The Venn diagram shows the number of farms and farm acres that received conservation payments, direct commodity payments, and crop insurance in 2010, where those groups do and do not overlap, and to which groups conservation compliance requirements would apply if the Farm Bill eliminated direct payments or reattached compliance to crop insurance.

The ERS diagram speaks to an increasingly worrisome problem associated with the provision of federally subsidized crop insurance and the likely elimination of direct payments in the next Farm Bill.  Basic conservation requirements to protect against soil erosion and wetland drainage have been a condition of receiving farm subsidies since 1985.  This conservation compliance has dramatically reduced soil erosion on farmland and protected wetlands, keeping land productive and natural resources intact.  Since 1996, however, these requirements have not applied to subsidized crop insurance.

Most of the farmers that are today enrolled in the crop insurance program are also enrolled in the direct payment program, the disaster assistance program, or the conservation programs and are therefore subject to conservation compliance.  There are farms, however, that are enrolled only in crop insurance and are therefore not currently subject to basic compliance.  If direct payments were to be eliminated, this number would certainly increase.  It is therefore exceedingly important that the next Farm Bill attaches basic conservation compliance provisions to both federally subsidized crop insurance and whatever replaces direct payments in the Commodity Title.

According to the ERS diagram, 33 million acres of cropland that were enrolled in the direct payment program but not in the conservation programs or the corp insurance program in 2010 would no longer be subject to compliance requirements if the direct payment program was eliminated.  Roughly 17 million acres of cropland were enrolled in the crop insurance program but not in the direct payment program or the conservation programs in 2010.  A portion of these acres would be subject to conservation compliance for the first time (or for some farmers, for the first time since 1996) if compliance requirements were reattached to crop insurance.

This new diagram is a very important contribution by ERS and helps clarify who would be subject to compliance requirements under various circumstances.  However, it is worth pointing out that there are a number of significant challenges and limitations when using enrollment and compliance data.  First, this data is from 2010 and do not reflect the current distribution of enrollments between crop insurance and direct payments; second, the data do not delineate which acres include highly erodible land or wetlands; and third, the data includes acres that are planted to non-annually tilled crops such as fruit trees or permanent sod, which are not subject to compliance requirements.

Due to these last two reasons, the number of acres that would be subject to compliance requirements for the first time if these requirements were reattached to crop insurance would likely be significantly smaller than the 17 million acres displayed in the diagram.

Today, in 2012, the Federal Crop Insurance program is the most dominant means of taxpayer support to agricultural producers, whether measured in total amount of taxpayer-provided subsidies, program participation rates, or geographical scope.  While direct payments may be eliminated in the next farm bill and while basic soil erosion prevention and wetland protection requirements should be attached to whatever program or programs replace direct payments, it is important to remain cognizant of the fact that federally subsidized crop insurance has become the centerpiece of the farm safety net.

Moreover, the subsidized risk reduction provided by crop insurance has the potential perverse effect of encouraging producer’s to expand production without consideration for cumulative effects (e.g. increased soil erosion, or loss of wetlands and their functions) or even land productivity.  A risk management program should not itself heighten risk, especially not with taxpayer’s money.

Whether or not direct payments are eliminated, and regardless or precisely what they may be replaced with, it is increasingly clear that the 2012 Farm Bill must reattach the Federal Crop Insurance program to highly erodible land and wetland compliance provisions.

Due to the sheer number and complex combinations of farm safety net programs, many policymakers have become wary of overlap in producer support programs.  There are numerous federal programs that provide payments to farmers, which include commodity price and income support programs, as well as risk management programs such as crop insurance and disaster assistance.

These programs combined are typically what fall under the term “farm safety net” or “Title I Programs” (even though authorization for some of these programs do not actually fall under Title I of the farm bill).  Farm safety net programs have been an essential component of agricultural policies since the New Deal era, when the federal government first established price support systems to help farmers survive volatile markets and depressed prices during the Great Depression.

