Congress Sends 2018 Farm Bill to President
President Trump signed the 2018 Farm Bill into law on December 20, 2018.
The Agricultural Improvement Act of 2018, generally referred to as the 2018 Farm Bill, cleared Congress this week and has now been sent to the President for an expected signature. The final bill stems from the work of a conference committee convened to reconcile differences between Senate and House versions passed earlier this year. The final bill is a compromise, prompted by the need to implement programs to assist farmers struggling with market and price uncertainties. Generally the bill veers little from status quo. The conference committee eliminated provisions that would not gain bipartisan support, including stricter work requirement for SNAP recipients. The Senate passed the final bill by a margin of 87 – 13 on December 11. The House followed suit on December 12, by a margin of 286-47. More than 75 percent of the $867 billion price tag over a 10-year period funds the SNAP program. Following is a summary of key agricultural provisions from the 807-page bill.
The bill reauthorizes Price Loss Coverage (PLC), Agriculture Risk Coverage County (ARC-co), and Agriculture Risk Coverage Individual (ARC-i). Producers must make a new five-year election (2019-2023) to obtain PLC or ARC-co on a commodity-by-commodity basis or ARC-i for all commodities. If no unanimous election is made, coverage is waived for the 2019 crop year and producers are deemed to have elected the same coverage for each covered commodity on the farm for the 2020 through 2023 crop years as they did for the 2015 through 2018 crop years.
The bill amends the minimum 10 base acre test for PLC or ARC payments to provide an exception for producers who collectively have more than 10 base acres across all farms The bill also adds beginning and veteran farmers or ranchers to the current law exception for socially disadvantaged farmers from the minimum 10 base acre test for ARC or PLC.
If all crop land on a farm was planted to grass or pasture from 2009 through 2017, base acres will continue, but PLC or ARC payments will not be made. These farms may participate in a five-year grassland incentive contract under the Conservation Stewardship Program (CSP), with a payment rate of $18 per acre.
The bill allows producers to change program elections to PLC or ARC each year, beginning with crop year 2021. This is a discretionary option. Producers who do not opt for a change will not be required to reaffirm previous elections.
The bill reauthorizes the PLC program, which generally continues to provide assistance to producers when the market price for a covered commodity falls below a statutory reference price. The bill sets the PLC payment rate as the difference between the “effective reference price” (a new term) and the effective price. This allows for potential increases in reference prices as market conditions improve. The “effective reference price” is the lesser of:
- 115 percent of the reference price OR
- The greater of:
- 85 percent of the Olympic average of the five most recent marketing year average crop prices or
- The reference price
The reference price for corn is $3.70 and for soybeans is $8.40. The maximum effective reference price for these commodities is $4.26 and $9.66 respectively. Within 30 days after the end of each applicable 12-month marketing year for each covered commodity, the Secretary must publish the payment rate.
The bill also gives all farms in the country a one-time opportunity to update the payment yield that would otherwise be used in calculating any PLC payment for each covered commodity on the farm, based upon a statutory formula, to be in effect beginning with the 2020 crop year.
The bill reauthorizes both the ARC-co and ARC-i programs, which generally continue to provide payments to producers when actual crop revenue falls below 86 percent of benchmark revenue. Under the bill, payments under ARC programs would be based on the payment rate of the county where the base acres are physically located. The transitional yield plug would also increase to 80 percent (from 70 percent). The yield would be trend-adjusted, and the “effective reference price” (defined above) would be used to calculate the benchmark revenue (guarantee). Other ARC provisions include the following:
- The bill separates irrigated and non-irrigated yields that would be calculated for each county, and RMA data would be prioritized in calculating guarantee and actual yields.
- When actual yields drop below 80 percent of the transition yield for the county, FSA will consult with the RMA to ensure that the transitional yield used is current and reflective of recent yields within the county.
- When a farm has a tract with base acres that cross a county boundary, FSA will prorate the base acres based upon the quality of cropland of the tract in each county. ARC-County payments will be calculated on that basis.
- The bill requires the USDA to publish the payment rate for each county no later than 30 days after the end of each 12-month marketing year for each covered commodity.
Largely due to the severe economic downturn impacting the dairy industry, more significant changes were made to the dairy program. The bill replaces the name “Margin Protection Program” with “Dairy Margin Coverage” (DMC).
Because Congress recognized that the prior margin protection program (MPP) did little to help dairy producers, the bill allows producers the opportunity to use 75 percent of net premiums paid for the margin protection program from 2014-2017 as a credit for future DMC premiums. Producers can alternatively choose to receive 50 percent of the net premium as a direct refund.
