High Income for 2012?

Very interesting farmgate piece on the possible implications of the income figures for 2012.  Farm income will be up, farmers with the harvest price option on their crop insurance will make out well, and taxpayers might question what subsidies should be in the farm bill.

[Updated to fix link]

Paul Ryan and the Farm Bill

Chris Clayton at DTN is fast off the mark in evaluating the impact of the selection of Paul Ryan as VP candidate on the prospects of the 2012 farm bill.  In a sentence:

"At the same time, the selection of the Wisconsin lawmaker now makes it unlikely House leaders would consider passing a farm bill without major modifications to satisfy fiscal conservatives --- certainly not before the presidential election."

[Updated with link]

Farm Bill Status and MIDAS

As of now, I don't have a clear picture of what will happen on the farm bill, mainly because the House Republicans don't seem to have a clear picture of what they want. Will we have a disaster bill only, or an extension, or a process leading to a 5 year bill?  Who knows.

I want to point out the problem I suspect MIDAS planners are having.  At some point they had to decide whether to support the livestock programs contained in the 2008 bill, which carried through 2011.  I've no idea which way they went: one alternative would be to say we need software to implement everything in the law as of right now, which presumably was sometime last year; another alternative would be to plan for what was in the law for 2012;  a third would be to plan to be flexible, to support whatever cockamanie ideas innovative policy designs Congress came up with.

Now the last alternative is the most difficult and most expensive; sticking to the 2008 language at some point is likely to mean wasting some money assuming Congress changes provisions for 2013.  Either way the managers are likely to be screwed, at least in being vulnerable to criticism.

[Updated: added link to the extension now pending in the House--Hat tip Farm Policy]

Budgetary Games and Livestock Programs

An innocent little question, based on the fact the House Republicans considering something like this (from Farm Policy):

"The bill extends a number of programs through 2012: the Supplemental Revenue Assistance Payments Program (SURE); Livestock Indemnity Program (LIP); Livestock Disaster Forage Program (LFP); Tree Assistance Program (TAP); and Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP)."

The question?   Why weren't those programs authorized through 2012 in the original 2008 farm bill?

My suspicion is that it was a budgetary game--by cutting them off with 2011 the total cost of the bill was lowered.  And the Congress people would know that they'd have the chance to do an "emergency" bill in 2012 if needed.  What may also be true is that they don't need to pay for it.

Price Loss Coverage III

Okay, finally read the farm bill as of July 9 (link) re: price loss coverage.(See previous post here.)

The provision:

(A) IN GENERAL.—Except as provided in
13 subparagraphs (B) through (D), the term ‘‘pay-
14 ment acres’’, with respect to the provision of
15 price loss coverage payments and revenue loss
16 coverage payments, means—
17 (i) 85 percent of total acres planted
18 for the year to each covered commodity on
19 a farm; and
20 (ii) 30 percent of approved total acres
21 prevented from being planted for the year to each covered commodity on a farm.
23 (B) MAXIMUM.—The total quantity of pay24
ment acres determined under subparagraph (A)
25 shall not exceed the farm base acres.
(C) REDUCTION.—If the sum of all pay
2 ment acres for a farm exceeds the limits estab
3 lished under subparagraph (B), the Secretary
4 shall reduce the payment acres applicable to
5 each crop proportionately.
6 (D) EXCLUSION.—The term ‘‘payment
7 acres’’ does not include any crop subsequently
8 planted during the same crop year on the same
9 land for which the first crop is eligible for pay10
ments under this subtitle, unless the crop was
crop was
11 approved for double cropping in the county, as
12 determined by the Secretary.

 The line numbers carry over in the copy process.  There's two considerations in determining acreage accuracy: (1) potentially exceeding a limit, which is what my previous posts discussed; (2) the accuracy of payment acreage. Based on the above, I was wrong on (1)--there's no program limit to be violated.  The only thing which looks like a limit is the farm base acreage, but if it's exceeded you just prorate out, so no big deal.

(2) however looks a bit different.  If I under report my planted acreage, I get less payment, so no harm to the program. But if I over report, because my payments are calculated on planted acreage, there's overpayment, so FSA would need to handle that and deter such over reporting.

The provision would mean that reports of planted acreage are needed, which was a big battle back in Freedom to Farm days (bureaucrats always worry about workload).

Price Loss Coverage II

Still too lazy to read the text of the bill, but I got to thinking on my way to the garden.  When I moved to the production adjustment side of ASCS, we had programs which limited the planted acreage to some figure.  I'm not sure when that changed and how drastically it did.

