The Senate Agriculture Committee kicked-started public debate on the 2013 Farm Bill, with the goal of moving the bill to the Senate floor the week of May 21st. After a quick two hour markup of the Agriculture Reform, Food and Jobs Act of 2013 (S. 10), the bill passed out of the committee by a vote of 15 – 5.
The Senate bill eliminates direct and counter-cyclical payments, as well as the Average Crop Revenue Election (ACRE) program after 2013, and creates a new Adverse Market Payment (AMP) program, The AMP program would pay producers of covered commodities when actual prices fall below a specific reference prices. The actual price will be equal to the higher of the national average price received by producers during the 12-month marketing year and the national average loan rate for a marketing assistance loan. These price points had previously been known as target prices and, with the exception of rice and peanuts, the newly minted reference prices are equal to the target prices established as part of the 2008 Farm Bill.
With the ascension of Senator Thad Cochran (R – MS) as the Ranking Republican on the Senate Agriculture Committee, it is clear that southern interests now have a stronger hand to play in the Senate. The reference price for rice in the Senate bill has been increased to $13.30/hundredweight (up from the current target price of $10.50/hundredweight) and the peanut reference price will be increased to $523.77/ton (up from $495/ton under current law.
In addition to the enhanced reference price, there is also an exception for the rice payment mechanism. For long-grain and medium grain rice, the actual price for each class of rice is the national average market price received by producers during the 12-month marketing year for the type or class of rice or the national average loan rate for a marketing assistance loan in effect. According to Agri-Pulse, rice producers will have a one-time chance to adjust yields that were established under the 2002 farm bill and peanut producers can update yields and base acres.
The AMP program is not the only safety net option available to producers. The Agriculture Risk Coverage (ARC) program is retained from last year’s bill but the formula has been adjusted for the purposes of cost savings. The price band has been adjusted to 88 percent instead of 89 percent and the prices will be calculated on a 12-month timeframe instead of the first five months of the marketing year.
The ARC program covers planted acres for wheat, corn, grain sorghum, barley, oats, long grain rice, medium grain rice, pulse crops, soybeans, other oilseeds and peanuts – with payments being made whenever the actual crop revenue for the crop year for the covered commodity is less than the agriculture risk coverage guarantee for the crop year for the same covered commodity. Producers would need to make a one-time irrevocable election in order to be covered under the ARC program for 2014-2018.
On the dairy front, the proposed legislation repeals the Dairy Product Price Support (DPPS), Milk Income Loss Contract (MILC) and Dairy Export Incentive programs. Conversely, the Dairy Forward Pricing, Dairy Indemnity, Dairy Promotion and Research programs (as well as the Federal Milk Marketing Order Review Commission) are all authorized through 2018.
The bill again includes the bulk of “Foundation for the Future” plan that has been advocated for by the National Milk Producers Federation (NMPF) for the past couple of years – including a new Dairy Product Margin Protection Program and a Dairy Market Stabilization Program. A dairy operation that signs up in the basic production margin protection program must also participates in the stabilization program.
The dairy operation would be required to pay an annual administration fee (depending on marketing volume) which would be used to cover the costs of the program, the reporting of dairy market news, and other related costs. There is an “off ramp” exception for limited-resource dairies.
Also of note (and a rather “late breaking” development) is the linkage of crop insurance to conservation. Last week a number of national farm, conservation and environmental organizations had reached agreement linking participation in the crop insurance program to conservation compliance. In exchange, the groups agreed to fend off another potential farm bill amendment that would have limited the amount of crop insurance premium subsidies, depending on a grower’s adjusted gross income (AGI).
During the mark-up Senators Heidi Heitkamp (D – ND) and John Hoeven (R – ND) attempted, without success, to decouple the two issues. Noting that it was the national organizations – not the local groups – who had agreed to the compromise, Ms. Heitkamp and Mr. Hoeven knew that it would be an uphill climb to remove or modify the provision from the bill. The issue is expected to resurface when the House Agriculture Committee begins work on their farm bill May 15th.
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