April 24, 2023
QUESTIONS AND ANSWERS REGARDING A NEW FARM BILL
The 2023 crop year will be the final year for the current Farm Bill, which is set to expire on September 30, 2023, unless there is an extension to the current legislation. A Farm Bill is one of the most comprehensive pieces of legislation that is passed by Congress, with programs ranging from farm commodity programs to food and nutrition programs, from conservation programs to rural development programs, and several more. In many cases, finalizing a Farm Bill can be quite controversial, both along political party lines and geographical differences, with members of Congress wanting to protect the farm, food, conservation, and economic interests of their State. Following are some key questions that are commonly being raised regarding passage of a new Farm Bill:
What is a Farm Bill and why is it so important ?
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 the Supplemental Nutrition Assistance Program (SNAP) is part of the Farm Bill. 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, forestry programs, school lunch programs, and agriculture research and extension education at land-grant universities.
What are the key issues in the Farm Bill for farm organizations and commodity groups ?
Most crop producers and ag lenders will highlight a sound working crop insurance program as the “centerpiece” for a solid risk management plan in a farm operation. Most crop insurance premiums are subsidized at a rate of 60-65 percent by the federal government, as part of the Farm Bill. Some members of Congress and some non-ag organizations are calling for some changes and modifications to the current Federal Crop Insurance program, while most farm organizations are lobbying to keep the current program. Many farm organizations would like to see a continuation of current crop commodity programs, offering a choice between the county revenue based “Ag Risk Coverage” (ARC-CO) program, or the price-only “Price Loss Coverage” (PLC) program, for corn, soybeans, wheat, and other eligible commodity crops. Some commodity groups are pushing for increased crop reference (guaranteed) prices in the next Farm Bill, given the current higher crop input costs. The dairy margin protection program and sugar support programs are also included under the commodity title of the Farm Bill.
What role does the SNAP program play in passing a Farm Bill ?
The Nutrition Title, which includes the SNAP program (food stamps), the Women, Infants and Children (WIC) nutrition program, and school lunch program, will probably be debated more than any other Title during Farm Bill hearings in 2023. The Nutrition Title will account for over 80 percent of annual federal spending allocated under the next Farm Bill and affects every Congressional District in the U.S. Several billion dollars were added to the Nutrition Title budget base as part of COVID relief legislation and the 2022 Inflation Reduction Act. Some members of Congress would like to separate the Nutrition Title from the Farm Bill; however, most agriculture policy experts warn that funding for ag commodity programs and crop insurance could become much more difficult if the SNAP program and the other nutrition programs are removed from the Farm Bill.
What role will “Climate Change” initiatives have on the new Farm Bill ?
Climate change and carbon sequestration have definitely been part of Congressional Farm Bill discussions up to this point and will likely be referenced in the final version of a new Farm Bill. Most farm organizations would like to see these “climate-smart” initiatives be implemented on a voluntary basis through existing programs such as the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP). However, other groups and some members of Congress would like these initiatives added as established requirements for receiving Farm Bill benefits through crop insurance and commodity programs.
What is the “CBO Baseline” and what role does that play in passing a new Farm Bill ?
Three times each year the Congressional Budget Office (CBO) releases projections for federal spending on Farm Bill-related programs, with those estimates for the current federal fiscal year (ends on 9-30-23) plus the next ten years through the 2032-33 fiscal year. The current CBO estimates were released in February of this year and are currently being used to set budget parameters for the new Farm Bill. Increasing funding in specific titles in the Farm Bill beyond the CBO baseline can be quite difficult for Congress, unless there are budget reductions in some other aspects of the Farm Bill. Some members of Congress would like to reduce the estimated overall federal budget outlay for the Farm Bill below the CBA baseline projections over the next 10 years.
What is the estimated cost of the new Farm Bill ?
The current CBO baseline estimate for Federal budget expenditures over the next ten years (2024-2033) is $1.5 trillion, or an average of $150 billion per year. This would make the proposed legislation the first trillion dollar Farm bill in in history. The projected baseline budget is 65 percent higher than when the last Farm Bill was passed in 2018, which had an estimated 10-year CBO baseline of $860 billion, or an average $86 billion per year.
What is the projected breakdown of spending in the new Farm Bill ?
The current CBO estimate for expenditures over the next ten years (2024-2033) for the various Titles in the Farm Bill are as follows:
- Nutrition Title —- $1.2 trillion (82% of total) or $120 billion per year; (76% of total in 2018).
- Crop Insurance Title — $97.1 billion (7% of total) or $9.71 billion per year; (9% of total in 2018).
- Commodity Title — $61.8 billion (4% of total) or $6.18 billion per year; (7% of total in 2018).
- Conservation Title — $57.5 billion (4% of total) or$5.75 billion per year; (7% of total in 2018).
(Note — An additional $34.7 billion (2% of Farm Bill) was allocated to the EQIP and CSP programs as part of the 2022 Inflation Reduction Act.)
- All Other Titles — $19.5 billion (less than 1% of total) or $1.95 billion per year; (1% of total in 2018)
What if a new Farm Bill is not passed this year ?
If no agreement can be reached on a new Farm Bill by the end of 2023, an alternative may be a one-year extension of the current Farm Bill for 2024 to allow continuation of the programs under the current Farm Bill. This would maintain 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 various versions of a new Farm Bill. If this occurs, the current PLC and ARC-CO farm program would likely be continued for the 2024 crop year, and there will also likely be very little impact on other Farm Bill related programs in 2024. A one-year extension of existing programs and funding has occurred quite frequently prior to the final passage of recent Farm Bills.
What is the likelihood of passing a new Farm Bill in 2023 ?
The Agriculture Committee leadership in both the U.S. Senate and U.S. House has been very committed to having a new Farm Bill completed by the end of 2023, with very little talk of an extension to the current Farm Bill. There are still a lot of hurdles to clear before a new Farm Bill is finalized and approved by both houses of Congress, and ultimately is sent to President Biden for final approval. This will likely need to happen by the end of 2023 or very early in 2024 to make it possible for the new legislation to be implemented for the 2024 crop year. Ultimately, there will likely be a compromise reached, and a new 5-year Farm Bill will be passed. However, given the political division that currently exists in Congress and some of the more extreme ideas that exist regarding the next Farm Bill, a one-year extension of the current Farm Bill is certainly a possibility by the end of 2023.
******************************************************************************************
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/