GFB News Magazine

New farm bill gives agriculture five years of certainty

Posted on February 17, 2019 7:00 PM

By Tripp Cofield

2018 was a particularly trying year for Georgia farmers. Many began 2018 still reeling from 2017’s historically low commodity prices, spring freezes and Tropical Storm Irma. Then, from early spring through summer, some of the United States’ closest trading partners levied retaliatory tariffs on U.S. products. Many of the tariffs were directed disproportionately at U.S. agricultural commodities. Uncertainty over trade issues was punctuated by the 2014 farm bill expiring the end of September.

Despite uncertainty over trade issues and the farm bill, Georgia farmers remained optimistic as most looked forward to harvesting their best crops in years. The 2018 cotton and peanut crops were expected to allow many farmers to dig out of debt and put money away for future tough times. Then, everything changed on Oct. 10, 2018, when Hurricane Michael made landfall. Agricultural losses in Georgia were estimated to be around $2.5 billion.

By Thanksgiving, Georgia farmers were looking to state and federal officials for help. During a special legislative session in mid-November, the Georgia General Assembly delivered some hope for farmers by passing a financial assistance package designed to help farmers struggling to recover from Hurricane Michael. Then, in mid-December, Congress finalized and passed the 2018 farm bill with a strong, bipartisan vote. Passage of the 2018 farm bill was a bright spot at the end of a historically tough year.

Conversations with lenders about 2019 operating loans will be a bit easier now that the federal farm programs, on which many producers depend, are guaranteed to be in place for the next five years. In addition to the added certainty, the new farm bill improved many of the existing programs in ways that will benefit Georgia farmers for years.

PLC & ARC changes

The most important part of a farm bill for many producers is the Commodity Title, which houses programs like Price Loss Coverage (PLC), Agriculture Risk Coverage (ARC), and the dairy program. These programs provide risk management support to farmers and are especially important when commodity prices are low, as they are now. Each of these programs has been reauthorized through 2023 with some farmer- requested enhancements.

For the 2019 and 2020 crop years, farmers will have an opportunity to elect either PLC or ARC on a crop-by-crop and farm- by-farm basis, a modest change from the 2014 bill. From 2021 forward, farmers will be able

to make a new election annually. This is an important change, and one that could benefit Georgia producers tremendously, as it offers growers annual flexibility to determine which risk management tool best suits their needs.

For farmers who use PLC, it’s important to note that statutory reference prices from the 2014 farm bill were maintained at the same levels. However, the 2018 farm bill includes Effective Reference Prices, which allow existing reference prices to rise up to 115 percent of statutory levels when crop prices increase. This means the peanut reference price, for example, could float as high as $615.25 (up from $535), and in turn, PLC support would increase.

Beginning in 2020, farmers will have an opportunity to update their PLC program yields. Historic yields are used by the Farm Service Agency (FSA) to calculate commodity support payments. Many producers across the nation experienced low crop yields from 2008 to 2012 - the time frame used to determine historic yields under the 2014 farm bill. The new farm bill provides a yield update beginning in 2020 using crop yield data from 2013 to 2017.

A number of modest reforms were made to ARC price and yield calculations in an effort to improve revenue support for farmers. For starters, PLC’s Effective Reference Prices will impact the ARC program by allowing plug prices to rise.

Plug yields for ARC benchmark revenue calculations will be at least 80 percent of county transitional yields, a reform that should increase the benchmark revenue guarantee for producers in many counties where crop yields have fallen in recent years, according to American Farm Bureau Federation economists.

Going forward, the ARC program will also use Risk Management Agency (RMA) trend-adjusted yield factors in ARC benchmark and actual yield calculations. AFBF economists believe trend- adjusted yield factors will increase crop yields to reflect improvements in productivity. Going forward, crop insurance program data from RMA will be the source for yield data rather than surveys from the National Agricultural Statistics Service.

In terms of base acres, which are used to determine producer eligibility for commodity support payments, the 2018 farm bill made only one change, which only applies to farms that have been entirely in grass or pasture since 2009. On such farms, base acres will be retained but are not eligible for ARC or PLC payments.

This reform was included by Congress to ensure the farm safety net is reserved for farms producing commodities. Farms impacted by this change will have an opportunity to participate in a five-year grass land incentive contract under the Conservation Stewardship Program (CSP) with payments of $18 per acre.

Crop insurance

Crop insurance is a vital part of the farm safety net, and the 2018 farm bill preserved the existing structure of the crop insurance program, so producers should see little to no changes moving forward. However, the Risk Management Agency, which is charged with administering the federal crop insurance program, was directed to look for ways to improve crop insurance for areas affected by hurricanes and tropical storms and on farms that utilize effective irrigation systems.

Dairy gets a new program

Georgia dairy producers—like many of their counterparts across America—have struggled in recent years. The 2018 farm bill contains reforms that could serve as a boon to the dairy industry. The Margin Protection Program (MPP) created by the 2014 farm bill will be replaced by Dairy Margin Coverage (DMC). The new, voluntary program will support producers when the national average income-over-feed-cost margin falls below certain coverage levels, similar to the way MPP worked.

Producers will continue to pay premiums based on their chosen coverage options, which will now range from $4 to $9.50 per hundredweight. Premium levels were adjusted to make certain options more afford- able. Dairy operations that choose to make a one-time election for both coverage level and enrolled milk amount may be eligible for a 25 percent discount on their premiums. Dairy producers will now be allowed to simultaneously use DMC and other risk management options like Livestock Gross Margin for Dairy Cattle or Dairy Revenue Protection. This is a significant change from the 2014 farm bill.

Conservation, rural development, timber & honey provisions

The 2018 farm bill includes no major changes to the conservation programs as it mostly maintained the structure of the Conservation Title from the 2014 farm bill. Key programs like the Conservation Stewardship Program (CSP), the Conservation Reserve Program (CRP), and the Environmental Quality Incentives Program (EQIP) were reauthorized for another five years.

The $75 million pilot program included in the farm bill to fund feral hog threat assessments, control methods, and land restoration is a victory for Georgia land owners concerned about the growing feral hog population. Feral hogs cause an estimated $2.5 billion in damage annually in the U.S.

For states like Georgia, with large rural areas, the Rural Development Title is always an area of focus, and the 2018 farm bill delivers some good news for rural residents. The USDA was given new authority to make grants and loans for “middle-mile broadband projects,” with the goal of linking rural regions with existing high-speed internet connections. Rural communities will enjoy expanded access to federal dollars that may be used to upgrade or construct “essential infrastructure projects” like hospitals, water systems, schools and more.

Other farm bill provisions likely to impact Georgia include the Timber Innovation Act. The TIA seeks to advance tall wood building construction and could benefit Georgia as the nation’s top timber state. Likewise, language was included directing the U.S. Food and Drug Administration to exclude single ingredient products, including honey, from its nutritional label “added sugar” declarations. This particular change was a top issue for Georgia Farm Bureau’s Honeybee Advisory Committee.

Tripp Cofield is National Policy Counsel for GFB’s Public Policy Department. For more information about the farm bill and its potential impact on Georgia, contact Tripp at 478-474-8411 or mtcofield@gfb.org.