Bill makes major changes to traditional farm programs

News
Jun 29, 2012
by DTN

Farmers would face tighter requirements for receiving commodity payments under reforms adopted in the farm bill that passed the Senate on June 21.

The U.S. Senate defied expectations that the body could not approve a major piece of legislation in a bipartisan manner as senators voted 64-35 to approve the “Agriculture Reform, Food and Jobs Act of 2012.”

The vote came after the Senate spent three days debating and voting on more than 70 amendments, some of which made changes to eligibility and payment caps for commodity and conservation programs, as well as crop insurance.

The bill’s passage marks an unusual circumstance in which the Senate will wait on the House. The House Agriculture Committee has scheduled markup on the legislation shortly after lawmakers return from their Independence Day break.

Prior to the amendment votes, the new farm bill was scored to cost $498 billion over its five-year lifespan, or $969 billion over 10 years, based on congressional scoring procedures. The bill spends about $23 billion less than projected spending would have been if the current law and programs were extended.

The bill makes dramatic changes to the farm-program safety net. The lion’s share of net savings, $19.8 billion, comes from an overhaul of commodity programs that end direct payments, the counter-cyclical program and Average Crop Revenue Election program, or ACRE.

The bill creates a new commodity program, the Agriculture Risk Coverage, or ARC, that has a $50,000 payment cap for an individual or a $100,000 cap on a married couple.

Income eligibility for commodity programs would be lowered to a $750,000 adjusted gross income, which translates into a $1.5 million AGI for a married couple. The legislation also tightens language for “actively engaged” in farming that would exclude people from collecting commodity payments merely because they are involved in some business phone conversations about the farm.

Besides ARC, the bill also creates the Supplemental Coverage Option, or SCO, that works like some insurance policies that trigger payments based on countywide production. USDA would pay 70 percent of the premium for an SCO policy. The policy would have a 10 percent deductible of expected revenue for farmers who choose not to participate in the ARC program. For farmers enrolled in ARC, the deductible for the SCO insurance would be 21 percent as well.

The SCO policies add $1 billion in cost to the farm bill over five years, jumping to $3 billion in additional costs for the 10-year budget projections.

Cotton producers get an entirely new insurance program, the Stacked Income Protection for Cotton, or STAX. Under STAX, USDA would pay 80 percent of the premiums. The Congressional Budget Office estimates the program would cost $912 million through 2017, and would jump to $3.2 billion over 10 years.

Amendments to the legislation, some of which were opposed by Senate Agriculture Committee leaders, made major changes to programs for farmers. Senators approved language that would reduce the taxpayer share of crop-insurance premiums by 15 percent for farmers with adjusted gross income levels above $750,000. The amendment would save about $1.1 billion over 10 years and affect about 1,500 farm operations now.

Senators also set a $75,000 cap on marketing-loan gains, a win for Sen. Charles Grassley, R-IA, a long-time advocate for tighter payment limits.

Another Senate amendment would require farmers to meet conservation compliance requirements to receive a subsidy on crop-insurance premiums.

In conservation, people with more than $1 million AGI would be excluded from receiving conservation subsidies.

Senators declined to pass an amendment that would have required labeling on food that has ingredients from biotech crops. The amendment garnered only 26 votes.

Despite disputes among policymakers and farmers with the Environmental Protection Agency (EPA), senators failed to resolve an issue over whether EPA should be doing flyovers of livestock operations to check for Clean Water Act violations. Two opposing amendments both failed to get the 60 votes needed for those amendments to pass.

In nutrition, the farm bill makes changes to the way people can become eligible for Supplemental Nutrition Assistance Program benefits (SNAP), also known as the food-stamp program. The bill saves $4.5 billion over 10 years in SNAP costs by ensuring people who qualify for low-income heating assistance are not automatically approved for SNAP. Senators voted down attempts on the floor to cut more from SNAP, as well as efforts to stop the cuts altogether. —

Chris Clayton, DTN

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