Examination of the design and funding of federal agricultural policies, focusing on Farm Bill law within a context of the contemporary economic and political environment.

1. Brad Jordahl Redlin
September 24, 2015
Context and Policies

2. 1. Federal Farm Policy in Context
2. Production Policy
3. Conservation Policy
4. Risk Management Policy
Context and
Policies

3.  51 percent of total U.S. land is in agricultural
use
(61 percent of lower 48 states).
 Urban land use is 2.7 percent.

4.  Farm numbers and sizes have changed, but not the
acreage.

5.  Major commodity prices had been strong in recent farm
bill periods…

6.  Crop prices do not have major effect on food prices

7.  Farm production % is up at 10.5 percent of food costs

8.  Title I Commodities
 Title II Conservation
 Title III Trade
 Title IV Nutrition
 Title V Credit
 Title VI Rural Development
 Title VII Research
 Title VIII Forestry
 Title IX Energy
 Title X Horticulture
 Title XI Crop Insurance
 Title XII Miscellaneous
 Farm Bill reauthorized every 5 years--or will revert to 1949 law.

9.  There are 3 means for delivering $ to agriculture via Farm Bill.
 Commodity Subsidies, Conservation Programs, Crop Insurance.

10. USDA Nutrition Assistance
►Farm Bill: SNAP (food stamps).
►Non-Farm Bill:
National School Lunch Program;
Women, Infants and Children (WIC);
Child and Adult Care Food Program;
School Breakfast Program.

11. 1. Federal Farm Policy in Context
2. Production Policy
3. Conservation Policy
4. Risk Management Policy
Context and
Policies

12. CCP CYs 2010-12
Wheat $4.17/bu
Corn $2.63/bu
Grain sorghum $2.63/bu
Barley $2.63/bu
Oats $1.79/bu
Upland cotton $0.7125/lb
Long-grain rice $10.50/cwt
Medium-grain
rice
$10.50/cwt
Peanuts $495/ton
Soybeans $6.00/bu
Other oilseeds $12.68/cwt
Loan Rate CYs 2010-12
Wheat $2.94/bu
Corn $1.95/bu
Grain
sorghum
$1.95/bu
Barley $1.95/bu
Oats $1.39/bu
Long-grain
rice
$6.50/cwt
Medium-
grain rice
$6.50/cwt
Soybeans $5.00/bu
Other
oilseeds
$10.09/cwt
Upland
cotton
$0.52/lb
ELS cotton $0.7977/lb
Peanuts $355/ton
 Commodity production supports paid on floor & target
prices… and at a standard rate de-coupled from production.
Direct Payment
rate
Wheat $0.52/bu
Corn $0.28/bu
Grain sorghum $0.35/bu
Barley $0.24/bu
Oats $0.024/bu
Upland cotton $0.0667/lb
Long-grain rice $2.35/cwt
Soybeans $0.44/bu

13.  Commodity program payments made on “base
acres.”
 historical planted acreage registered for each farm.
 may plant any* crop; payments based on “base”…
Soybeans
35 acres
Corn
50 acres
Wheat
15 acres
…and historical yield.
 2014 Farm Act permits one-time option to update base
(no increase in acres) and yield (2009 - 2012).
 base stays with land.
XYZ Farm
100 acres

14. Price Loss
Coverage
(PLC)
• 85% base
• SCO
Wheat
$5.50 per
bushel
Corn
$3.70 per
bushel
Grain sorghum
$3.95 per
bushel
Barley
$4.95 per
bushel
Oats
$2.40 per
bushel
Long-grain rice
$14.00 per
hundredweight
Medium-grain
rice
$14.00 per
hundredweight
Soybeans
$8.40 per
bushel
Other oilseeds
$20.15 per
hundredweight
Loan Rate
Wheat $2.94/bu
Corn $1.95/bu
Grain
sorghum
$1.95/bu
Barley $1.95/bu
Oats $1.39/bu
Long-grain
rice
$6.50/cwt
Medium-
grain rice
$6.50/cwt
Soybeans $5.00/bu
Other
oilseeds
$10.09/cwt
Upland
cotton
$0.42/lb to
$0.52/lb
ELS cotton $0.7977/lb
Peanuts $355/ton
 2014 law maintains MAL; PLC alternative to CCP; and ARC
“shallow loss.” (choose one time between PLC and ARC)
Agricultural
Risk Coverage
(ARC)
Pymts no greater
than 10 percent of
benchmark revenue
ARC-county
(85% base)
avg county yield
times national farm
price drops below
86% of county
benchmark revenue
(5-year Olympic avg
county yield times >
5-year Olympic avg
national or reference
price each year)
ARC-individual
(65% base)
difference between 86%
individual farm
guarantee (the 5-year
Olympic avg individual
yield times > 5-year
Olympic avg of national
or reference price each
year) and actual
individual farm revenue
summed across all
commodities (sum all
covered commodities
avg revenue weighted
by plantings)
NOTE: CBO 2015 projection:
ARC and PLC will average
$4.4 billion, compared with
CBO’s 2014 projection of
$2.94 billion

