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2014 Farm Bill Drill Down: Conservation – Crop Insurance Linkages

February 10, 2014

With the 2014 Farm Bill recently signed into law, NSAC is doing a blog series that delves into the details of the bill for sustainable food and farming systems.  Our coverage of the conservation title is divided into three parts: working lands conservation programs; this one on the linkage between conservation and crop insurance; and easement, land retirement, and energy programsPrevious posts in this farm bill series dove into the overall farm bill by the numbers and beginning and socially disadvantaged farmer issues.

Privately owned crop, pasture, and rangeland together account for roughly half of the landmass of the lower 48 states, with private forestlands making up another 20 percent.  In addition to providing food and fiber, farmers and ranchers are in a unique position to help provide healthy soils, clean water, habitat for native wildlife, renewable energy sources, and other conservation benefits.

Since 1985, the farm bill has represented our nation’s commitment to helping farmers conserve natural resources through public investments in conservation programs on agricultural and forested lands.  The 2014 Farm Bill Conservation Title in large part renews this commitment, but for the first time since 1985 the new farm bill takes a step backward by reducing overall funding for conservation programs.

The final bill cuts Conservation Title funding by roughly $4 billion over ten years directly, and that number increases to $6.1 billion under the upcoming automatic cuts to conservation under the sequestration process that was not changed or modified by the farm bill.

On the plus side, the new bill for the first time ever makes wetland and grassland easement funding permanent, meaning there will not be a need to find new funding for it when the next farm bill is taken up.  In addition, conservation funding “no-year” money, meaning that any mandatory funds not used in a particular year will remain within the Title for later use, rather than being sent back to the Treasury.  The bill also reduces the eligibility limit for farm bill conservation programs to $900,000 ($1.8 million for married couples filing separately) while removing both the previous distinctions between farm and non-farm sources of income and the possibility of a waiver.

Unlike the Conservation Title, the Energy Title stayed out of the red, and will receive $879 million in new money over ten years to invest in renewable energy and energy efficiency programs on farms and in rural communities.  This sum almost exactly matches the amount for the energy title in the 2008 Farm Bill.

This post provides further details on how specific provisions linking conservation to crop insurance subsidies fared.

Conservation Compliance and Sodsaver

During this three-year farm bill effort, NSAC has worked to reduce the level of environmental degradation caused by federal crop insurance subsidies.  To accomplish this, we set two goals for the conservation section of the farm bill: first, to establish basic soil and wetland conservation requirements as a condition of receiving crop insurance premium subsidies; and second, to create a nationwide Sodsaver provision to limit subsidies on cropland that is converted from native grass.

Separately, in the subsidy provisions of the bill, we proposed phasing out the subsidy level as a function of volume of production over $1 million as well as creating a new program to eliminate the current crop insurance program barriers to agricultural diversification and sustainable practices.

Wins — The final 2014 Farm Bill reattaches soil and wetland conservation requirements (known as “conservation compliance”) to crop insurance premium subsidies, and establishes a Sodsaver provision to protect our remaining native grasslands.  As a result of these new provisions, millions of acres of environmentally sensitive lands, including grasslands and wetlands, will be protected in coming years.  Tens of millions of tons of soil will be retained on the land rather than being lost into our waterways.

For the first time since Congress severed the link between conservation and insurance subsidies in 1996, farmers who purchase subsidized crop insurance will have to develop conservation plans when they grow crops on land subject to high rates of erosion.  Recipients of crop insurance subsidies will also be prohibited from draining or filling wetlands, unless they mitigate those wetland losses.  Between 1996 and present day, these conservation requirements applied to commodity program payments, conservation program payments, and farm loan programs; however, they did not apply to what is now by far the largest farm subsidy program – federal crop insurance.

The 2014 Farm Bill also includes a Sodsaver provision to limit crop insurance subsidies on native grasslands that are converted to crop production.  The Sodsaver provision applies to six Midwestern and plains states—Montana, North Dakota, South Dakota, Minnesota, Iowa, and Nebraska—where some of the country’s native grassland remains.  Once the farm bill is enacted, a producer who plows native prairie for crop production in one of those six states will receive a 50-percentage-point crop insurance premium subsidy reduction.

