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Common Ground
Farm Credit Services of America Blog

Top Line Farm Bill Features

by FCSAmerica Staff Reports | Dec 27, 2018
Overall, reaction to the 2018 farm bill (Agriculture Improvement Act of 2018) is positive. While there are many tweaks to farm safety nets, most programs are not radically different from those producers have known for the past four years.

Many details are yet to come as USDA writes regulations, sets deadlines, etc., but a few that have been written into the law will interest many farmers, including:

Loan rates raised
  • For the first time since the 2002 farm bill, loan rates for marketing assistance loans (MAL) and loan deficiency payments (LDP) are for most commodities. There was no change to the $10.09/cwt. rate for minor oilseeds such as sunflower, canola or safflower.
  • MAL and LDP payments will not count toward the $125,000 payment limit that applies to ARC and PLC payments.

  •  

    Current loan rate

    2019-2023 loan rate

    Percentage increase (rounded)

    Corn

    $1.95

    $2.20

    13

    Soybeans

    $5.00

    $6.20

    24

    Wheat

    $2.94

    $3.38

    15

    Grain sorghum

    $1.95

    $2.20

    13


Agricultural Risk Coverage/ Price Loss Coverage
Economists say that current price expectations favor PLC over ARC, especially for corn; the soybean choice is slightly less clear. This is the opposite of the 2014 bill, when 97 percent of corn growers and 94 percent of soybean growers chose ARC. On the other hand, economists say, odds of a payout with either are fairly low at this time.

  • Agriculture risk coverage-county (ARC) and price loss coverage (PLC) are not a one-time decision under this bill. Producers will choose between them for 2019 and 2020 and then, beginning with 2021, the choice will be made annually. As was the case under 2014, the default option is PLC. ARC-Individual ends with 2018.
  • USDA will announce payment rates for each county within 30 days of the end of the marketing year.
  • Payment limits: Individual payment limits remain unchanged at $125,000 for an individual or $250,000 married; the adjusted gross income cap remains at $900,000.
  • The definition of family now extends to nieces, nephews and first cousins.
  • Base acres: This law prevents payments on any base acres if all the cropland on the FSA farm was planted to grass or pasture during 2009 to 2017, although the base acres remain on record and will count toward base for future legislation. These base acres will be eligible for the CSP grasslands program and qualify for a payment of $18/acre.
   PLC
  • Producers have a one-time chance to update their program yields for PLC, effective with the 2020 crop year.The two-step formula is somewhat complicated, but the provision is designed to let producers who had lower yields in 2008 to 2013 adjust based on yields in 2013 to 2017.
  • Effective reference prices (ERP) used for PLC payments now will rise if market prices improve, with a limit of 15 percent. The statutory/base price remains unchanged:
  •  

    Statutory reference price

    Maximum (115%)
    effective reference

    Corn

    $3.70

    $4.26

    Soybeans

    $8.40

    $9.66

    Wheat

    $5.50

    $6.33

    Grain sorghum

    $3.95

    $4.54


   ARC
  • Separate irrigated and dryland ARC-CO guarantees and payments will be calculated in every county.
  • The plug yield used in the Olympic average calculation for ARC-CO rises to 80 percent, from 70 percent, of the transitional yield to replace the producer’s yield in any year it is lower than the plug.
  • ARC-CO payments will be based on the physical location of the farm, not the administrative county.
Crop Insurance
Most provisions in the crop insurance title were unchanged. Tweaks include:
  • Enterprise units are allowed across county lines.
  • The law gives RMA the authority – but does not require – expanding availability of limited irrigation crop insurance.
  • Changes in cover crop details may increase their use in some areas, Kansas State University economists say. The bill defines “cover crop termination” as “a practice that historically and under reasonable circumstances results in termination.” It also provides that cover crop practices are to be considered “good farming practice” if terminated according to USDA guidelines or an agricultural expert and that termination should not impact the insurability of the insurance crop.
Dairy Insurance
  • The dairy margin protection program (MPP) was renamed dairy margin coverage (DMC). Building on the improvements made last February:
  • The top margin coverage available on the first 5 million pounds of production (about 240 cows) increases from $8cwt. to $9.50/cwt.
  • Annual premiums on both the first 5 million pounds of production and Tier II (above 5 million pounds; coverage levels $4-$8/cwt.) are greatly reduced.
  • Coverage cannot exceed 95 percent of production history.
  • Producers who lock in DMC for five years qualify for a 25 percent discount on premiums.
  • Those who were enrolled in MPP could get 75 percent of their premium refunded to use toward buying DMC coverage; they could get half the MPP premiums refunded in cash if they don’t want to enter the new program.
Conservation
  • The conservation reserve program (CRP), currently capped at 24 million acres, will increase to 27 million by 2023. However, rental rates will be reduced to 85 percent of the county rental rate for general sign-ups and 90 percent of the county average for continuous enrollment.
  • The conservation stewardship program (CSP) will be phased out as a stand-alone acre-based program, with existing five-year contracts continuing and those expiring before the end of 2019 being allowed a one-year extension. Going forward the CSP will be administered via a specific funding level each fiscal year, similar to the environmental quality incentives program (EQIP).
Other
  • Livestock producer groups lobbied hard and succeeded in getting provision for a federal vaccination bank that prioritizes foot and mouth disease.
  • Hemp becomes a legal agricultural crop – and will qualify for crop insurance. Industrial hemp is cannabis that has no more than 0.3 percent of the psychoactive compound THC in any part of it. Under the 2014 farm bill, which allowed it to be grown in a narrow range of cases, producers grew 25,713 acres of hemp in 19 states in 2017.
Producers will need to understand state law because the farm bill stops states from interfering with interstate commerce but does allow them to set more restrictive regulations regarding its production and use, including banning hemp growing.

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