October 15, 2018
NEW FARM BILL MOVES TO “LAME-DUCK” SESSION OF CONGRESS
By mid-Summer, both the U.S. House and Senate had passed their versions of a new Farm Bill. This created optimism that the new Farm bill could be finalized and voted on by the time the current Farm Bill expired on September 30, 2018. However, no compromise Farm Bill has been agreed on by the leaders of the Senate and House Conference Committee, so no action has been taken by Congress on the next Farm Bill. Now, the hope is that a compromise Farm Bill can be drafted, and that a vote in Congress can be taken following the November 6 mid-term elections, before the end of 2018, during the so-called “lame-duck” session of Congress.
Even though the current Farm Bill expired on September 30, 2018, some programs are maintained under a “continuing resolution”, while others are discontinued. For example, funding for Federal food and nutrition (SNAP) programs, which make up about 75 percent of Farm Bill spending, are continued. Similarly, any 2018 ARC-CO or PLC payments, 2018 crop insurance indemnity payments, and dairy market protection program (MPP) payments will be made, as will annual rental payments for existing Conservation Reserve Program (CRP) contracts. However, no new CRP contracts can be added, and no new contracts can be signed for most other conservation programs. Funding for trade promotion and food aid programs will also be halted until a new Farm Bill is implemented.
If no agreement can be reached on a new Farm Bill by the end of 2018, another alternative may be a one-year extension of the current Farm Bill for 2019 to allow continuation of various USDA programs governed by the Farm Bill legislation. This would also maintain funding of programs that may be discontinued without a new Farm Bill, or an extension of the current Farm Bill. This would also allow time for Congress to work out differences between the U.S. Senate and U.S. House versions of the Farm Bill. A Farm Bill extension was enacted for the 2013 crop year, prior to final passage of the current Farm Bill.
Failure by Congress to enact a new Farm Bill, or to extend the current Farm Bill on a timely basis, could result in the 1949 Farm Act, or so-called “permanent farm law” to be enacted. This would put in place price supports for crops and dairy that are based on “parity pricing”, which are well above today’s price levels. It would also eliminate many USDA programs that have been enacted since 1949, including conservation programs, crop insurance provisions, rural development programs, along with food and nutrition (SNAP) programs. There is no support in Congress or by the Administration to allow Farm Bill policy or USDA programs to revert back to 1949 levels, so this is not no likely to occur.
Key Issues in reaching a compromise on a New Farm Bill:
- SNAP programs are a key difference in the Senate and House Fam Bill versions.
The U.S. Senate version of the new Farm Bill proposes very few changes to current food and nutrition programs (Title IV) that exist in the current Farm Bill. However, the U.S. House Farm Bill proposed some fairly major changes to Supplemental Nutrition Assistance Program (SNAP) requirements. Under the House proposal, in order to receive SNAP benefits (food stamps), there would be a 20-hour per week work/training requirement for all work-capable adults (ages 18-59). This proposal would eliminate both the general work requirement and the “able-bodied adults without dependents (ABAWD) time limit that exists in current legislation. There would be exemptions to the proposed requirements for specific populations that are receiving SNAP benefits, including the elderly, disabled persons, and women that are pregnant. States would be allowed a two-year transition period to implement the revised SNAP requirements. The proposed revisions to the SNAP program have been very unpopular with many members of Congress, which could be a major “sticking point” in reaching a Farm Bill compromise.
- CRP acreage and eliminating the CSP program are key Conservation (Title II) differences.
The U.S. House Farm Bill proposal would merge the Conservation Stewardship Program (CSP) with the Environmental Quality Incentives Program (EQIP), with the goal of having more efficiency in implementing the programs, since both programs target practices on working farms. Existing CSP contracts would still be honored under the new Farm Bill, but no new CSP contracts would written. The U.S. Senate Farm Bill would keep the CSP program intact, keeping it separate from EQIP. The CSP program is very popular in States such as Minnesota, North and South Dakota and Nebraska.
The U.S. Senate proposes to increase the maximum allowable Conservation Reserve Program (CRP) acres by one million acres per year to 25 million acres, compared to the current maximum level of 24 million acres. The U.S. House Farm Bill proposes to increase the maximum CRP acres by one million acres per year, beginning in 2019, up to a cap of 29 million acres in 2023. To help generate more Federal budget capacity for the added CRP acreage, the maximum CRP rental rate in a given county would be reduced to 80 percent (.80) of NASS average cash rental rate in a county for a given year in the U.S. House Bill, and 88.5% in the U.S. Senate Bill.
- Differences in commodity programs (Title I) is a surprising issue in the new Farm Bill.
Both the Senate and House versions of the new Farm Bill would give eligible farm operators another one-time, 5-year choice between the ARC-CO and PLC program for the crop years 2019-2023, on a commodity-by-commodity basis. However, the Senate version would give producers the option to opt- out of their farm program choice after year two of the Farm Bill and switch to the other farm program option. The price and yield formulas used to calculate benchmark revenues and potential payments for the ARC-CO program would remain the same as the current Farm Bill.
The Commodity Title in the House version of the Farm Bill contained a provision that would allow producers that were impacted by long-term severe drought from 2008-2012, the years used for yield updates in the current Farm Bill for yield updates, to have their program yield re-calculated by averaging yields for the 2013-2017 crop years. This would primarily affect counties in the Southern Plains States, such as Texas and western portions of Oklahoma and Kansas. The Upper Midwest had some very good corn and soybean yields from 2013-2017, meaning that producers could see substantial benefits, if they too were allowed to update their farm program yields in the New Farm Bill.
Bottom-Line on finalizing a New Farm Bill
There are still a lot of hurdles to clear before a new Farm Bill is finalized. Once legislation is approved by the Conference Committee, it will need to be approved by both houses of Congress, before being sent to President Trump for final approval. This will likely need to happen by the end of 2018 or very early in 2019, in order for the new legislation to be implemented for the 2019 crop year. Given the political discord that currently exists in Congress, together with possible changes following the mid-term elections this year, completing a new Farm Bill in 2018 could be challenging.
If no new Farm Bill is completed in 2018, it is highly likely that the current Farm Bill could be extended for the 2019 crop year. Well over 90 percent of corn and soybean producers are currently in the ARC-CO program. It is not clear if producers would be given a choice between the ARC-CO and PLC program for 2019 under a Farm Bill extension. If producers are forced to stay in the ARC-CO program for the 2019 crop year, rather than being allowed to switch to the PLC program, it could end up being quite costly to many farm operators, assuming that crop prices stay very low. This could come at a time when a farm program “safety net” is needed the most.
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Note — For additional information contact Kent Thiesse, Farm Management Analyst and Senior
Vice President, MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960);
E-mail — kent.thiesse@minnstarbank.com)