Senate sends long-overdue farm bill to President

Cattle and Beef Industry News
Feb 10, 2014
Last Tuesday, following a 68-32 vote in the U.S. Senate, and several years of debate, the Agriculture Act of 2014 was—finally— sent to President Obama’s desk for his approval. On Jan. 29, the House of Representatives approved a compromised House- Senate version of the bill, dubbed the farm bill, with a 162-63 vote.

“Getting a strong vote in the House and now a strong vote in the Senate is great,” said Sen. John Hoeven, (R-ND) a member of the conference committee that negotiated the final version of the bill. “The farm bill is one of the most important bills Congress passes, with the need to balance the interests of America’s tremendous agriculture industry. If we had not been able to get this passed, we probably would have been looking at another extension.”

Sen. Heidi Heitkamp, (D-ND), a member of the Senate Committee on Agriculture, Nutrition and Forestry, also voiced her relief that the bill finally passed.

“Over two years ago, I pledged to work tirelessly to get a longterm farm bill passed,” Heitkamp said. “Finally, we stepped up and gave our hardworking farmers and ranchers the certainty they absolutely deserve to do their jobs. My concern now is how this bill will be implemented and we will be doing everything we can to make sure this is implemented according to Congressional intent.”

The legislation will cost an estimated $956 billion over 10 years, a savings of about $16.6 billion compared with current funding, according to the Congressional Budget Office.

Obama released a statement through his press secretary Tuesday afternoon praising the Senate vote. He is expected to sign the bill.

“The U.S. Senate came together to pass a comprehensive farm bill—legislation that will build on the historic economic gains in rural America over the past years, create new jobs, and protect the most vulnerable Americans,” the president said in the statement. “This bill provides certainty to America’s farmers and ranchers, and contains a variety of common sense reforms that my administration has consistently called for, including reforming and eliminat-ing direct farm subsidies and providing assistance for farmers when they need it most.”

While the bill is on its way, it still is not without its controversy.

While there is relief in some areas of the agriculture community, there are areas of concern in the final bill.

“The farm bill contains crucial support for our farmers, ranchers and rural communities, by providing important drought disaster aid—including livestock feed assistance— and funds for conservation and specialty crop and invasive species management programs. However, this bill is not perfect, as significant cuts to nutrition assistance programs remain,” said California Department of Food and Agriculture Secretary Karen Ross.

But Heitkamp said another important stipulation included in the bill is the retroactivity of what she referred to in a release as a “serious, permanent livestock disaster program.”

“It won’t be just the cattle loss in the October storm; it will go back to livestock losses all the way through October of 2011. Hopefully, folks documented their losses so they can get some relief. To me, of all the provisions that need immediate implementation, we need to get the livestock provision up and running,” she said.


Carl Zulauf Department of Agricultural, Environmental and Development Economics, with Ohio State University put together this summary on a portion of the 949-page bill.

Title 1. Commodity Programs

•Direct payments are repealed except for reduced transition payments to cotton for the 2014 crop and even smaller payments for the 2015 crop under specified, limited conditions.

• Programs authorized for the 2014-2018 crop years and through Dec. 31, 2018, for dairy.

• A crop farm has a one time, irrevocable opportunity to elect either Price Loss Coverage (PLC) or county Agricultural Risk Coverage (ARC) on a crop by crop basis. The producer may also elect individual farm ARC, but this election applies to the entire farm. If no choice is made, the farm defaults to PLC. All producers on a farm must make the same election or face potential loss of payments for the 2014 crop.

• PLC payments occur if U.S. average market price for the crop year is less than the crop’s reference price. Reference prices are: wheat, $5.50/bushel; corn, $3.70/bushel; grain sorghum, $3.95/bushel; barley, $4.95/bushel; oats, $2.40/bushel; long grain rice, $14.00/hundredweight (cwt).; medium grain rice, $14.00/cwt.; soybeans, $8.40/bushel; other oilseeds, $20.15/cwt.; peanuts $535.00/ton; dry peas, $11.00/cwt.; lentils, $19.97/cwt.; small chickpeas, $19.04/cwt.; and large chickpeas, $21.54/ cwt.