Under the bill, participating dairy operations would be paid when actual dairy production margins are less than threshold levels for the dairy risk coverage payment. The DMC would add margin coverage levels of $8.50/cwt., $9.00/cwt., and $9.50/cwt. for the first 5 million pounds of covered milk production. Premium rates would thus range from $4.00/cwt. to $9.50/cwt. for Tier I and from $4.00/cwt. to $8.00/cwt. for Tier II. Producers with covered production greater than 5 million pounds could enroll in coverage levels of $8.50/cwt., $9.00/cwt., and $9.50/cwt. under Tier I and make a separate coverage election under Tier II. The bill would also allow producers to expand their range of production to be covered, from 5 percent up to 95 percent of production history. Premiums for $5.00 coverage in Tier II are generally reduced by 88 percent in an effort to make catastrophic coverage more affordable.
Producers who lock in a five-year coverage level and coverage percentage will receive a 25 percent reduction in premium rates.
The bill also attempts to ensure a more efficient sign-up process for dairy operations with multiple owners. The bill allows a multi-producer operation to elect to exclude from registration under the DMC one or more individual owners, where they individually own less than five percent of the operation or are entitled to less than five percent of income. Coverage will be allowed, even when every owner does not participate. Those participating will be treated as a single operation. Premiums due and payments made will be adjusted downward to reflect the proportion of owners not participating. This will not, however allow participating dairy operations to reduce production history to impact eligibility for Tier I or Tier II premiums.
Nonrecourse marketing assistance loans are extended through 2023. The bill also increases the loan rates for many commodities pledged via a marketing loan to more accurately reflect market prices. The loan rate for corn, for example, increases from $1.95/bushel to $2.20/bushel and for soybeans from $5.00/bushel to $6.20/bushel.
The bill also authorizes FSA to increase guaranteed loan limits from $1,399,000 to $1,750,000, direct operating loans from $300,000 to $400,000, and direct farm ownership loans to $600,000.
The bill retains the current payment limitation of $125,000 per person or entity for all ARC or PLC payments. A separate limit applies to peanuts. The bill also continues to limit participation to those persons or entities with less than $900,000 of adjusted gross income. Loan deficiency payments and marketing loan gains do not count toward the payment limitation. Corporations and LLCs remain subject to these limitations.
Actively Engaged in Farming Requirement
To be eligible for farm program payments, participants must continue to meet requirements concerning “active participation” in the farming activity. Beginning in 2014, limits were placed on the number of non-family members that could qualify as farm managers for payment purposes. No such limits apply for qualifying family members. The bill expands the definition of family members to whom these exceptions apply. It now includes first cousins, nieces, and nephews. The bill does not include proposed provisions to restrict the number of non-farming managers to one and to impose a 500 hour/year requirement to qualify for active engagement.
The bill increases Conservation Reserve Program (CRP) enrollment from 24 million to 27 million acres by 2023. This includes 8.6 million acres devoted to continuous practices and two million acres devoted to grasslands. Contract lengths will be between 10 and 15 years, after which most land will be eligible for reenrollment. Payments for general and continuous enrollment contracts are limited to 85 percent and 90 percent, respectively, of the county average rental rates. USDA is directed to use average rental rates reflective of local rental rates. These provisions were put in place to prevent competition with local farmland rental markets.
The bill continues the environmental quality incentives program (EQIP) for working lands and increases funding to $2.025 billion through 2023. The bill authorizes conservation innovation grants, conservation innovation trials, and soil health pilot projects.
The bill continues the conservation stewardship program (CSP) for working lands but reduces funding from $1.8 billion to no more than $1 billion per year. Current contracts will be honored, with one-year extension options allowed for contracts expiring in 2019.
The bill restores funding for the agricultural conservation easement program (ACEP) to $450 million per year.
The bill reserves 10 percent of conservation funding for the protection of drinking water.
The bill provides $300 million of yearly funding to fund targeted conservation initiatives through the Regional Conservation Partnership Program (RCPP). The program will been streamlined and the funds awarded through a competitive, merit-based application process at the local level, in partnership with private organizations.
The bill provides $500 million over 10 years for conservation infrastructure initiatives like water and flood prevention and small watershed rehabilitation.
The bill retains the existing structure for the crop insurance program. Beginning farms can now receive a discount for their whole farm revenue protection premiums for 10 years instead of five. The bill also makes industrial hemp eligible for crop insurance and directs the FCIC to develop policies regarding this change.
The bill legalizes the production of hemp as an agricultural commodity and removes it from the list of controlled substances.
The bill provides funding for many other programs, including the following:
- Reestablishing farm and ranch stress assistance network
- Combatting rural health emergencies
- Reserving funds to tackle opioid crisis
- Working to extend access to rural broadband networks
- Promoting community economic development programs
- Improving the National Organic Program and National Organic Standards Board
The Center for Agricultural Law and Taxation does not provide legal advice. Any information provided on this website is not intended to be a substitute for legal services from a competent professional. The Center's work is supported by fee-based seminars and generous private gifts. Any opinions, findings, conclusions or recommendations expressed in the material contained on this website do not necessarily reflect the views of Iowa State University.