Evaluating commodity program choices in the new farm bill
The new farm bill (which can be found here) has revised the farm safety net, requiring farmers and landowners to sort through a series of decisions. This post will provide initial analysis and information on the choices in the new farm safety net for the 2014 crop year.
On February 4, 2014, the 2014 Farm Bill (named the Agriculture Act of 2014) cleared its final Congressional hurdle. The President is expected to sign the bill into law on February 7, 2014, then it goes down to the United States Department of Agriculture for implementation. The commodity programs in Title I of the farm bill and the choices required all begin with the 2014 crop year. The final regulations will further determine program and decision parameters, as well as when farmers can begin to sign up. The discussion below is based on the legislative text. It will be updated or revised as needed based on the regulations.
The difficult negotiations between competing approaches to the farm safety net resulted in the compromise approach in the final bill that require the decisions discussed herein. In short, the House farm bill required the owners of a farm to choose between a county revenue program and a fixed-price program. The Senate version of the farm bill provided both a price and revenue program for all farms and covered commodities but within the revenue program it required a choice between county level revenue or individual farm level revenue. The final bill requires a choice among a price program, a county revenue program or an individual farm revenue program.
Title I of the 2014 Farm Bill includes a price-based assistance program called Price Loss Coverage (PLC) and revenue-based assistance programs called Agriculture Risk Coverage (ARC) (more information is available here). Reflecting significant concerns about market and planting distortions, the compromise utilizes base acres for all program payments (i.e., payments are made on a percentage of the farm's base acres); neither program makes payments on the acres actually planted to covered commodities with the exception of cotton base acres (now termed "generic base acres") that are planted to covered commodities. Cotton is no longer a covered commodity due to the World Trade Organization (WTO) dispute with Brazil.
First, owners of a farm will be provided a one-time opportunity to either retain their current base acres or to reallocate their base acres among those covered commodities planted during the 2009 through 2012 crop years. If the owners choose reallocation, the farm's base acres going forward will be in proportion to the four-year average of acres planted to each covered commodity in those crop years, including any acreage that was prevented from being planted to a covered commodity in a crop year. Other base acre provisions, such as adjustments for acres that exit the Conservation Reserve Program (CRP), are similar to the 2008 Farm Bill except the program decisions outlined below must be made for CRP acres when they exit. An election to reallocate base acres cannot, however, result in an overall increase in the farm's base acres.
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