• County ARC payments occur when actual crop revenue is below the ARC revenue guarantee for a crop year. County ARC guarantee is 86 percent of county ARC benchmark revenue. Coverage is capped at 10 percent, meaning coverage is between 76 percent and 86 percent of the county ARC benchmark revenue. County ARC benchmark revenue is based on the Olympic average (removes high and low values) of county yields and U.S. crop year average prices for the 5 preceding crop years.

• Individual farm ARC is a whole farm—not individual crop—program. In essence, it is based on the average covered commodity experience on the farm.

• For both PLC and county ARC, payment acres for a crop are 85 percent of the farm’s base acres for the crop plus any generic base acres (former cotton base acres) planted to the crop. Individual ARC payments acres are 65 percent of the sum of the farm’s total base acres and any generic base acres planted to covered crops on the farm.

• Total base acres on a farm are the same as current base acres. However, a farm can elect to reallocate base acres among the farm’s covered crops according to each covered crop’s share of the farm’s total acres planted to covered crops over the 2009- 2012 crop years.

• The Secretary of Agriculture is to develop procedures for identifying and eliminating base acres on land that has been subdivided and developed for multiple residential units or non-farming uses and is unlikely to return to agriculture uses.

• PLC payment yields can be updated to 90 percent of the farm’s average planted yield over the 2008-2012 crop years.

• The 2008 Farm Bill’s nonrecourse marketing loan and loan deficiency payment program and associated loan rates are extended, except for modifications to the loan rate for cotton, which now can range between 45 and 52 cents per pound.

• The Dairy Product Support and MILC programs are replaced with a Dairy Production Margin Protection Program based on the difference between the price of milk and feed cost of producing milk. A producer elects a coverage level between $4 and $8 per cwt. No premium is paid for the $4 coverage level; premiums are paid for higher coverage levels. Premium schedules are specified for production of 4 million or fewer pounds and for production greater than 4 million pounds. No supply control provision is included.

• A Supplemental Agriculture Disaster Assistance program is funded permanently. It includes a Livestock Indemnity Program for livestock losses from adverse weather or attacks by federally reintroduced animals; a Livestock For age Program for losses resulting from drought or fire; a program of emergency relief to producers of livestock, honey bees, and farm raised fish not covered by the two previous programs; and a Tree Assistance Program for natural disasters.

• The so-called permanent laws of 1938 and 1949 are not repealed.

• Payments indirectly or directly received by a person or legal entity under Title I are limited to $125,000. Limit for a person and spouse is $250,000.

A separate payment limit for peanuts is retained. The only Title 1 crop program not included in this single payment limit is the benefit derived from forfeiting nonrecourse loans.

• USDA is to write new regulations defining “active engagement in farming.”

• The two (farm and nonfarm income) adjusted gross income (AGI) limitation tests are replaced with a single $900,000 AGI limitation for certain commodity, as well as conservation programs.

Title 11. Crop Insurance

• Supplemental Coverage Option (SCO) provides farms the option to purchase county level insurance that covers part of the deductible under their individual yield and revenue loss policy. Coverage level cannot exceed the difference between 86 percent and the coverage level in the individual policy. Subsidy rate is 65 percent. SCO is not available if enrolled in ARC. A slightly different Stacked Income Protection Plan (STAX) is offered for cotton. Implementation begins the 2015 crop year.

• The higher subsidy levels for enterprise insurance are made permanent.

• A new revenue-minuscost margin crop insurance contract is authorized. The initial target is rice for the 2015 crop year.

• Several provisions encourage data sharing, with a focus on U.S. Department of Agriculture agencies. One objective is to increase availability of county-based insurance products.

• Insurance plug yields are increased from 60 percent to 70 percent. A producer may exclude a yield for a crop year in which the county planted acre yield was at least 50 percent below the average county yield over the previous 10 consecutive crop years.

• Budget limitations are placed on renegotiations of the Standard Reinsurance Agreement, including budget neutrality with regard to the crop insurance programs.

• Insurance benefits are reduced if a farm tills native sod for production of an annual crop.

• Insurance coverage is to be offered by dryland and irrigated acres of a crop.

• Beginning farmers and ranchers are eligible for a higher subsidy rate on insurance.

• Proposal to reduce the level of insurance subsidies for high income individuals was deleted.