Because these farm safety net programs were established over time throughout successive farm bills and other legislation, there has been criticism about potential duplication in coverage and payments within these programs, and concern that actual payments to farmers may exceed actual crop production losses.

With recent farm bill discussions focused on eliminating direct payments altogether, this report chose to focus primarily on the potential for overlap within the following risk management and income support programs:

• Average Crop Revenue Election (ACRE) which is an alternative revenue-based safety net to the price-based safety net provided by counter-cyclical payments
• Supplemental Revenue Assistance Payments (SURE) which supplements crop insurance by providing financial assistance at the whole farm level for crop production losses due to natural disasters
• Crop revenue insurance (i.e. AGR, AGR-lite) which protects against low revenue due to unavoidable natural disasters and market fluctuations

The report lays the conceptual groundwork for assessing potential program duplication by identifying patterns of farm program participation.

Some of the key findings from the report include:

• Because federal farm program designs and purposes vary, producers can be expected to participate in multiple programs on the same farm, depending on factors like the number and types of commodities the farmer produces (or has historically produced) and current market/production conditions.
• Many risk management programs are designed to preclude overt duplication.  However, overlap among them may occur because different programs may protect producers from similar risks at different points in time or under several different risk scenarios.
• Because both ACRE and SURE insure revenues, the potential exists for them to interact with each other and with crop (revenue) insurance products to generate overlapping support within the farm safety net.
• Occasionally there appears to be evidence of (1) overlap in support that actually duplicates coverage for the same losses and (2) support from multiple programs that provides compensation beyond that intended in individual programs.

The ERS report takes a careful look at the overlap issues, but not at targeting.  NSAC and its allies have long advocated for fairness and reform in the farm safety net programs, including placing reasonable income limits on producers eligible to receive farm payments, and requiring that payment recipients are actively engaged in the day to day farming operations.  These important NSAC priorities are included in the Rural America Preservation Act of 2011, which was introduced in the Senate by Sens. Chuck Grassley (R-IA) and Tim Johnson (D-SD).  We will be continue to press for inclusion of these reforms in any farm bill debates over the coming year.

NSAC has also been working with allies and champions in Congress to develop a whole farm revenue-based crop insurance program that works for diversified grain and grain-livestock operations and for specialty crop and local food producers.  To read more about this proposal, check out our page on the Local Farms, Food, and Jobs Act, which was introduced in the House by Rep. Chellie Pingree (D-ME-1) and in the Senate by Sen. Sherrod Brown (D-OH).

To read more about NSAC’s work on commodity payments reform, check out our Grassroots Guide.

In addition to improving organic crop insurance options, USDA plans to use the survey results to improve programs like the Environmental Quality Incentives Program for organic producers.  Additionally, USDA plans to use the results to evaluate whether to expand the Market Access Program to allow for more exports of organic products.  The survey results will also be used more generally to inform policies, funding allocations, and availability of services for organic growers.

Organic producers should be receiving the survey by mail and can respond by mail, internet, or phone, or by contacting a NASS representative.  To complete the survey online, producers should go to www.agcounts.usda.gov and enter the ID number printed on the mailing.  Responses are kept confidential.

To view USDA’s information sheet on the survey, click here.

Many farmers in these four states, and other states, have recognized the value of cover crops to protect soil, soak up excess nutrients to lessen water pollution, fix nitrogen, and increase soil organic matter.  Cover crops are also an important component of many organic cropping systems.  Farm Bill programs including the Conservation Stewardship Program and the Environmental Quality Incentives Program provide farmers with cost-share funding and technical assistance to establish cover crops.

The Risk Management Agency, however, has been on a long road to understanding the value of cover crops.  The starting point was RMA’s general assumption that cover crops have a negative impact on the yield of subsequent crops.  Farmers who allowed a cover crop to reach the headed or budded stage and/or harvested the cover crop could be ineligible for crop insurance on the subsequent crop.

