August 28, 2017

FARM  BILL  PRIORITIES  BEING  DISCUSSED

Earlier in August, key issues and priorities for the next Farm Bill were discussed “Farm Bill Listening Session” at FARMFEST, hosted by Committee Chairman, Michael Conaway (R-TX) and Ranking Member Collin Peterson (D-MN), as well as on a farm visit in Blue Earth County featuring Sonny Perdue, U.S. Ag Secretary. A large number of farmers, ag leaders, conservation supporters, and others presented their Farm Bill priorities and concerns during the two events. Following is a summary of some of the main issues related to development of the next Farm Bill that were discussed:

• Crop Insurance and Commodity Programs — Many farm operators are concerned about the future of the Federal Crop Insurance program, which is probably the best risk management tool that crop producers have available to them. The Federal government currently covers approximately 60 percent of the premium cost paid by farmers for most common levels of crop insurance coverage. Crop insurance has been a “financial life-saver” in recent years for crop producers in many areas of the U.S. that have suffered crop losses due to natural disasters and poor crop growing conditions.

The Trump Administration budget proposal would reduce the maximum federal premium subsidy to $40,000 per farm operation. Currently, there is no limit on the maximum premium subsidy. The Administration proposal would also eliminate the popular Harvest Price Option (HPO) for crop insurance that is utilized as a risk management tool by most Midwest corn and soybean producers. In addition, the Administration revisions would eliminate federal crop insurance coverage to any farm operation that exceeds $500,000 in adjusted gross income (AGI). If all of these changes were implemented, it could drastically change the federal crop insurance program for many crop producers, as we know it today.

Most farm operators are just beginning to understand the current Farm Bill and farm programs that were implemented beginning with the 2014 crop year, and will be in place through the 2018 crop year. There has been lot of concern over the payment calculations in the current county-based Ag Risk Coverage (ARC-CO) farm program option, which over 90 percent of the corn and soybean producers in the Upper Midwest are enrolled in for 2014-2018. The ARC-CO payments for a given crop in a crop year can vary widely from county-to-county, due to the payment calculation formula. Most ag groups favor keeping a choice a choice between the revenue-based ARC-CO program and the price-only Price Loss Coverage (PLC) program, but would like to see some “tweaks” to the ARC-CO payment calculation formulas.

• Dairy Margin Protection Program (MPP) — The MPP program is a voluntary program that was part of the 2014 Farm Bill, which was designed to help dairy producers offset low profit margins. However, the established MPP payment formulas have not worked in today’s market environment, and as a result the MPP program has not provided the financial support to most dairy producers that it was designed to accomplish. Many producers and dairy leaders are calling for revisions to the MPP program in the next Farm Bill. Livestock producers also have expressed the need to develop “vaccine banks” and other measures in the next Farm Bill, in order to protect against “Foot and Mouth” disease and other pandemic livestock diseases.

• Conservation Programs — One topic that has seemed to unite ag organizations, environmental groups, and wildlife supporters alike is continued support for conservation programs. The Conservation Reserve Program (CRP), which has been the cornerstone of USDA conservation efforts since the late 1980’s, has received the most attention. The maximum acreage in the CRP program was reduced to 24 million acres nationwide in the 2014 Farm Bill, with 23.4 million acres currently enrolled in CRP, as of June 30, 2017. The CRP enrollment was 29.5 million acres in 2012, and was 33.6 million acres in 2001. CRP contracts will expire on 2.5 million in 2017, and another 1.5 million acres in 2018.

Many groups are calling for an increase in CRP acreage in the next Farm Bill; however, most would like to see the CRP program continue to be targeted to the most environmentally sensitive land. The biggest challenge with increasing CRP acreage is probably the cost of the CRP program, in an era when the Administration and Congress are trying to reduce the Federal budget deficit. The 33.6 million CRP acres in 2001 required a total budget outlay of $1.6 billion, while the 24 million CRP acres in 2017 requires a budget outlay of over $1.8 billion.

Some members of Congress would like to separate the Food and Nutrition Title, which funds the “Supplemental Nutrition Assistance Program” (SNAP), from the Commodity Title when the next Farm Bill is written. The SNAP program, which utilizes approximately 70-80% of the funds expended under the Farm Bill, has been a way to engage both urban and rural members of Congress on the importance of this legislation. For many decades Farm Bills have contained both the Commodity and Nutrition Titles. Experienced ag policy experts warn that funding for ag commodity programs could become much more difficult in the future, if the farm programs and SNAP programs are separated.

One overriding issue of the farmers attending these events was the current very tight margins and low profitability in crop and livestock production today. Farm operators stressed the need for USDA to maintain a strong “safety net’ program for producers, through Federal crop insurance and the crop and livestock commodity programs. The other overriding issue with farm families and rural residents is the high cost of health insurance coverage, and access to adequate health care coverage. Congress and Administration will now need to find a balance between the many needs and priorities for the next Farm Bill and the growing Federal budget deficit.

**********************************************************************************

Note — For additional information contact Kent Thiesse, Farm Management Analyst and

Vice President, MinnStar Bank, Lake Crystal, MN.  (Phone — (507) 381-7960);

E-mail — kent.thiesse@minnstarbank.com)