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What to know about the new farm bill

May 8, 2019
Farm News

By KRISS NELSON

editor@farm-news.com

FORT DODGE - The Iowa Farm Bureau has been holding informational meetings across the state in order to better inform producers and other agriculture professionals on the 2018 farm bill.

Not only are the meetings designed to help ag professionals make better farm program decisions, they're also meant to provide updates on changes that have been made from the previous farm bill.

Spencer Parkinson, executive director of Decision Innovation Solutions, spoke at the meeting in Fort Dodge, which was held March 28.

Overall, he said the new farm bill is very similar to the previous one, passed in 2014, and has no real fundamental changes.

"It can be considered enhancements and improvements," he said.

Parkinson said to consider your own objectives when it comes to signing up for the farm program: is it yield risk, price risk or revenue risk?

"There are all sorts of reasons to participate in farm programs," he said.

Other considerations include:

- Are you attempting to maximize farm program payments or manage revenue risk?

- Balance and consider near-term versus long-term risk management.

"The take home goal is to be to get comfortable with your risk protection no matter what happens in the future," he said. "A farm program can be a part of the overall strategy."

Improvements in marketing loan rates

Parkinson said there has been a 13 percent increase in the marketing loan rates in the 2018 farm bill, making the national corn loan rate $2.20 and the national soybean loan rate $6.20 versus 2014's marketing loan rates of $1.95 and $5, respectively.

ARC or PLC election

Parkinson said once you decide to be a part of the farm program, you need to decide which coverage you would like to be under.

The Agriculture Loss Coverage-County (ARC-CO) and Agriculture Loss Coverage-Individual (ARC-IC) is a USDA program that provides revenue loss coverage at the county level. ARC-CO payments are issued when the actual county crop revenue of a covered commodity is less than the ACR-Co guarantee for the covered commodity.

Price Loss Coverage (PLC) program payments are issued when the effective price of a covered commodity is less than the respective reference price for that commodity. The effective price equals the higher of the market year average (MYA) or the national average loan rate for the covered commodity.

Parkinson said the vast majority of producers chose the ARC coverage during the 2014 farm bill's implementation.

Producers around the September timeframe will need to make the decision between ARC or PLC election, and re-enrollment is required.

"Even if you are going unchanged from the 2014 farm bill, you still need to enroll," he said. "If you don't make a selection this fall, you will miss out on any payments for 2019."

At that time, producers will be electing between ARC and PLC for the 2018 and 2020 crop years. Once 2021 comes around, there will be an annual re-election option, allowing for more flexibility to make the decision on a year-by-year basis.

"In the past there were a lot more restrictions," he said. "Once a program was selected for a farm it had to stay that way and now it's a crop-by-crop, farm-by-farm decision."

Who is eligible for ARC or PLC coverage?

According to information provided by Parkinson, it is current producers with an interest in cropland on the farm who will make the election of ARC or PLC on each Farm Service Agency (FSA) farm number.

The definition of producer has not changed from the previous farm bill, which is "a person or legal entity with a share in a crop or cropland on the farm and shares in the risk of producing the crop on the farm."

Parkinson noted that owners of farms receiving cash rent do not have a share in the crop nor does the owner share in the risk of producing the crop.

Improvements to PLC

Parkinson said one of the biggest changes to the 2018 farm bill was the addition of an effective reference price.

"That is a big improvement from the last bill," he said.

According to Parkinson, to utilize the new effective reference price, an Olympic Moving Average (OYA) of the past five years of MYA prices times 85 percent must exceed the statutory reference price.

In the 2014 farm bill, Parkinson said the PLC reference price was fixed. Those are now allowed to float higher based on the OYA price, but he added they can't sink lower.

This effective reference price can increase 115 percent of the statutory reference price. Max price for corn is $4.26 and soybeans is $9.66.

The reference price can never drop below the current statutory reference price.

Improvements to ARC

Parkinson said there has been an increase in yield plug from the 2014 farm bill from 70 percent to 80 percent of the county transitional yield.

The primary source of yield data is now coming from the Risk Management Agency of Crop Insurance opposed to just National Agricultural Statistics (NASS) of the USDA.

The USDA must calculate and utilize trend-adjusted yield (similar to the trend-adjusted yield used in the crop insurance program) to be used in yield calculations.

The program will utilize an "effective reference price" when calculating benchmark revenue. These prices have certain requirements, similar to the changes in the PLC program.

Since the PLC effective reference, prices can float to 115 percent of the statutory reference price.

ARC plug prices can also float.

Payments are based on physical location of the farm, not the FSA's location.

Updating or keeping current program yields

Information provided by Parkinson states:

- Farm owners get a one-time opportunity to update PLC program yields. The yield update will be effective for the 2020 crop year.

This can be done on a crop-by-crop decision: yields can be update for either crop or both crops.

"You can update to make them higher or leave them as they are," he said.

- If farm yield in any of the years (2013-2017) is less than 75 percent of the 2013-2017 simple yield average, USDA will assign 75 percent of the county average yield for that year as a "plug" yield for that year in the calculation.

- If there are no yield records for a year the crop was planted, then plug yield is used for that year.

- If there is a year with no planted acres for the crop, then that year is not used in the average.

- Prevented planting acres are also not used in the average.

Payment limitations

Parkinson said the 2018 farm bill retains the limit of $125,000 of PLC and ARC payments. The Loan Deficiency Program and Marketing Loan Gains no longer count towards the payment limitation.

Conservation

- Conservation Reserve Program (CRP)

Parkinson said there has been an increase in CRP enrollment from 24 million to 27 million acres by the year 2023.

Payments for general and continuous CRP acres enrollment contracts are limited to 85 percent and 90 percent, respectively, of county average rental rates.

- Conservation Stewardship Program (CSP), according to the USDA, helps you build on your existing conservation efforts while strengthening your operation.

In the 2018 farm bill, CSP continues 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.

A farm that only has been planted to pasture/grass from 2009-2017 will not be eligible for ARC/PLC, but Parkinson said they are eligible for a preserve base and can be paid $18 an acre for base acres.

- ACEP (Agricultural Conservation Easement Program)

The 2018 farm bill restores funding for the ACEP to $450 million per year.

- Environmental Quality Incentives Program (EQIP)

The 2018 farm bill continues EQIP for working lands. Parkinson said there has been an increase in funding to $2.025 billion through 2023.

The bill authorizes conservation innovation grants, conservation innovation trials and soil health pilot projects.

Industrial hemp

Parkinson said the growth of industrial hemp was made legal by the 2018 farm bill, but only for product that has less than 0.3 percent THC.

According to the USDA, the 2018 farm bill removes industrial hemp from the Controlled Substance Act Schedule 1 drug list, effectively creating a legal pathway to produce and process hemp.

However some significant requirements must be met to qualify for legal production status.

If states do not have hemp regulations, USDA will have a regulatory program for those producers to apply for licenses.

Currently, Parkinson said industrial hemp is not legal for growth in Iowa.

"The USDA is working with states like Iowa to remove these restrictions," he said.

For a state to comply with the new farm bill requirements, state departments of agriculture must consult with the state's governor and chief law enforcement officer to devise a plan that must be submitted to the secretary of the USDA.

A state's plan to license and regulate hemp can only commence once the USDA secretary approves that state's plan.

According to the USDA, there is a worldwide market of $2.5 billion for industrial hemp with the U.S. share's market estimated at $820 million.

 
 

 

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