In January 2011, the RMA Regional Office in Springfield Illinois issued a fact sheet modifying that position and establishing a process for farmers to request a Written Agreement to provide coverage for a crop planted after a cover crop by submitting a Request for Actuarial Change through a crop insurance agent.  The farmer had to provide in the request information that included evidence from agricultural experts that the crop to be insured can be grown using the cover crop practice and that the practice is used commercially to grow the subsequent crop and that there is a viable market for that crop.  A Written Agreement approved by the RMA had to include a rate, a transitional yield by crop for acreage farmed with the cover crop practice, and an understanding that the cover crop growth must be terminated by May 15 of the current crop year.

In Spring 2011, heavy rains pelted the Eastern corn belt and many farmers who had entered into Written Agreements could not get into their fields to terminate cover crops.  The RMA Regional Office extended the date for terminating a cover crop for corn and soybeans.

Over the summer, the RMA Regional Office entered into discussions about cover crops with farmers, agronomists, NGOs, the NRCS and others.  These discussions emphasized work done by organizations such as the Practical Farmers of Iowa and sustainable agriculture researchers at Midwest Land Grant Universities that has demonstrated the value of cover crop systems.

As a result of this work, the Springfield Regional Office announced a further easing of crop insurance restrictions in the 4-state region.  For 2012, RMA has modified the limitation so that crops planted following a cover crop are insurable as long as the cover crop is killed or harvested before June 5, without consideration of the stage reached by the crop.  The cover crop practice is defined as a crop planted within twelve months of planting the insurable crop that is recognized as a sound agronomic conservation practice for the area.

The draft bill aimed at Super Committee consideration has not been released, nor has an accurate detailed summary of its contents.  It appears that will remain the case.  We summarized some of the key ingredients in the draft bill for our readers last week.

There continues to be speculation about the possibility of attaching a farm bill, either the draft 2011 Stabenow-Lucas measure or a variation on it, to a resuscitated government-wide deficit-reduction measure or as an offset to another spending or tax cut measure, as an alternative to proceeding to a stand alone farm bill under a more regular legislative process.  The verdict for now is to head into the new year looking at a more normal farm bill process as the default setting but at the same time keeping options open as Congress grapples with larger spending, stimulus, tax, and deficit reduction measures.

Some policymakers have suggested starting all over next year from a clean slate.  That seems highly unlikely.  To the extent that sentiment is more than rhetoric, however, it appears to be aimed primarily at the commodity title of the bill, and there is little doubt that it was the most problematic aspect of the bill and will likely remain so.  There may be some hope that a return to more regular order, with the prospect of the amendment process in committee and on the floor, will tamp down some of the wilder elements in the draft commodity title.   For starters, perhaps, interest groups and Members will possibly think twice about provisions that would have distorted planting decisions and increased payment limits, knowing the difficulties they would face defending such propositions on the floor.

Another big area for changes, albeit one that has received little attention, are all the titles that were not at all fleshed out other than simple date-changing re-authorizations in the rush to complete a bill in time for Super Committee consideration.  These include among others the credit, rural development, research, and trade titles.  There are both funding issues and policy issues to be faced in all of these titles.  Though they do not generally receive the same attention as the big money titles (nutrition, crop insurance, commodities, and conservation), there is major policy work to be done that by and large was not attended to in the hurry-up 2011 draft bill.  Even in some of the big money titles there is more work to be done on the policy front than there was time for in 2011.

The new fiscal reality facing the 2012 Farm Bill is the automatic cuts to government spending that will trigger in January 2013 as a result of the Super Committee’s inaction.  There continues to be lots of talk about possible ways sequestration, as the automatic cuts are know, might be un-triggered, either yet this year in some mega-negotiation over the remaining FY 2012 government funding bills and big ticket items like payroll tax cuts, alternative minimum tax rules, and Medicare payments to doctors, or next year as part of a new try at a deficit reduction deal.  As of now, however, the betting line would still favor sequestration hitting in 2013.