15.  ARC
explained
…maybe.
$4.50 x 180 =
$810 x 0.86 =
$696.60/acre $3.20 x 180 =
$576/acre
$696.60 - $576 =
$120.60 x 50 acres =
$6,030 x 0.85 =
$5,125.50 or $102.51/acre
($810 x 0.10 = $81/acre)
$81 x 50 =
$4,050 ARC payment

16. Price Loss Coverage and Agriculture Risk Coverage
- planting provisions -
 Previous policy (multiple farm bills) lost acre-to-acre DP
and penalized market value of vegetables.
 PLC and ARC enrollment permits fruit, vegetables, and
wild rice on up to 15% of registered farm base acres.
non-base acres base acres
no penalty
<15% base acres:
no penalty
>15% base acres:
payment acres
reduction acre-for-
acre exceding15%
(NOTE: 35% individual ARC)

17.  Associated
programs
offered in 2015.
Supplemental Coverage Option (SCO)
• eligible if enroll in PLC and purchase federal Crop Insurance
• provides coverage based on county average yield or revenue
• subsidies pay 65 percent of premiums
• pays from 86% down to level of federal crop Insurance coverage purchased
• not subject to payment limitations or adjusted gross income (AGI) eligibility limits.*
Stacked Income Protection Plan (STAX)
• county/area revenue insurance policies to cotton producers
• in place of coverage for cotton under PLC and ARC
• STAX policies can supplement federal crop insurance, or be stand-alone
• pays from 90% down to level of insurance coverage, or maximum of 70%
• subsidies pay 80 percent of premiums
• not subject to payment limitations or adjusted gross income (AGI) eligibility limits.*
* Payment limit $125,000 for PLC, ARC and MAL combined (double for spouse)
AGI eligibility limit of $900,000 (3-year average)

18. 1. Federal Farm Policy in Context
2. Production Policy
3. Conservation Policy
4. Risk Management Policy
Context and
Policies

19. 
Conservation
Title contains a
suite of
programs.
 Programs
meet different
goals and
utilize different
methods.
Wetlands Reserve Program, Farmland Protection Program,
and Grassland Reserve Program (easement) consolidated into:
Agricultural Conservation Easement
Program (ACEP)
Agricultural Water Enhancement Program, Chesapeake Bay
Watershed Program, Cooperative Conservation Partnership
Initiative, Great Lakes Basin Program are consolidated into:
Regional Conservation Partnership
Program (RCPP)
Wildlife Habitat Incentive Program is merged into:
Environmental Quality Incentives
Program (5% dedicated wildlife)
Grassland Reserve Program (rental) will be through:
Conservation Reserve Program
(grassland up to 2 million acres)

20.  Working
lands
conservation is
dominant.

21. Conservation Compliance
Highly Erodible Land (HEL) Compliance, Sodbuster, Wetland Conservation (Swampbuster)
 Public provides financial support via USDA payments.
 Recipients protect soil and wetlands for the public.
 Penalties are reduction or loss of farm program
payments for draining existing wetlands or not
maintaining soil protections.
Ducks Unlimited photo
NRCS photoNRCS photo

22.  Conservation
CHIMPS.
 Farm Bills set
mandatory
spending levels;
appropriators
nonetheless do
otherwise.

23. 1. Federal Farm Policy in Context
2. Production Policy
3. Conservation Policy
4. Risk Management Policy
Context and
Policies

24.  Federal Crop Insurance is subsidized for
producers and insurance companies.
 National average is 62% of premium is
paid by subsidy, often even higher.
 Crop Insurance exempted from compliance
in 1996 Farm Bill. Reinstated in 2014.

25.  Subsidized risk reduction, without compliance checks and balances,
can incent unintended consequences:
 Producers “left” the farm
program to avoid compliance.
 Producers
may take risks
with land or
practices.

26.  Participation in Crop
insurance is high across
major commodities.
 Premium subsidies,
Revenue policies have
been growing rapidly.

27.  Revenue insurance is dominant with high coverage levels.

28.  Fundamental crop insurance formula:
((Yield * Coverage) * price) * acres =
Insured Revenue
Yield – Actual Production History (APH)
minimum 4 yrs, maximum 10 yrs
Coverage – percentage of yield/APH insured
like a deductible, select from sequence 50% - 85%
Price – generally, higher of spring/harvest price
average futures prices Feb or Oct
Acres – acres planted to insured crop
optional “units,” e.g. all acres of one crop in county

29. Approved Projected Price: $5.65 Approved Harvest Price: $4.39

30.  Crop Insurance dominant in Farm Bill policy and budget.
 2014 again saw near/record production & yield for major crops.
 Extended low-price cycle is challenge to revenue insurance.
 Climate change is challenge to APH (provisions already
enacted).

31.  Crop Insurance is
lynch pin of Farm Bill
for farmers.
 2014 Farm Act asks
complex questions of
farmers.
 And 2014 Farm Act
continues to provide
conservation options.

32. www.iwla.org/farmbill
Brad Jordahl Redlin
bjredlin@gmail.com
651.270.0564
www.sustainableagriculture.net
Context and
Policies
www.ers.usda.gov/ www.fsa.usda.gov/FSA/