 Farm Bill is made permanent, with a payout limit increased to $300,000. A $325 service fee is waived for beginning and socially disadvantaged farmers, who also receive a 50 percent premium discount. The coverage includes local, organic, contract, or other premium prices.
    • A streamlined policy is created for diversified operations, as well as for farms with less than $100,000 in liability, which simplifies the process for submitting farm records and acreage reports.
    • FSA and RMA are directed to collect and share data so that RMA can develop policies for NAP users. The bill also requires a coordination effort between the two agencies to provide better coverage options for beginning and socially disadvantaged farmers.
    • FSA and RMA are directed to work together to help the transition of crops and counties from NAP to crop insurance, including assisting beginning farmers to use NAP as an on-ramp to federal crop insurance.
  • Requires RMA to establish continuing education requirements for loss adjusters and insurance agents that include conservation activities and agronomic practices (including organic and sustainable practices) common to particular regions.
  • Improves coverage for small dairy farms under the newly renamed Dairy Margin Coverage program. The final bill sharply reduced premiums for the first five million pounds of production (roughly equivalent to 240 cows) and raises the top margin coverage level from $8 per hundredweight to $9.50.

Mixed Bag

  • Includes a strong step forward toward ending discrimination against farmers who adopt cover cropping. For several years, NSAC has made incremental progress in convincing RMA to count all conservation practices and enhancements as “good farming practices” for crop insurance purposes. The new farm bill takes another big step forward by clarifying the definition of cover crop termination in a way that will reduce farmers’ fears that cover cropping could risk their crop insurance coverage.
    • However, the final bill deletes Senate passed language that would have included all conservation activities, not just cover cropping. The report accompanying the bill does at least send a strong signal to RMA, reiterating the point that NSAC has been making over and over again, stating: “The Managers expect USDA [U.S. Department of Agriculture] to coordinate internally and provide clear guidance to farmers, agents and loss adjusters to ensure that guidance, procedures, or advice regarding voluntary conservation practices from one part of USDA does not potentially put other USDA benefits at risk.”
  • Closes a loophole in Sodsaver policy (which denies crop insurance subsidies for land broken out of native sod toexpand crop production) policy. The loophole allowed receipt of insurance subsidies for cropping grassland after growing non-subsidized crops for four years. The final bill does not, however, expand the Sodsaver provision to states outside the prairie pothole region that voluntarily elect to be included, as was proposed in the Senate-passed bill. NSAC has strongly advocated for this important conservation provision to be applied nationwide.
  • Requires USDA to identify available data relevant to conservation practices and the effects of conservation adoption on crop yields, farm and ranch profitability, and soil health. The bill also requires USDA to then report to Congress on how they will provide secure access to that data to university researchers. The ultimate goal is to foster research that can help create a stronger interface between crop insurance risk rating and premiums and conservation.
    • The Senate-passed bill would have directly created a secure data warehouse within USDA that could be accessed by researchers, and directed RMA to work with other agencies to conduct new research on yield variability and risk as impacted by conservation practices. Hopefully, this compromise will allow USDA to achieve the same goal after studying the matter for the next year.
  • Rejects in large-part the House bill’s provision to deny commodity program benefits to farmers who choose to plant alternative crops, or who choose to convert a portion of their former cropland to grass-based agriculture. That provision would have unfairly reduced planting and enterprise flexibility and encouraged unsustainable practices. However, the final bill does deny program benefits to those farms that for a period of at least 10 years have converted the entirety of the previous cropped acreage to grass-based agriculture. For those farms, a one-time opportunity was provided for them to enroll in the Conservation Stewardship Program.

Lowlights

  • Rejects the Senate-passed bill provision to encourage Performance-Based Insurance Premium Discounts for adoption of advanced conservation systems.
  • Includes a major new payment limit loophole to provide the largest commodity farms in the country with a way to avoid the statutory limit of $250,000 a year on commodity subsidies.
  • The House bill proposed two major new loopholes, one for corporations and one for extended family members, which would both would nullify the payment limit. The final bill incorporates the second of the two proposed loopholes, and rejects the Senate-passed bill’s provision to reform payment limit law so that the statutory limit is actually the effective limit.
    • Cousins, nieces, and nephews of the farm owner (not just immediate family members) are made eligible for payments through this new loophole. This means that the number of multiplications of the statutory limitation is limited only by the size of the extended family.
    • USDA could easily restrict this obscene fraud or even negate it by closing loopholes that the Department itself has created administratively, but it remains to be seen if they will. History suggests that the Department will keep the spigot open and allow extreme program abuse to continue. If so, it will be to the long-term detriment of family farmers, dampening new opportunities for aspiring producers and negatively impacting the health and well being of rural communities.
  • Removes marketing loan gains and loan deficiency payments from payment limits altogether.
  • Fails to include the Senate-passed provision to reduce the commodity program eligibility threshold from people with less than $900,000 a year in adjusted gross income (at least twice that for most married couples) to $700,000 a year.

Other Provisions

Elsewhere in the commodity title, the new bill:

  • Allows farmers to switch between the two major programs – Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) – on an annual basis rather than once a farm bill cycle.
  • Provides for an increase in PLC reference prices when commodity prices improve.
  • Allows for all program participants in certain circumstances to update their yields that help determine payment levels certain circumstances. 
  • Increases the marketing loan price level for nearly all commodities.

Categories: Commodity, Crop Insurance & Credit Programs, Farm Bill


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