A closer look at the new farm bill's commodity title
After weeks of predicting that a new farm bill, might happen this year, we now have a final product that's ready to be rolled out next year. The Agricultural Improvement Act of 2018 was quickly passed by the U.S. Senate, 87-13, and the House of R...
After weeks of predicting that a new farm bill, might happen this year, we now have a final product that's ready to be rolled out next year. The Agricultural Improvement Act of 2018 was quickly passed by the U.S. Senate, 87-13, and the House of Representatives by a whopping 369-47 margin.
Now comes the next phase - figuring out all that's included in the 540 pages of legislative text and figuring out how all 13 titles of the bill will be implemented.
For the most part, there are not any big surprises. But there are several modifications designed to make the farm safety network better for farmers of all shapes, sizes and geographic locations. Here's a brief summary of some of the most significant changes in the commodity title:
Commodity programs would be modified in several ways. Instead of being locked into either county Agriculture Risk Coverage or Price Loss Coverage for the life of the bill, farmers would be allowed to switch between the two programs next year and again in 2021 and following years. The election could be made on a farm-by-farm and crop-by- crop basis. The bill adds an escalator provision to potentially increase PLC reference prices and includes a provision for some farmers to update yields for commodity program payment calculations.
Although Price Loss Coverage reference prices remain the same as under the 2014 farm bill, the escalator provision could increase them if market prices rise significantly. The new "effective reference price" would be 85 percent of the five-year moving average (minus the highest and lowest years) for the commodity's average market price but could rise no more than 15 percent above the current reference price.
For soybeans, the crop most likely affected, the maximum effective reference price could be $9.66 a bushel. The PLC reference price for soybeans is $8.40.
Farmers who experienced unusually low yields during 2008-2012, the period used by the 2014 farm bill to establish averages, may adjust the averages based on their yields from 2013 through 2017. The bill includes a formula designed to exclude changes in a farmer's yield that are due to national increases in trend yields.
In addition, for any year in which the farm yield was less than 75 percent of the county average for 2013‐2017, the farmer may claim a yield of 75 percent of the county average. The original version of the provision in the House-passed bill was limited to farmers who had experienced exceptional drought (level D4) for 20 consecutive weeks from 2008-2012.
ARC - The bill would modify ARC guarantee calculations to allow a substitute "transitional" T-yield of 80 percent of the county T-yield, an increase from the 70 percent now allowed. The 25 largest counties could be subdivided for calculating ARC coverage, which is based on fluctuations in county revenue.
ARC yields would be based on Risk Management Agency data rather than National Agricultural Statistics Service surveys, and separate yields would be calculated for irrigated and non-irrigated land in each county. The final bill also would incorporate effective reference prices into the calculations of benchmark revenue.
Unplanted base - ARC and PLC payments will be eliminated on base acres that have been planted on grass for the last decade instead of being planted to program crops. As compensation, landowners can enroll that land in the Conservation Stewardship Program for five years for an annual payment of $18 per acre.
Marketing loans - Many commodity loan rates are increased, and the payment limit is eliminated. Producers can store crops based on the commodity's loan rate, and loan rates also serve as a floor under commodity prices for producers since they can forfeit crops if the market price falls below the loan rate or claim a payment for the difference.
Loan commodities and loan rates - The new loan rates under the 2018 bill, compared to the rates under the previous legislation.
Wheat (per bushel)
Corn (per bushel)
Grain sorghum (per bushel)
Barley (per bushel)
Oats (per bushel)
ELS cotton (per pound)
Rice (per hundredweight)
Soybeans (per bushel)
Dry peas (per hundredweight)
Lentils (per hundredweight)
Small chickpeas (per hundredweight)
Large chickpeas (per hundredweight)
There was no change to the rate ($10.09 per hundredweight) for minor oilseeds such as sunflower seed, canola, safflower, or any other oilseeds designated by USDA. Graded wool ($1.15 per pound), nongraded wool (40 cents per pound), mohair ($4.20 per pound), honey (69 cents per pound), and peanuts ($355 per ton) also saw no rate changes in the new bill.
Payment limits - The final bill would allow a farmer's cousins, nephews and nieces to qualify for commodity program payments, which are limited to $125,000 per person or $250,000 per married couple - as long as they meet other eligibility requirements for farm risk and engagement.
Dairy - Renames the Margin Protection Program as Dairy Margin Coverage and builds on enhancements that Congress made to the Margin Protection Program in February - sharply reduced premiums for the first 5 million pounds of production (Tier I) - about 240 cows. Raises the top margin coverage level from $8 per hundredweight to $9.50.
For larger producers, premiums for $5 coverage above 5 million pounds (Tier II) are reduced by 88 percent.
Producers who lock in DMC coverage for five years would get a 25 percent discount on premiums. Producers who were enrolled in MPP could get 75 percent of their premiums refunded to use toward buying DMC coverage. They could get half the MPP premiums refunded in cash if they don't want to use the money for the new program.
Sugar - Loan rates for sugar would be raised 1 cent for cane sugar and 1.28 cents for beet sugar.
We'll be writing about more aspects of the new farm bill in the coming weeks. But for now, farm organization leaders seem pleased with the commodity title.
"ASA applauds the improvements in Title I support programs, including giving producers the option to choose between the county ARC and PLC programs in four of the five years of the new bill. This will allow farmers to respond to increased volatility in overseas markets and prices in coming years," noted American Soybean Association President and Kentucky farmer Davie Stephens. "The increase in the soybean loan rate will benefit farmers who need to access low-interest financing for their 2019 and future crops."
"Historically low prices, trade instability, and the current weather challenges are all weighing heavily on the minds of growers," stated National Association of Wheat Growers President and Oklahoma wheat farmer Jimmie Musick. "The 2018 farm bill provides the certainty they need to get through these arduous times and many of the programs within the bill can help growers stay in business."