If that betting line holds, any farm bill written next year will have to assume sequestration will in fact take effect.  The biggest loser in that scenario is the crop insurance program, the largest of the farm subsidies.  It is also one of the more perplexing items in the farm bill-sequestration interface.  Crop insurance policy changes to meet the sequestration budget cut target will be determined by the Administration and will be formulated at the same time that the Agriculture Committees will be trying to write crop insurance provisions for the new farm bill.  That dual and possibly conflicting process might in turn lead to some intriguing negotiations.

As we discussed in an earlier blog, there are many possible scenarios under which a farm bill gets finished next year and others in which it is not completed until 2013.  It may be months yet before the ultimate path to the new farm bill becomes clear.  Our position will remain to work for a new farm bill that addresses the pressing needs for programs and policies that promote a more sustainable farm and food system and to get that new bill completed on schedule in 2012.

Also on the website are a list of Tax Topic fact sheets, a sample 2009 tax return, a list of related links, and a brief history of the National Farm Income Tax Extension Committee.

USDA’s Risk Management Agency (RMA) funded the project and Extension agents and professors from 15 universities have contributed to its development.  Participating universities include Virginia Polytechnic Institute and State University, University of Wisconsin-Madison, Oklahoma State University, North Carolina State University, University of Illinois, University of Vermont, University of Georgia, The Ohio State University, Iowa State University, Purdue University, University of Kentucky, University of Arizona, and Colorado State University.

For additional information about farm perspectives on federal taxes, visit the USDA Economic Research Service briefing page on Farm Household Economics and Well-Being: Federal Taxes and Households.

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.

The petitions, filed in 1999 and 2005, urge the FDA to withdraw the approvals for antibiotics given to animals in feed or water for purposes other than disease treatment if the antibiotics are also used in human medicine.  The petitions were filed by Environmental Defense, Center for Science in the Public Interest, Food Animal Concerns Trust, Union of Concerned Scientists and other groups because evidence shows that use of antibiotics for non-therapeutic purposes in livestock production can lead antibiotic resistance within human populations.  The groups argue that these antimicrobial drugs shouldn’t be used for growth promotion and disease prevention, but rather for treating diagnosed illnesses.

The response to these long-standing citizen petitions came after several of the petitioners filed suit in May against the FDA for not responding.  In its response to the petitions, the agency expressed shared concern with the public and the need to address this issue, yet proceeded to deny the petitions on the basis of statutory hurdles such as a notice to the drug maker and an evidentiary hearing on the matter.  It argues that taking these drugs off the market would simply be too expensive, resource intensive, and cumbersome: “The agency’s experience with contested, formal withdrawal proceedings is that the process can consume extensive periods of time and agency resources.”

Instead, FDA is “currently pursuing other alternatives to address the issue of antimicrobial resistance related to the production use of antimicrobials in animal agriculture.”  The proposed alternative is collaborating with the pharmaceutical companies that produce these antibiotics to voluntarily take them off the market for animal feed.

As expected, consumer and public health interests are not pleased by this alternative proposal.

“Instead of adhering to its mission to protect consumers, the FDA is waiting for the drug companies to voluntarily do what the Agency is legally mandated to do.  There is absolutely no reason to believe that drug companies will voluntarily reduce sales of antibiotics and act against their own financial self-interest.  Without reductions in antibiotics used it is impossible for there to be any public health benefit.” said Steven Roach, Public Health Program Director of Food Animal Concerns Trust (FACT).  “For this reason we do not see the FDA’s plan as an answer to the petitions or the problem of antibiotic resistance.”

FACT’s Executive Director Richard Wood declared that, “reducing antibiotic overuse is essential for making sure antibiotics will keep working for years to come – to treat our sick children, families and animals.  It is outrageous that the FDA considers voluntary self-regulation by drug companies to be enough.  It is clearly not.”