Assume with me that since 1997 FSA hasn't been enforcing any acreage limitations--that may be true, may not be.  Back in the day we had "measurement variance", which recognized the ways we determined acreages were not 100 percent accurate.  If you ran the planimeter on your aerial photography, you might be off a tad.  And we also had a "tolerance" figure, which recognized the farmer might be trying to limit her planted acreage to the exact figure, but wouldn't have the tools to be exact.  Roughly speaking, if the farmer were supposed to plant only 100 acres of corn and he planted 103 acres, he was probably "within tolerance" and in full compliance with the program.

Finally we had "failure to fully comply". If you the farmer planted more than you were supposed to by more than the tolerance (say 106 acres), then the county committee had to determine whether you were acting in "good faith".  If you were, the payment would be reduced.  If you weren't, you were ineligible.

I recite these provisions first because they fascinated me as I tried to figure them out. My co-workers had all come from county offices so they had absorbed the provisions; I had to figure out their logic and how they related.

The provisions are interesting because, if there is no limit, as there hasn't been for a while (think I'm safe in saying that), they all go away.  But if the Price Loss Coverage program, which seems to reinstate a limit, the situation may change.

Damn, I really need to read the bill's language.
[Updated: this may be interesting as history, but probably inapplicable to the proposed program.  More to follow]

Price Loss Coverage

Been lazy so haven't looked up the actual provisions of this program as included in the House farm bill.  Looks like a target price/counter cyclical type program, but based on planted (and prevented planted) acreage and with updated yields.  If I get ambitious I'll do some research.  It strikes me though that such a program will have problems with WTO rules--farm programs aren't supposed to encourage plantings.

Farm Bill Progresses?

House Agriculture has passed its version of the 2012 farm bill, but speculation provided by Keith Good at Farm Policy suggests it may not get to the floor.  Instead there'd be a temporary extension of current legislation and action later, after the election.  Sounds likely to me--Good quotes an expert on how seldom the new farm bill is passed on time. 

The problem for FSA is they don't know what to prepare to implement, the House version, the Senate version or something new which the conference committee comes up with.  As the time gets tighter, the less we know.

Gee, I'm glad I'm retired.

Farm Bill in the House

I get the impression the House will likely oppose the conservation compliance requirement for crop insurance and the payment limitation, and since there's weak support on Senate Ag, if it goes to conference it will be out.  I also get the impression the House may retain a bit more of the current structure (i.e. counter-cyclical programs, etc.) than did the Senate.

I'm always impressed by Farm Policy's  completeness and Sustainable Agriculture's good analysis (even though I don't always agree with their policy positions, they seem to know their stuff).

EPA and Aerial Observation

From Farm Policy this morning:

"And, Pete Kasperowicz reported yesterday at The Hill’s Floor Action Blog that, “Rep. Shelley Moore Capito and 10 other House Republicans want to prevent the EPA from conducting air surveillance of farms.
“Rep. Shelley Moore Capito (R-W.Va.) and 11 other House members introduced a bill Tuesday that would prevent the Environmental Protection Agency (EPA) from conducting aerial drone surveillance of farms to enforce the Clean Water Act, or using any other overhead surveillance.”

And this report on the farm bill passing the Senate this afternoon reports:

On a 56-43 vote, Sen. Mike Johanns (R-Neb.) came surprisingly close to winning a flat ban on the Environmental Protection Agency to conduct any aerial surveillance to inspect or record images of agricultural operations

Read more: http://www.politico.com/news/stories/0612/77703.html#ixzz1ySpSETnZ

I'm just waiting for these efforts, or a renewed court challenge based on the Bill of Rights,  to spill over on FSA's aerial photography

EWG Loses One

An issue I personally think EWG should have won on: I believe in transparency. But here's the Washington Post editorial on the farm bill:

But if there’s anything the farm lobby dislikes more than losing its subsidies, it’s letting the public follow its money. Senate leaders barred consideration of the Begich-McCain amendment, which means there won’t even be a floor debate on increasing transparency in farm programs over the next five years. It’s not an auspicious start.

Farm Bill Is in the News

In both the Post and the Times.

From the Post:

 It may the be most tangible symbol yet that the age of austerity has dawned in Washington. The bill, which sets the nation’s agricultural and food policy for the next five years, enjoys rare bipartisan support and could be the only significant piece of deficit-reduction legislation to gain congressional approval this year.

The lede from the Times:

At the same time that high crop prices are prompting farmers to expand into millions of acres of land once considered unsuitable for farming, Congress is considering expanding a federal insurance program that reimburses farmers for most losses or drops in prices. 

Yes, they're writing about the same piece of legislation.
[Updated: The White House is now supporting it.]

A Totally Partisan Congress? No

One aspect of the progress of the new farm bill is the existence of bi-partisanship.  Here's a Politico story on the problems in the Senate with rice and peanuts.  While there's tension in both Houses, the tension now is among the "Aggies", as Sen. Chambliss calls them.  The Senators and Representatives with allegiances to different commodity groups are sparring, but I expect them to come together in the end.

