Posted February 6, 2014
After nearly three years of limbo in congress, a five-year farm bill has been passed. Farmers across the nation now face the burden of learning how the changes will affect their home operations.
The legislation is expected to reduce spending by $23 billion over the next decade, with a portion coming from the end of direct payments. This cut allowed lawmakers to expand the federally subsidized crop insurance programs to help farmers better manage risk tied to unexpected weather disasters or fluctuations in commodity prices.
“We are grateful for the passage of a farm bill,” said Dalton Henry, director of governmental affairs for Kansas Wheat. “We will continue to work on both the unresolved regulatory pieces and will follow conservation compliance closely during rules phase to ensure the changes work for farmers.”
The bill provides a multi-year safety net and authorization for key programs such as the Market Access Program and Foreign Market Development Program. It also shifts commodity support from direct payments to a mix of programs that will only pay when a farmer experiences a loss. The programs include Ag Risk Coverage, Supplemental Coverage Option and Price Loss Coverage.
Ag Risk Coverage is a shallow loss program designed to fill the gap between a real revenue loss for producers and when crop insurance coverage begins. It will have a county or farm level option. In the conference report the coverage range was shifted downward to provide a band of coverage options from 76 percent to 86 percent. This shift is expected to be negative for wheat producers as it will reduce the frequency of payments.
The Supplemental Coverage Option is a crop insurance based shallow loss program. It is similar to ARC, except that the producer will be able to purchase shallow loss coverage at the county level. The coverage will be subsidized by the federal government at a 65 percent level.
Price Loss Coverage is a new target price program with updated target prices. Wheat is set a $5.50 per bushel. Payments will be made on 85 percent of base acres to alleviate the World Trade Organization concerns. Producers will be allowed to reallocate base acres to better reflect current crop mixes and will be allowed to update yields, but not add acres. Producers must make a one-time choice between ARC and PLC. A producer will be allowed to choose both PLC and SCO but not ARC and SCO.
Crop insurance avoided the adjusted gross income limits that had many wheat farmers concerned but did pick up conservation compliance. It gained permanent enterprise units and allows the splitting of enterprise units between irrigated and non-irrigated cropland.
Crop insurance also gains a new provision that will allow producers to remove a catastrophic loss year from the actual production history calculation.
The 68-32 Senate vote on Tuesday marked the end of the battle to pass the first comprehensive farm policy package since 2008.
“We are excited and thankful to have a strengthened safety net under farm income,” said Justin Gilpin, CEO of Kansas Wheat.