Provisions to Watch During Farm Bill Debate
The Senate and the House have passed their respective versions of the 2018 farm bill. The Senate passed its bill by a vote of 86-11 on June 28, 2018, and the House passed its more partisan bill by a vote of 213 – 211 on June 21. Now, the debate moves to conference committee, where significant differences between the bills must be resolved. It is not clear how long this process may take. Although the Senate cancelled its usual August recess, the House will adjourn, and Congress has a tough fall schedule with mid-year elections fast approaching. The 2014 farm bill expires at the end of this year.
Each bill contains hundreds of pages of provisions, but the following summarizes key provisions of interest for agricultural producers. Watch for changes and more details as the debate unfolds.
The Senate bill would not change overall spending for conservation programs as a whole. It would modestly increase CRP acres from 24 million to 25 million, with the increase funded by limiting payments to 88.5 percent of average county rental rates. The program would prioritize the enrollment of marginal and environmentally sensitive land, as well as land that would have a “positive impact” on water quality. An adopted amendment to the bill would allow landowners to graze livestock on their CRP ground, in exchange for a 25 percent reduction in CRP payments. The amendment would also allow vegetative cover to be mechanically harvested every three years (or one third-per year) in exchange for a 25 percent reduction in payments for the acres harvested.
The Senate bill would authorize the USDA to purchase conservation reserve easements, which would permanently retire land from farming status. Conservation reserve easement acres would not count toward the standard CRP acreage limitation. Land subject to a conservation reserve easement could likely continue to be used for hunting and fishing, periodic haying or grazing, and managed timber harvest. Any such uses would be subject to a USDA conservation plan developed for the land. USDA would make cash payments to landowners, based upon the fair market value of the land. Landowners would have the choice of a one-time payment or 10 annual payments. The Senate bill would also decrease funding for the Conservation Stewardship Program (CSP) and the Environmental Quality Incentives Program (EQIP), and increase funding for the Agricultural Conservation Easement Program (ACEP) and the Regional Conservation Partnership Program (RCPP). Thirty percent of RCPP funding would be administered through grants administered by project sponsors. An amendment to the Senate bill would create a new Soil Health and Income Protection Program (SHIPP), which would pay producers half of the CRP rental rate in exchange for not planting up to 15 percent of their marginal acres. Such contracts would be negotiated for three to five years.
The House Bill would reduce overall conservation spending by $795 million over 10 years according to the CBO. It would increase the CRP acreage cap by one million for each year through 2029, when acres would be capped at 29 million. The costs of the increase in acreage would be funded by a reduction in payments to 80 percent of the average county rental rates. Reenrolled acres would be subject to even lower rates.
The House bill would eliminate the CSP program and increase funding for EQIP. This would reduce money for “working land” conservation and shift remaining funds to cost-share programs. Current CSP contracts would continue until they expire. These changes would reduce conservation spending by around $5 billion over 10 years. EQIP would include a new stewardship contracting option, which would feature 5 to 10-year contracts.
The Senate bill would reduce the adjusted gross income limit from $900,000 to $700,000. It would retain the current $125,000 payment cap for individuals. An adopted amendment from Senator Grassley would restrict the number of non-farming managers eligible to receive farm program payments to one. To qualify for a program payment, the active manager would have to provide at least 500 hours of management for the farm each year or provide at least 25 percent of the total management hours required for the operation.
The House bill takes a much different approach. It would exempt “qualified pass through entities” (including partnerships, LLCs not taxed as C corporations, S corporations, and joint ventures) from the adjusted gross income limit and from payment limits. The House bill would also add “first cousin, niece, and nephew” to the list of family members that may be added to a farming operation and increase the number of persons to which the payment limit could be applied. In other words, family members added to the operation would receive a separate $125,000 payment limit. The House bill would also not apply the payment limit or AGI limit to marketing assistance loans or loan deficiency payments. These limits would apply only to commodity payments.
The Senate bill would reauthorize Price Loss Coverage (PLC), Agriculture Risk Coverage County (ARC-co), and Agriculture Risk Coverage Individual (ARC-i). Producers would 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 election is made, the Senate bill provides that coverage would be waived for the 2019 crop year and the producer would default to ARC-co for the 2020 through 2023 crop years. This would be a change from the 2014 Farm Bill, which defaulted to PLC. Under the Senate bill, payments under ARC programs would be based on the physical location of the farm, and the transitional yield would increase to 75 percent (from 70 percent). The yield would be trend-adjusted. An adopted amendment would grant producers the flexibility to make a one-time irrevocable election to change their commodity program in the 2021 crop year for crop years through 2023. The USDA would 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.
The Senate bill would replace “Margin Protection Program” with “Dairy Risk Coverage” through 2023. Participating dairy operations would be paid when actual dairy production margins are less than threshold levels for the dairy risk coverage payment. The Dairy risk Coverage program would add margin coverage levels of $8.50/cwt. and $9.00/cwt., and eliminate the 25 percent minimum production coverage requirement. It would also allow producers to select catastrophic coverage (for a $100 administrative fee), which would cover a $5.00 margin and a coverage level of 40 percent of production history.
The CBO estimates that the Senate bill would reduce spending on commodity programs by $400 million during a ten-year period.
The House bill would increase funding for PLC, decrease funding for ARC-co, and eliminate ARC-I altogether. Under the House bill, the PLC reference price could adjust as markets improve. As in the 2014 farm bill, PLC would be the default option for producers who do not make an election. County payments would be based on RMA data. The House bill would also rename the Margin Protection Program the Dairy Risk Management program. Few changes would be made the program.
The CBO report estimates that the House bill would increase spending on commodity programs by $193 million over 10 years.
The Senate bill passed by such an overwhelming measure because it did not seek to implement reforms to the Supplemental Nutrition Assistance Program (SNAP).
The House bill, on the other hand, passed very narrowly because it included new work requirements for SNAP recipients. To receive SNAP benefits, adults with no children under the age of six, including workers through the age of 60, would have to prove each month that they worked or participated in a work program for at least 20 hours each week or qualified for an exemption.
The Senate bill did not adopt amendments that would have restricted producers’ eligibility for crop insurance subsidies. And neither the House bill nor the Senate bill would appear to reduce crop insurance benefits.
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