There are four Regional Risk Management Education Centers across the country (Western, Northeast, North Central, and Southern) that were established with funding from USDA’s National Institute of Food and Agriculture (NIFA). Since 2001, NIFA has partnered with these Regional Centers to address the risk management educational needs of agricultural producers within their regions, primarily through this competitive grants program.  The purpose of projects funded under this program is to educate agricultural producers about the full range of risk management activities including futures, options, agricultural trade options, crop insurance, cash forward contracting, debt reduction, production diversification, farm resources risk reduction, and other risk management strategies.

Qualified groups, organizations, and institutions with a demonstrated capacity to develop, carry out, and manage educational projects that deliver targeted risk management results for agricultural producers and their families are eligible to apply for funding from this program.

Groups interested in applying for funding, should go to the website for the appropriate Regional Risk Management Center in order to view the 2012 RFA, and to access the online application for funding.

Proposals are due on Thursday December 8th, 2011 at 5:00 PM PST.

For more information on the program, click here.

The purpose of these cooperative partnership agreements is to deliver crop insurance education and risk management training to U.S. agricultural producers to assist them in identifying and managing production, marketing, legal, financial and human risk, including States where there is a low level of crop insurance participation and availability.

These two programs give priority to partnerships that provide education and outreach to specialty crop producers (who are not currently insured under Federal crop insurance); underserved commodities (such as livestock and forage); and limited resource, socially disadvantaged and other traditionally underserved farmers and ranchers.

Many of the organizations that received grants from these RMA partnership programs offer risk management education to underserved producers and focus on crop diversification, farm viability, and place an emphasis on sustainably grown products.  Of the 104 grants awarded this year, 21 went to NSAC member organizations, including:

• Agriculture and Land-Based Training Association (Salinas, CA) – to prepare socially disadvantaged and beginning farmers to confidently manage sources of regulatory and legal risk
• Center for Rural Affairs (Lyons, NE) – to help 100 veterans gain knowledge about managing farm and ranch startup strategies and managing business risk
• Kansas Rural Center (Whiting, KS) – to fund a sustainable agriculture risk management strategies conference
• Land Stewardship Project (Minneapolis, MN) – to train beginning, immigrant, women and existing farmers seeking to diversify their enterprise at the whole farm or field level
• Michigan Food and Farming Systems (East Lansing, MI) – to improve and expand African American and Hispanic producers’ strategies to reduce risk on their specialty crop family farms
• Midwest Organic and Sustainable Education Services (Spring Valley, WI) – to provide information and resources on sustainable farm management to new farmers, women farmers, and young farmers
• National Center for Appropriate Technology (Butte, MT and nationwide) – to deliver a risk-management training series for small-acreage specialty crop and livestock producers in various regions of the country, train women and Hispanic farmers and ranchers in Oklahoma, and do pastured poultry training in California;
• Northwest Center for Alternatives to Pesticides (Eugene, OR) - to do risk management education at specialty crop producer conferences in Idaho
• Northeast Organic Farming Association of New York (Rochester, NY) – to deliver on-farming training to farmers in NYS
• Southern Sustainable Agriculture Working Group (Fayetteville, AR) – to provide risk management education on direct marketing strategies for producers of specialty horticultural crops and/or livestock in various areas of the South
• Wallace Center at Winrock International (Arlington, VA) – to educate producers about new business enterprise models for local and regional markets

NSAC will be advocating for increased funding for this important program that serves beginning and socially disadvantaged farmers and ranchers across the country in the upcoming farm bill debates.  NSAC has worked with champions in Congress to incorporate provisions into The Beginning Farmer and Rancher Opportunity Act of 2011 [HR 3236] that, if rolled into the farm bill, would expand and strengthen risk management education programs and place a particular emphasis on beginning farmers.  To learn more about the bill, click here.

To learn more about RMA’s Risk Management Education and Outreach Programs, click here.

For a complete list of awards, click here.