Producers will gain farm program flexibility and modestly larger support from the federal safety net in the 2018 Farm Bill, which takes effect with 2019 crops. It will be easier to switch between ARC and PLC, marketing loan rates are higher, and there’s the possibility of a 15% increase in PLC reference prices.
Congress delivered on the top priority of farm groups: maintenance of a strong crop insurance program. Provisions would remove crop insurance barriers to cover crops.
Here’s a run-through of the 10 major points of the five-year farm bill.
1. SELECTION BETWEEN ARC AND PLC
Growers made a one-time election between ARC and PLC for the life of the 2014 Farm Bill. Under the new bill, they will make a selection between ARC and PLC for 2019 and 2020 crops. Beginning in 2021, it’s an annual selection. PLC is always the default option.
2. MARKETING LOAN RATES GO UP
In the first across-the-board increase in nearly two decades, loan rates rise by 13% to 24% for grains and soybeans. The new rates are corn $2.20, soybeans $6.20, wheat $3.38, sorghum $2.20, barley $2.50, and oats $2 a bushel.
3. PLC REFERENCE PRICES MAY GO UP, BUT ONLY IF COMMODITY PRICES DO
If there is a sustained increase in commodity prices, an escalator provision in the farm bill would rachet up PLC reference prices. “In the near term, this isn’t going to do much,” said a House Ag staffer, considering lackluster prices of recent years. Increases are calculated at 85% of the five-year Olympic average for the nationwide average price of a crop during a marketing year.
4. PLC PROGRAM YIELDS CAN GO UP, BUT IT’S COMPLICATED
Growers will have a one-time opportunity to update program yields, using a formula that starts at 90% of the average yield for crops from 2013-2017 and reduces it by a ratio that compares the 2013-2017 national average yields with the average for 2008-2012 crops. The result is a yield update factor “indicating how much of the initial 90%…a farmer can claim in the update,” says a team of university economists, who estimated an update factor of 1 for wheat and 0.81 for corn and soybeans.
5. ARC IS IMPROVED
USDA will use a yield plug of 80% of the transitional yield and will calculate a trend-adjusted yield for use in benchmark calculations. The farm bill says USDA shall take into consideration the trend-adjusted yield factor used by the crop insurance system, so the result is likely to be the same as trend-adjusted yields used by crop insurance.
6. SOME BASE ACRES ARE PUT OUT TO PASTURE
Base acres will not be eligible for crop supports on farms that were planted entirely to grass and pasture from 2009-2017. Instead, the land will be eligible for a five-year grassland incentive contract at $18 per acre. The change in base acres was expected to offset the cost of the PLC yield update. When Congress passed the farm bill, there was no estimate of how many base acres will be affected.
7. MORE FAMILY MEMBERS ELIGIBLE FOR FARM SUPPORTS
Nieces, nephews, and first cousins become eligible for farm supports under the 2018 Farm Bill, a step back from previous farm bills, which tried to tighten payment limits. The CBO estimates a $4 million a year increase in payments under the new provision.
8. THE CRP GROWS A BIT BIGGER
Maximum enrollment would rise to 27 million acres, from the current 24 million, with 2 million acres reserved for grasslands. Payments rates would be 90% of the average county rental rate for land entering through the continuous enrollment option for high-priority practices and 85% of the average county rate for general enrollments.
9. WORKING LANDS PROGRAMS GET A MAKEOVER
Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP) are combined statutorily with the goal of streamlining paperwork and coordinating conservation activities between two programs, each with a distinct purpose. EQIP funding would grow to $2 billion a year from its current $1.75 billion, with half of funding earmarked for livestock. Irrigation districts become eligible for EQIP. Formerly allowed to enroll up to 10 million acres a year, CSP will operate under a dollar limit, beginning at $700 million in 2019 and rising to $1 billion in 2023. CSP will oversee a new Grassland Conservation Initiative, paying $18 an acre per year. The Regional Conservation Partnership Program would get $300 million a year to leverage private investment in conservation initiatives across a watershed or landscape.
10. COVER CROPS ARE A GOOD PRACTICE
Provisions in the crop insurance section of the farm bill are intended to improve acceptance of cover crops as a good farming practice for insurance purposes. The biggest step forward is “clarifying the definition of cover crop termination in a way that will reduce farmers’ fears that cover cropping could risk their crop insurance coverage,” said the National Sustainable Agriculture Coalition.
Source: Chuck Abbot, Successful Farming
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