Losses — Heading into farm bill conference, the Senate farm bill included a nationwide Sodsaver provision while the House bill included a regional Sodsaver provision.  The House version limited applicability to the Prairie Pothole Region (PPR), an area of the U.S. known for a certain type of wetland called a “pothole.”  The PPR includes a tiny sliver of Montana, roughly half of the Dakotas, and small portions of Minnesota and Iowa.  The bulk of the remaining native grassland in the country falls outside of the PPR, and would not have been covered by the House version of Sodsaver.

The good news is that the provision in the final farm bill covers the entirety of six states, including Nebraska, which lost more non-cropland than any other state in 2012.  The bad news is that it does not cover the entire country.  Among other places, it leaves out several critical prairie states, including the Dust Bowl states of Texas, Oklahoma, Kansas, and Colorado.  Besides the obvious inequities resulting from a rule that applies to producers in only certain states, the final Sodsaver outcome appears to be rolling the dice and placing taxpayer money on the bet that history will not repeat itself in the southern Plains.

As with Sodsaver, the linkage of conservation compliance to crop insurance subsidies is a major step forward for conservation.  Federal crop insurance is by far the largest piece of the farm safety net, and is expected to become more predominant over time.  This win ensures that wetland and soil conservation continues as the farm safety net grows and transforms.

The new compliance requirements for crop insurance subsidies, however, differ from existing compliance requirements for commodity, loan, and other farm bill programs in several problematic ways.

First, the bill provides $10 million for wetland banking so that producers who drain and fill wetlands can buy credits to partially mitigate environmental degradation.  The final conference report language, though not the statutory language, directs USDA to limit mitigation to a 1-to-1 acreage ratio (one acre drained to one acre mitigated) rather than directing USDA to ensure that overall net environmental benefits are not lost.

This is problematic because the environmental benefits of natural wetlands often exceed those of constructed wetlands.  Thus, one acre of natural wetlands does not have the same value as one acre of mitigated wetlands.  Moreover, wetland mitigation efforts, especially wetland creation, often simply do not work.  The statutory language remains focused on total benefits and values, however, so hopefully USDA will follow normal rules and ignore the directly contradictory report language.

Second, the bill grandfathers in producers who destroyed wetlands prior to passage of the farm bill.  Those producers will be able to receive crop insurance subsidies without having to mitigate prior actions taken to drain or fill wetlands.

Third, producers who receive federally subsidized crop insurance are required to self-certify that they are in compliance.  The bill states that if USDA does not review a certification in a “timely manner,” the producer must be held harmless even if found to be out of compliance.  The problem is that the farm bill does not define “timely manner,” and thus risks creating a major loophole through which producers can destroy wetlands without losing their eligibility for crop insurance subsidies.  USDA will need to provide a strong rule to implement this provision or risk spending years in litigation.

Finally, the bill does nothing to fix the problem of insufficient funding for investigation and enforcement of the conservation requirements.  The current very low rate of spot checks and great regional disparity in enforcement will likely therefore continue, calling into question the fairness and efficacy of the entire program.  Not taking care of this funding problem was a very significant missed opportunity.

With respect to the larger issues of the impact of growing expenditures and reliance on crop insurance premium subsidies on the structure of agriculture and agriculture’s impact on the environment, there was good news and bad news.

The good news is that several steps were taken to improve access to crop insurance for sustainable and organic farming systems.  The bill itself does not ensure they will be implemented or be adequate for the task at hand – that will be up to USDA.  But the bill does get the ball rolling.

The bad news is the bill contains no subsidy reform at all, not even a Senate-passed provision that would have modestly reduced insurance premium subsidies for millionaires and multimillionaires.  Combined with the absence of effective payment caps in the commodity title of the bill, this lack of subsidy reform is the new farm bill’s greatest failing.

Categories: Commodity, Crop Insurance & Credit Programs, Conservation, Energy & Environment, Farm Bill

3 responses to “2014 Farm Bill Drill Down: Conservation – Crop Insurance Linkages”

  1. […] The recent 2014 Farm Bill represents some wins and losses in the area of conservation of working lands. One of the wins is a renewed requirement to link conservation practices to crop insurance subsidies. Find out more about how this works and some of the good and bad about these significant policy changes: 2014 Farm Bill Drill Down: Conservation – Crop Insurance Linkages – NSAC. […]

  2. […] Triple-Header: Working Lands, Crop Insurance Linkages, and Easements, CRP, and […]

  3. […] Farm Bill shifted much of its direct payment program to crop insurance subsidies. The good news, environmentalists say, is that for the first time in nearly two decades, the bill requires farmers to come up with a […]