• The Risk Management Agency is given a clear mandate to focus on developing insurance products for underserved commodities. Immediate priorities are revenue insurance for peanuts, margin insurance for rice, and a specialized irrigated policy for grain sorghum. Studies are authorized for insurance of swine and poultry catastrophic disease, poultry business interruption; and food safety. Insurance for organic crops is to offer price elections that reflect the retail or wholesale price, as appropriate. Index-based weather insurance pilot programs are a priority.

Other key pieces:

The Supplemental Nutrition Assistance Program, commonly referred as food stamps, will be cut by about $8 billion over the course of the next decade. SNAP and other nutrition programs account for more than three-quarters of the farm bill’s spending—$756 billion over a decade.

Country Of Origin Labeling (COOL) remained in the 2014 bill despite heavy lobbying from some areas of the meat industry. Mexico and Canada, two of the largest exporters of beef to the United States, have challenged COOL at the World Trade Organization.

The King Amendment, intended to block a California law requiring that all eggs sold in the state come from chickens kept in nonconfining cages, was included in the House-passed bill but was dropped from the final legislation. Critics said the provision, pushed by Republican Representative Steve King of Iowa, could have invalidated hundreds of state laws on animal protection and food safety.

Payment in lieu of taxes program (PILT) was included, allowing local governments to collect tax revenues on federal lands. The $400 million-a-year program was a late addition to the farm bill after it was not included in the January budget deal. A bipartisan group of 16 senators had urged that PILT be included in the farm legislation.

U.S. catfish farmers and Southern lawmakers successfully fought to a keep a provision, first authorized in the 2008 farm bill, that shifted catfish inspection to the Agriculture Department from the Food and Drug Administration.

Hemp research made the final farm bill. Supporters of industrial hemp saw an opening and pushed through a provision that allows colleges and state agencies to grow and conduct research on the crop in the nine states where it is legal.

A provision in the final bill removes subsidies for fuel pumps in rural areas that blend gasoline with higher concentrations of biofuels, like corn-based ethanol.

A 15-cent fee was tacked onto every fresh-cut Christmas tree sold in the United States, with the money being used to promote demand for trees.

Calling the bill “important to the entire nation,” U.S. Department of Agriculture Secretary Tom Vilsack said in a statement that the farm bill contained “meaningful” reform and billions of dollars in savings for the taxpayer.

“While no legislation is perfect, this bill is a strong investment in American agriculture and supports the continued global leadership of our farmers and ranchers,” Vilsack stated in a release. “Our communities will have additional support to attract new economic opportunity and create jobs.”

Heitkamp joined several other senators last week in asking Vilsack to expedite implementation of the livestock disaster programs reauthorized in this bill.

The senators wrote, “In 2012, U.S. grazing livestock producers experienced the most devastating loss of pasture, rangeland, and forage in decades due to the widespread drought... In October 2013, winter storm Atlas, an unexpected early fall blizzard, killed more than 20,000 cattle, sheep, horses and bison in the Dakotas and Nebraska, leaving many livestock producers with less than 50 percent of their livestock herds surviving… Due to the magnitude of pasture, forage, and livestock losses and the urgent need for financial assistance these losses have created, we strongly urge you to place implementation of 2014 farm bill livestock disaster programs as a top priority.”

The Canadian Cattlemen’s Association (CCA) also voiced their concerns over the farm bill, in relation to the COOL debate.

A coalition of U.S. meat industry association opponents of COOL is demanding that the U.S. government repeal the legislation in order to reduce the negative financial harm of COOL, and also to prevent exposure to potential retaliatory measures from the World Trade Organization (WTO), if a complaint by Canada and Mexico that COOL violates the U.S.’s trade obligations is successful. Canada’s Ministers of Agriculture and International Trade have made it abundantly clear that the threat of retaliatory tariffs is very real if COOL is not made to meet its international trade obligations.

Canada will continue with the WTO process, including presentation of oral arguments before the compliance panel during the week of Feb. 18.

The Government of Canada has already published a list of possible U.S. goods that could be targeted for retaliatory tariffs. That list includes beef, pork, cereals, baked goods, fresh fruit and many other items. — Traci Eatherton, WLJ Editor