December 4, 2023
CURRENT FARM BILL EXTENDED THROUGH 2024
In mid-November the U.S. House and Senate passed a continuing resolution that provided additional federal funding to avoid a government shutdown at the federal level. The continuing resolution that was passed and signed into law also extends the current Farm Bill for one year through September 30, 2024. This means that the current farm program and crop insurance provisions will remain in place through the 2024 crop year. It also will keep other important federal programs such as the Dairy Margon Coverage (DMC) program, Conservation Reserve Program (CRP), Environmental Quality Incentives Program (EQIP), and other popular USDA programs in place for at least another year. The extension will also limit any immediate changes to the Nutrition Title of the Farm Bill, which funds food assistance programs through SNAP, WIC, and the school lunch program.
The current Farm Bill, known as the “Agriculture Improvement Act of 2018”, expired on September 30, 2023. Even though both houses of Congress held multiple hearings and listening sessions during the past year, no formal legislation for a new Farm Bill has been proposed in either house of Congress. Once a formalized Farm Bill is proposed and discussed, it will need to be passed by both houses of Congress and signed by President Biden before it can be enacted. It was not realistic to complete this process on a timely basis in order to avoid gaps in the continuation of some important USDA programs, which is why a one-year extension was passed by Congress. The continuing resolution that was passed will also maintain funding for most federal agencies, including those that are part of USDA, until either mid-January or early February of 2024.
When most people hear of a “Farm Bill”, they think of the commodity programs and payments that affect crop producers. Some people may be aware that crop insurance and conservation programs are included under the Farm Bill, and some are knowledgeable that Supplemental Nutrition Assistance Program (SNAP) and food stamps are part of the Farm Bill legislation. However, very few people outside of government officials and policy experts are aware that the Farm Bill also covers funding for rural fire trucks and ambulances, export promotion, international food aid, forestry programs, ag research and extension education at land-grant universities, and school lunch programs. The current Farm Bill passed in 2018 was over 1,000 pages in length, and contains 12 separate Titles, which cover a multitude of programs that are administered by USDA.
Farm Program for 2024 The recent extension of the 2018 Farm Bill means that the “price loss coverage” (PLC) and “ag risk coverage” (ARC) farm program options for eligible crops will remain in place for the 2024 crop year and will be similar to PLC and ARC programs for the 2019 to 2023 crop years. For 2024, producers will be able to choose between the price-only PLC and revenue-based ARC program choices for the 2024 crop production year. The ARC program choice includes both the county-yield based “ARC-CO” program, which is most popular, and the “ARC-IC” program, which is based on farm-level yields. If no choice is made, the 2023 farm program choice will remain in place for 2024. The deadline to finalize the farm program choice and to enroll for 2024 farm program benefits will likely be March 15, 2024, at local Farm Service Agency (FSA) offices. As of this writing, USDA has not yet made any official announcements regarding 2024 farm program sign-up.
Crop base acres for 2024 will likely remain at the same levels as 2023 for all crops on most farms, unless there are adjustments in base acres for crop acres that were added via land purchases or rental agreements or acres that are no longer eligible for farm program payments. The 2023 farm program yields on individual farm units, which were last updated in 2020, will be continued to calculate potential PLC payments. The ARC-CO “benchmark yields” for 2024 will be based on the “Olympic-average” Risk Management Agency (RMA) county average yields for the 2018 to 2022 crop years. The national “market year average” (MYA) price for each program crop for the years 2018-2022 will be averaged to calculate the 2024 “benchmark price” for the ARC-CO and ARC-IC programs.
The calculation formulas, etc. for the 2024 PLC, ARC-CO and ARC-IC programs will likely remain the same as in previous years.PLC payments for 2024 will be made if the final MYA price for 2024 falls below the reference price for a given crop. ARC-CO payments for 2024 will be made if the final county revenue for the year (county yield x final 2024 MYA price) falls below the 2024 benchmark revenue (county benchmark yield x benchmark price) for a given crop. The calculations for the ARC-IC program are the same as for the ARC-CO program, except ARC-IC uses farm-level yield data and considers all crops on a farm unit together for calculation of potential payments in a given year. PLC and ARC-CO payments are paid on 85 percent of crop base acres, while ARC-IC payments are paid on only 65 percent of base acres.
The 2014 Farm Bill established “statutory reference prices” for all crops that were used to calculate PLC payments. The 2018 Farm Bill set the fixed statutory prices as minimum reference prices and added the possibility for “effective reference prices” (ERP). The ERP allows the reference price to increase by as much as 15 percent above the fixed reference price (fixed price x 115%). The final ERP for a given year is the higher of the fixed statutory price or the 5-year “Olympic average” price for a commodity times 85 percent (.85). The “Olympic average” price is calculated by taking the market year average (MYA) price for the five previous years (not including the current marketing year), dropping the high and the low price, and then averaging the other prices for the other three years. For the 2024 crop year, the “Olympic average” price is based on the MYA prices for the years 2018 to 2022, which is then multiplied by 85% (.85) to determine the final ERP price.
The final effective reference prices (ERP) for the 2019 to 2023 crop years were at the minimum statutory levels of $3.70 per bushel for corn, $8.40 per bushel for soybeans, and $5.50 per bushel for wheat, meaning that calculation for higher ERP levels was not triggered for any of those three crops. MYA prices have been high enough in recent years to likely result in higher 2024 PLC reference prices for corn and soybeans; however, the wheat reference price will likely remain at the minimum level. The higher reference prices for corn and soybeans potentially increases the likelihood of PLC payments for the 2024 crip year, especially for corn if average market
prices continue to decline during the 2024-25 marketing year. (Please refer to the attached Table.) Following are the estimated 2024 PLC reference prices:
- Corn = $4.02 per bushel (maximum is $4.26/bu. and minimum is $3.70/bu.)
- Soybeans = $9.26 per bushel (maximum is $9.66/bu. and minimum is $8.40/bu.)
- Wheat $5.50 per bushel (maximum is $6.33/bu. and minimum is $5.50/bu.)
The 2024 benchmark (BM) prices that are used for the ARC-CO and ARC-IC programs are also based on the five-year “Olympic average” MYA prices for 2018 to 2022; however, the ARC benchmark prices are not factored downward by 85 percent (x .85). The minimum BM price is the statutory reference price for a given crop. Following are the estimated ARC-CO and ARC-IC benchmark prices for the 2024 crop year:
- Corn = $4.75 per bushel $3.98/bu.in 2023)
- Soybeans = $10.89 per bushel ($9.57/bu.in 2023)
- Wheat $6.21 per bushel ($5.50/bu. in 2023)
BOTTOM – LINE
Another provision in the 2018 Farm Bill allows farm operators to make year-to-year decisions between PLC, ARC-CO and ARC-IC for each eligible crop on an FSA farm unit. Assuming that the PLC and ARC-CO farm program provisions and calculations in 2024 stay relatively similar to recent years, farm operators will want to do a bit more analysis before finalizing year-to-year farm program decisions for various crops. The potential for higher PLC reference prices and increasing benchmark prices will make that decision a bit more challenging for 2024 than in recent years. USDA has not yet announced the 2024 farm program details and sign-up dates at local FSA offices.
******************************************************************************************
Note — For additional information contact Kent Thiesse, Farm Management Analyst and Sr. Vice President,
MinnStar Bank, Lake Crystal, MN. (Phone — (507) 381-7960)
E-mail — kent.thiesse@minnstarbank.com) Web Site — http://www.minnstarbank.com/