The long winter of farmers’ discontent with the lack of a farm bill and an uncertain outlook for the future finally came to a close today as President Obama signed the Agriculture Act of 2014.
Surrounded by Democratic leaders of Congress — and no Republicans — the president signed the new law on the campus of Michigan State University, alma mater of Sen. Debbie Stabenow, Senate Agriculture Committee Chair who led the effort to pass the farm bill in the Senate three times.
The president cited Stabenow for her “great leadership” in getting a bipartisan farm bill passed. He also praised Sen. Thad Cochran, R-Miss., ranking minority member; Rep. Frank Lucas, R-Okla., chairman of the House Agriculture Committee; and Rep. Collin Peterson, D-Minn., ranking member of the House Ag Committee, for their work.
“I could not be prouder of your own Debbie Stabenow, who has done just extraordinary work. She’s been a huge champion of American manufacturing but really shepherded through this farm bill, which was a very challenging piece of business,” he said.
“She worked with Republican Senator Thad Cochran, who I think was very constructive in this process. We had Representatives Frank Lucas, a Republican, working with Collin Peterson, a Democrat. We had a terrific contribution from our own Secretary of Agriculture, Tom Vilsack.
Mr. Obama said the farm bill is not just about helping farmers. “Secretary Vilsack calls it a jobs bill, an innovation bill, an infrastructure bill, a research bill, a conservation bill. It’s like a Swiss Army knife. It’s like Mike Trout – for those of you who know baseball.”
The farm bill lifts up our rural communities, he said. “Over the past five years, thanks to the hard work and know-how of America’s farmers, the best in the world, we’ve had the strongest stretch of farm exports in our history. And when I’m traveling around the world, I’m promoting American agriculture. And as a consequence, we are selling more stuff to more people than ever before.”
Prior to signing the farm bill, Obama toured a renewable fuels facility. He also talked about efforts at Michigan State to help farmers grow crops that are healthier and more resistant to disease and the fact some students are growing pigs on an organic farm.
“So we’re seeing some big advances in American agriculture,” he noted. “And today, by the way, I’m directing my administration to launch a new “Made in Rural America” initiative to help more rural businesses expand and hire and sell more products stamped ‘Made in the USA’ to the rest of the world -- because we’ve got great products here that need to be sold and we can do even more to sell around the world.”
The farm bill did not include everything he would like to have seen, he said. “And I know leaders on both sides of the aisle feel the same way. But it’s a good sign that Democrats and Republicans in Congress were able to come through with this bill, break the cycle of short-sighted, crisis-driven partisan decision-making, and actually get this stuff done.
“And that’s the way you should expect Washington to work. That’s the way Washington should continue to work. Because we’ve got more work to do.”
As the ink dried on the new law, farm leaders across the country were delving into the fine points of the legislation, trying to figure out how to advise their members to best approach its crop-insurance-oriented provisions.
Although “very happy to finally have a new law,” Mississippi Farm Bureau President Randy Knight said, “we are a little overwhelmed with the many changes in this bill compared to the old law — the most significant being the repeal of the direct payment program that southern producers have relied upon due to higher production costs of their commodities, such as cotton and rice.”
For southern producers, he says, crop insurance “may have not been as effective as in other parts of the country. This change will also take millions of dollars out of Mississippi’s agricultural economy.”
Knight says producers “will have many options and important decisions to make, many of which have to be made very, very quickly.”
Growers will have the option of a whole farm revenue-type program (ARC or Agricultural Risk Coverage) or a target price support program (PLC or Price Loss coverage), similar to the current countercyclical program, both of which will be administered by the government’s Farm Service Agency.
These programs will be paid on base acres, and farmers will have a one-time option to update their farm base and program yield, which is based on a five-year history of actual planted acres on their farm. The payment limit under the new law is $125.000 and the adjusted gross income or AGI limit is $900,000.
Peanut and rice farmer groups had sought a PLC option because, historically, crop insurance has not been a popular program in the South. With low participation rates, insurance premiums in the region often were much higher than in other parts of the country.
Producers will have a choice, said Sen. Thad Cochran, R-Miss., ranking member of the Agriculture Committee, that “offers producers options for managing risk through counter-cyclical risk management tools based on price or revenue protection (Price Loss coverage or Agricultural Risk Coverage).”
A PLC payment is triggered if the effective price for the covered commodity is less than the reference price for the covered commodity. The effective price will be the higher of the national average market price or the national average loan rate for a marketing assistance loan for the commodity.
The reference prices for the covered commodities: $14.00 per hundredweight for long grain rice, $5.50 per bushel for wheat; $3.70 per bushel for corn; $8.40 per bushel for soybeans to $535 per ton for peanuts.
The new law also creates a new stacked income protection program or STAX for cotton producers who felt traditional crop insurance-type programs would not help avert what they call shallow losses. The other commodities have a Supplemental Coverage Option or SCO program to help avoid such losses.
Because of the complexity of writing the new rules, USDA’s Risk Management Agency will not be offer STAX in 2014. Instead, growers will be eligible for transition assistance in counties where the STAX program has not been implemented.
The transition assistance payment will be calculated using a formula involving marketing year average prices for upland cotton, the national program yield of 597 pounds per acre and 60 percent of the cotton base acres for the farm in 2014 and 36.5 percent of the base acres in 2015. Some sources say the transition payment will be 5.85 cents per pound.
The Mississippi Farm Bureau’s Knight says the new Supplemental Coverage Option will be a positive enhancement to crop insurance, particularly for growers in the southern states who have not put much faith in the product in the past.
“Farmers can purchase the Supplemental Coverage Option on top of their existing individual coverage. This will also work like an area group policy, and we’re told it will be very cost-effective. However, most of the county will have to incur a loss for an indemnity to be issued.”
The bill also changes the payment limits provisions, he says, and leaves changes to the definition of “actively engaged” to the discretion of the Secretary of Agriculture in the rule-making process. “This concerns us greatly.
For more information on the farm bill: Highlights of Recent Farm Sector and Rural Economy Performance