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TCS Analysis of the Farm Bill Conference Report

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January 28, 2014

Lawmakers are trying to rush a 949-page farm bill conference report through Congress that would spend nearly a trillion dollars over the next ten years. If legislators somehow find time to read the bill, they’ll realize that compared to previous versions in both the House and Senate, it’s gone from bad to worse. The bill is so bad, Agriculture Committee leaders had to remove “reform” from the title. To help staff and lawmakers out, the TCS team is breaking down what’s in and what’s out of the bill being considered in the House tomorrow (Jan. 29, 2014).  Here’s a link to the letter we sent to Congress today and below is a look at what we found for each title in the legislation:

Cost Information from Congressional Budget Office Score

  • Saves just $16.6 billion and spends $956 billion over ten years, so saves not even 2 percent over the next ten years
     
  • Saves less than either the 2013 House- or Senate-passed farm bills
     
  • Crop insurance expenditures are increased by $6 billion over the next ten years
     
  • Two-thirds of savings occur in FY19-23 after the new farm bill will have expired
     
  • $879 million in mandatory spending for energy title programs
     
  • New shallow loss programs are expected to cost at least $19 billion but this is an extremely low estimate – see our chart of previously-passed shallow loss program costs here
     
  • Transition payments for cotton (continued direct payments under a new name) cost taxpayers $558 million

Commodity Title

  • PLC and ARC are included (Price Loss Coverage, i.e. government-set target prices, and Agriculture Risk Coverage, the Senate shallow loss program) – for more information on shallow loss programs, see our fact sheet. Payment limits for these individual programs have been eliminated from earlier versions of the bills despite already being agreed to by both the House and Senate.
     
  • Marketing loans are provided for high moisture feed grains and seed cotton, among other crops, and also contain no limits on the amount of subsidies taxpayers provide to agribusinesses.
     
  • Payment Limits: Total payments to an individual/entity for PLC, ARC, marketing loan gains, or loan deficiency payments are capped at $125K. Peanuts have their own $125K payment limit. Specific payment limits for ARC (shallow loss program), for instance, are gone; no specific payment limits for marketing loans.
     
  • Actively engaged in farming provisions (in order to receive farm subsidies) are gutted:
     
  • The bill punts the decision of how to define active engagement to the U.S. Department of Agriculture (USDA) but only “if the Secretary determines it is appropriate…” It also directs the Secretary to take into account if the decision “will adversely impact the long-term viability of the farming operation.” USDA has already said it doesn’t have enough direction from Congress to implement such regulations. Instead of providing direction, Agriculture Committee leaders watered down the regulations.
     
  • Regulations do not apply to “family farms.” This allows farmers’ kids, who may be lawyers in Chicago and NYC, to continue to receive farm subsidies simply because their father has hit farm payment limits and intends to suck taxpayers dry by signing them up for the program as well. Just because they are family. Even if they aren’t farmers.
     
  • This is almost comical… “in order to conserve Federal resources and prevent unnecessary paperwork burdens, the Secretary shall ensure that any additional paperwork required as a result of the regulations promulgated pursuant to subsection (a) be limited to those persons who are subject to such regulations.” So, we don’t want to burden people or their lawyers with paperwork required for farm subsidy eligibility.
     
  • The House previously voted 230 - 194 (Roll no. 282 on HR 1947) to include nearly identical language in the Senate bill that would rein in payments to multiple “farm managers” and cap subsidies at $250K per person. This language was included in the Chairwoman’s mark in the Senate bill before it reached the floor in 2013. However, four Agriculture Committee leaders gutted these modest reforms.
  • Adjusted Gross Income (AGI) limit:  the bill allows farmers to receive subsidies only if their AGI is less than $900,000 (significantly higher than Senate’s $750K and $50K lower than House’s $950K). Millionaires can’t receive farm subsidies, but those making $900K in annual adjusted gross income can.
     
  • Better measures to ensure dead farmers aren’t receiving subsidies are included.
     
  • According to the manager’s report (language accompanying the farm bill legislative text) and the bill, “transition assistance” will exist for cotton for 2014 and 2015 until STAX[1] is implemented. The assistance is calculated by taking:

= (marketing year average price of cotton)  X (yield of 597 pounds per acre) X (another percentage and other complexities)

So instead of continuing direct payments for cotton which would look bad politically, the bill continues them under another name. More details on the calculation are available in the manager’s report.

  • ARC shallow loss program - payment on 85% of base acres for county coverage or 65% for individual coverage; covers 10% band of revenue loss from 76% to 86% of revenue
     
  • Producers receive either ARC or target prices (PLC), not both
     
  • Sushi rice will receive subsidies (officially called Temperate Japonica Rice)
     
  • Livestock disaster programs are the same as the House bill –
     
  • Livestock Indemnity Payments and Livestock Forage Program payments are unlimited
     
  • Livestock, honey bees, and farm raised fish program is limited to $20M per year
     
  • Tree Assistance Program  is unlimited
  • New payment reductions in commodity title if farmers previously planted fruits and vegetables (doesn’t appear to be in either House or Senate bill)
     
  • Target prices are the higher prices from the House bill:
     
  • Just a 14% drop in current corn prices will trigger price supports;
     
  • Barley target prices increased 88% from its Crop Year 2012 level in 2008 farm bill, sorghum increased 50%, corn 41%, soybeans 40%, oats 34%, rice 33%, wheat 32%, and peanuts 8% (see table below).

