New Farm Bill Ends Direct Payments to Farmers
After multiple extensions and delays, the Agricultural Act of 2014—more widely known as the Farm Bill—was finally passed by Congress and signed into law by the president in February. Since then, it has been up to the USDA and other agencies to integrate the changes the bill contains, to work through the specific rules for the programs, and to oversee its implementation at ground level. Farmers themselves are interested in the portions of the bill that have changed in regard to agriculture policy and how these changes may affect them.
The vast majority of the Farm Bill costs still fall to the Nutrition program, also known as the Supplemental Nutrition Assistance Program (SNAP), at 80 percent. After that, 8 percent goes to expanded crop insurance programs, 6 percent to conservation programs, 5 percent commodities, and 1 percent “other.”
However, the end of direct payments has garnered the most attention on the agricultural scene. These payments were known as the Direct and Counter-cyclical Program (DCP) and the Average Crop Revenue Program (ACRE). These direct payments to farmers, first instated as a temporary program in the 1996 farm bill but retained in subsequent bills since, were the object of bipartisan ire for many years, since the payments didn’t depend on need or the condition of the crop, but solely on the number of acres owned, sometimes even if those acres did not grow an actual crop.
As a result, lawmakers backing the final iteration of the bill touted a victory in managing to pass something that affected such a wide array of interest groups, and that is expected to cut the budget by $17 billion over a decade.
While direct payments have come to an end, the bill does offer more robust insurance and revenue protection systems instead. In place of DCP and ACRE programs, the new farm bill will offer:
• Price Loss Coverage (PLC), a price protection program that triggers payments when market year average prices fall below target levels, which are called reference prices.
• Agricultural Risk Coverage County (ARC-C), a revenue protection program that triggers payments when the county revenue per acre falls below a benchmark revenue guarantee per acre set for the county.
• Agricultural Risk Coverage Individual (ARC-I), a revenue protection program that triggers payments when there is a revenue-per-acre shortfall on the individual farm that falls below a benchmark revenue guarantee per acre for that farm.
Dwight Aakre, North Dakota State University Extension Service farm management specialist, says this of the new ARC programs: “Unlike the ACRE program, where the entire state had to experience a revenue shortfall in the current year, the ARC program will use the county or the individual farm as the benchmark. This results in support payments when the revenue is less than the benchmark for either the county or the farm, which more closely reflects the actual condition an individual producer experiences.”
Producers taking advantage of the program will have to choose either the county or farm option. The county option pays up to 85 percent of the base acres, while the farm option is limited to a maximum of 65 percent of base acres.
The PLC option will work much like the previous DCP program. The PLC payment results when the covered commodity’s marketing price falls below the reference price.
The latest farm bill brings some significant changes to the programs offered to farmers. Do you need help further understanding these changes, and how they may affect you as a landowner? Let UFARM help you navigate the options available to you.
United Farm and Ranch Management (UFARM) is a Nebraska-based company devoted to meeting landowners’ needs. UFARM offers a full range of Nebraska land management services, including real estate sales, rural property appraisals, consultations and crop insurance. UFARM has operated in Nebraska since the early 1930’s.
Sources:
“2014 Farm Bill Eliminates Direct Payments.” North Dakota State University Agricultural Communication. NDSU Extension Service. 31 Jan. 2014. Web. 05 Jun. 2014.
Stewart, Jennifer. “Purdue Ag Economist Offers Insights to Latest Farm Bill.” The Prairie Star. The Prairie Star. 04 Jun. 2014. Web. 05 Jun. 2014.