There are the outliers who are moved by policy ideas, which can correlate to partisanship.  A few Republican members oppose federal expenditures on agriculture, reflecting their general positions (and the lack, I suspect being cynical, of significant agriculture in their district.

A Glimmer of Hope for Target Prices?

Apparently House Ag Committee is leaning to preserving target prices, but perhaps on planted acres.  That's according to today's Farm Policy.

There's fear of a collapse of prices.

And there's infighting between regions and crops.


And so it goes.

Summary of ARC

From Gary Schnitkey at IL extension, a summary of the Agricultural Risk Coverage program in the Senate Ag's bill:

Summary

ARC will make payments if revenues reach lower levels. In years in which revenue declines, ARC payments will be useful to farmers.

ARC payments will offset some of the losses in gross revenue. The entire loss will not be covered because 1) the .89 factor used to calculate the guarantee effectively puts an 11% deductible on revenue losses, 2) payments are a factor of the shortfall (.80 for the county program and .65 for the farm program), and 3) ARC payments are capped at 10% of benchmark revenue.

If prices are persistently low for several years, ARC payments will decline over time as lower prices enter into the calculation of benchmark revenue. Hence, ARC will provide payments in early years of a multi-year price decline, eventually though farmers will need to fully adjust to price declines as ARC payment decline.

A couple of thoughts:

• there's a cap on the acres (average of plantings 2004-8) which presumably could replace the acreage base, but may involve such things as: the initial establishment and the right to appeal, and the problems of handling prevented planting, CRP acreage, rotations, and changes from one crop to another.  Reminds me of the days of establishing NCA's and acreage bases.
• interesting issue on collecting data--do you collect production data for every participant every year, or only if there's a possibility/probability of qualifying for ARC payment?

Corn Prices and the New Farm Bill

Just a note based on items in Farm Policy--apparently the warm spring has meant early corn planting on large acreages which means prospects for the crop are good, which means prospects for prices are poor (maybe as low as $4--which would have seemed great when I worked).  And the evaluation of the Senate Ag farm bill is that if there are multiple years with lower prices the program payments will decline, an idea the evaluators don't like, preferring instead the guarantee provided by target prices set in the law.

Budget Baselines

Via EWG, here's the Congressional Research Service's discussion of the budget baseline for the next farm bill.  It shows a baseline of $90 billion over the next 10 years for crop insurance, including roughly $1.3/4 billion in delivery expenses.  Interestingly, the administrative expenses for NRCS and FSA aren't included in the discussion.

Conservatives Against Farm Bill

The good folks at Washington Times find conservatives who see dangers in the new farm bill as reported out by Senate Ag--if prices drop the government's exposure increases.

Sodsaver Provision

The Sustainable Ag coalition blogs about sodsaver/cross compliance here.  They say:

While the Sodsaver provision in the Senate bill does not, as we had proposed, deny all crop insurance subsidies on newly broken out land, it does provide for a 50 percent reduction in the subsidy.  It also includes two important provisions that prevent people from gaming the system to increase their revenue insurance coverage at the expense of taxpayers and the environment.  One keeps the newly broken out land isolated from other crop acres the producer may have when calculating insurable yields.  The other requires the operator to take a percentage of the county average yield until being able to show a multi-year yield history.

They go on to note a similar provision in the 2008 act was neutered. I assume enforcing this would require the insurance agents to access FSA data.

I wonder how the GIS system handles history--can you go back through historical land use layers?  This sort of issue, breaking out "noncropland" for annual crops has been a perennial issue in ag programs.  One question I'm not sure ever got answered is: does cropland ever become noncropland, when "noncropland" the land hasn't yet been devoted to "nonagricultural uses".

I remember one of the Great Plains state specialists assuring me that the county office would know the different between land which had once been cropped and land which had never been cropped.  I was dubious then and am more dubious today.

OIG's Thoughts

Via Chris Clayton at DTN, USDA's OIG has a report out reviewing the results of their and GAO's audits as in the light of lessons for the new farm bill:

• they ding RMA and NRCS for deficient controls over operations and they're going to look at FSA controls on the biomass program.
• SNAP--going to compare SNAP database with SSA's Death file.
• staffing and workforce planning issues for FSA, FS, and FSIS.
• concerns for FSA on peanut prices (NASS inaccurate), controls on farm-stored collateral, and problems with MILC "dairy operation" definitions.
• concerns for NRCS on controls of conservation easements and management controls for CSP
• concerns for FNS on SNAP: checking background of participating retailers, security of the EBT system and control of SNAP retailer fraud
• FSA controls over emergency loans, over loan collateral, over interest rates on guaranteed loans