Conservation Title

  • Conservation title saves $4 billion over 10 years
     
  • Conservation accountability standards linked to crop insurance is in but two changes mean that people who already drained wetlands will not be penalized (and actually will receive taxpayer subsidies as $10 million was added for a nationwide mitigation bank (this is to satisfy Sen. Hoeven and North Dakotans where lots of wetlands conversion is happening) essentially meaning taxpayers fund farmers to drain their wetlands and then “move” them elsewhere
     
  • Conservation Reserve Program is 24 million acres with 2 million acres for grasslands
     
  • Conservation Security Program - 10 million acres at $18 per acre – payments will still be made for existing conservation practices which is not the most efficient use of taxpayer dollars; also “prohibits giving a higher ranking to a contract offer based on the applicant’s willingness to accept a reduced payment”
     
  • Regional Conservation Partnerships Program - $100 million for FY14-FY18 that prioritizes 8 conservation areas; 25% of funding for states, 50% nationwide, and 25% for critical areas
     
  •  $110 million of funding during FY14-18 for water quality and nutrient management
     
  • Environmental Quality Incentives Program - FY14 is $1.35 billion, FY15 is $1.6 billion, FY16 is $1.65 billion, FY17 is $1.75 billion, and $1.75 billion continues in out-years; 60% of funding will go to livestock (such as confined animal feeding operations) and at least 5% for wildlife; $450K payment limit is far too generous
     
  • Regional equity funding is included which says certain amount of funding has to go to each region regardless of the cost effectiveness of the conservation practices being funded
     
  • Conservation Innovation Grants (CIG) – “The Managers intend for there to be increased transparency by USDA in the area of innovative conservation projects and monitoring that these innovative conservation approaches are later incorporated into common conservation practices,” which is a good step toward measuring and increasing the cost-effectiveness in conservation programs.

Trade Title

  • New study for U.S. Atlantic Spiny Dogfish

Research Title

  • Repeals the Nutrient management research and extension initiative
  • Authorizes research for a coffee plant health initiative, a corn and soy meal high-priority research and extension area, a pulse crop health initiative, industrial hemp, cotton diseases, and training coordination for food and agriculture protection

Energy Title

  • The bill authorizes nearly $900 million in funding for energy title programs, broken down as follows (note that only mandatory funding is listed below): 
     
  • Biorefinery Assistance - $100M in FY14 and $50M each for FY15 and FY16
  • Biobased Markets - $3M per year; eligible “biobased products” to explicitly include forestry materials and forest products for the first time
     
  • Repowering Assistance (back even though the 2012 House and Senate bills eliminated it) - $12M for FY14
     
  • Bioenergy Program for Advanced Biofuels - $15M per year
     
  • Biodiesel Fuel Education - $1M per year
     
  • Rural Energy for America Program - $50M each year per year
     
  • Biomass R&D - $3M per year
     
  • Feedstock Flexibility Program, or the sugar biofuels program - is extended
     
  • Biomass Crop Assistance Program - $25M per year  
     
  • Community Wood Energy will receive just discretionary funding
  • Ethanol blender pumps thankfully won’t be allowed to continue to receive subsidies under REAP 

Crop Insurance Title

  • Section 11001(b) is deleted. Even though the House bill agreed that crop insurance subsidies received by Members of Congress, Cabinet Secretaries, and members of their immediate families should be publicly disclosed, the final bill removes this provision meaning taxpayers won't know how many federal subsidies their lawmakers are receiving.
  • Supplemental Coverage Option (shallow loss program)
     
  • Coverage is available for individual yield and loss, area yield and loss, or individual with area supplemental, up to 85% individual and 95% area yield
     
  • Pays out after losses exceed 14% of normal revenue, so SCO covers losses between the level of crop insurance selected by the agribusiness and 86%
     
  • Taxpayers cover 65% of the premium
     
  • Cotton can receive both Stacked Income Protection Program (STAX) and SCO subsidies
     
  • Managers intend for popcorn and hybrid seed to become eligible for SCO subsidies
     
  • Randy Neugebauer (R., Tex.) released a statement stating, “Instead of sending out direct payments, which aren’t tied to a farmer’s current production, the conference committee strengthened crop insurance, which requires farmers to pay a premium and only pays out in the event of a loss.  I’m also proud that my market-based Shallow Loss Coverage Option (SCO) was included in the final report.” Key word is “HIS” SCO shallow loss program
     
  • For more information on SCO, see our fact sheet.
  • Crop Margin Protection - allows margin insurance to be developed for all crops that is subsidized by taxpayers
     
  • Makes enterprise (all tracts of one crop) and whole farm units permanent.
     
  • Creates separate enterprise units for irrigated and non-irrigated crops, meaning a greater likelihood of taxpayer payouts since less risky land is separately insured from riskier farmland
     
  • Budget Limitation on renegotiation of the Standard Reinsurance Agreement (Sec. 11012) must try to be revenue neutral, meaning future agreements between USDA and private crop insurance companies (intended to negotiate their annual subsidies for selling and servicing crop insurance policies) will not be allowed to save taxpayer dollars. Any savings from renegotiating must be given to insurance companies via increasing the administrative and operating subsidy or increasing the Underwriting Gains (instead of paying down the deficit). 
     
  • Sodsaver language – to reduce crop insurance subsidies for people tearing up native grasslands to plant crops - applies to 6 states including Prairie Pothole states (ND, SD, IA, MN, and MT) plus NE. After enactment, if someone breaks native sod to plant an annual crop, their crop insurance premium subsidies will be reduced 50 percentage points for the first four years of production (after which it would no longer be penalized). Annual report on cropland acreage and changes in acreage in each applicable county and state is required
     
  • Beginning and disadvantaged farmers get a 10% boost in their premium subsidies
     
  • Stacked Income Protection Program (STAX) – a new shallow loss program only for cotton - covers between 70 and 90% of expected revenue. 80% of premium paid by taxpayers
     
  • Mandates peanut revenue insurance. Says the effective price for peanuts will be the Rotterdam price index, “or other appropriate price as determined by the Secretary) p. 844. But there is an “adjustment” section allowing the USDA Risk Management Agency and Federal Crop Insurance Corporation to adjust the price as needed “to correct distortions”. IF there is an adjustment it has to be done in an open and transparent manner and a report must be sent to the Committees
     
  • Sec. 11021: Crop insurance fraud. May use up to $9 million a year to review policies and plans, and to maintain actuarial soundness
     
  • Sec. 11022: R&D priorities. Policies that increase participation by producers of under-served agricultural commodities, including sweet sorghum, biomass sorghum, rice, peanuts, sugarcane, alfalfa, pennycress, dedicated energy crops, and specialty crops’
     
  • Margin Coverage for Catfish included
     
  • Other special interest crop insurance provisions:  Biomass and Sweet Sorghum Energy Crop Insurance, Study of Swine Catastrophic Disease Program, Whole Farm Diversified Risk Management (liability limitation would be $1.5 million), Study on Poultry Catastrophic Disease Program, Poultry Business Interruption Insurance (caused by integrator bankruptcy), Study of Food Safety Insurance, and Alfalfa Crop Insurance. The manager's report also includes support for a new irrigated grain sorghum policy.
     
  • Sec. 11023: Crop Insurance for Organic Crops. Insurance for organics to be based on organic prices no later than 2015 reinsurance year. Also requires an annual report on the extent organics are insured, progress made, new approaches to insurance, recommendations
     
  • Sec. 11026: Index-based weather insurance pilot program for livestock and other underserved commodities.

Miscellaneous Special Interest Carve-outs:

  • Maple syrup:  New grants to support the domestic maple syrup industry are authorized in the Senate’s Acer Access and Development Program and the final conference report
     
  • Pulse crops (dry peas, beans, and lentils):  Sen. Cantwell (D-WA) successfully secured an amendment on the Senate floor to add taxpayer spending for “encouraging greater awareness and interest in the number and variety of pulse crop products available to schoolchildren” which is included in the final bill
     
  • Santa’s reindeer (farm-raised deer and elk):  Sen. Hoeven (R-ND) convinced the Senate Agriculture Committee to tack on research grants to prevent and diagnose diseases affecting farmed deer and elk, which also made it into the final bill
     
  • Cotton, wool, and citrus:  The final bill, at the behest of Sen. Baucus (D-MT), would establish trust funds for cotton, wool, and citrus to be known as the following:  “Pima Cotton Trust Fund,” “Agriculture Wool Apparel Manufacturers Trust Fund,” and the “Citrus Disease Research and Development Trust Fund.” While no known cotton or citrus is grown in Montana, as Chairman of the Finance Committee, Sen. Baucus brought up similar legislation for a successful vote in 2012 that evidently didn’t become law
     
  • 2 catfish inspection offices remain, one at USDA and another at FDA, so Sen. McCain’s (R-AZ) amendment failed to be included even though it passed by voice vote in 2012 (but was denied a vote on the 2013 Senate farm bill) and passed through the House Agriculture Committee and final House bill. 
  • $1.5 million for the Sheep Industry Improvement Center even though the House voted to repeal the program
  • Industry-funded promotion, research and information program for fresh cut Christmas trees
  • Olive oil trade considerations to be taken into account by USDA and other agencies
  • Surveillance program for low pathogenic avian influenza for commercial poultry
  • Sense of Congress urging the Secretary of Agriculture to recognize the threat feral swine pose to the agricultural industry and to prioritize eradication of feral swine

[1] For more information on STAX, see below under Crop Insurance Title

 

 

Filed under: Avoid Unnecessary Liabilities, Stop Waste, Cut Subsidies

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