Government Farm Programs

Agriculture Improvement Act of 2018

On December 11th, 2018, the Senate passed the Farm Bill Conference Report (Agriculture Improvement Act of 2018) on a bipartisan vote of 87 to 13. It was approved by the House on December 12th, 2018, with a 369-47 vote. President Trump signed the Agriculture Improvement Act of 2018 into law on December 20th, 2018 which will remain in force through 2023, although some provisions extend beyond 2023.

Nutrition policy, particularly the Supplemental Nutrition Assistance Program (SNAP), will continue with minor changes. Crop insurance options and agricultural commodity programs will exist much as under the 2014 Farm Act. All major conservation programs are continued, although some are modified significantly. The Congressional Budget Office (CBO) projects total outlays between 2019-2023 to amount to $428 billion.

Overall the Agriculture Improvement Act of 2018 is estimated by CBO to spend $867 billion over a 10-year budget window of FY2019-FY2028. Below is a Summary of the major provisions of the Commodity, Conservation and Crop Insurance Titles.

Commodity Title

The commodity title continues the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) programs with modifications and discontinues the Agricultural Risk Coverage-Individual Coverage option. Under the 2014 farm bill, producers were allowed a one-time choice between ARC and PLC on a commodity-by-commodity basis, with payments made on 85% of each commodity’s base acres. To increase producer flexibility, the 2018 farm bill provides producers the option in 2019 of switching between ARC and PLC coverage, on a commodity-by-commodity basis, effective for both 2019 and 2020. Beginning in 2021, producers again have the option to switch between ARC and PLC on an annual basis.

Price Loss Coverage - as the name implies, this program protects against a drop-in price. The price difference is multiplied by historical yield and 85% of base acres for that crop. The bill allows farmers to update, their program yield (based on 90% of 2013 -- 2017 average. In addition, an escalator provision was added that could potentially raise a covered commodity’s effective reference price (used to determine the PLC per-unit payment rate) by as much as 115% of the statutory PLC reference price based on 85% of the five-year Olympic average of farm prices.

Agricultural Risk Coverage is a revenue program. To avoid the disparity in ARC payments that some neighboring counties experienced in recent years the 2018 farm bill reprioritizes how data is calculated. The change is expected to allow ARC calculations to better reflect significant yield deviations within a county. Also, ARC will use a trend-adjusted yield, as is done by RMA for the federal crop insurance program. This has the potential to raise ARC revenue guarantees for producers. Finally, the five-year Olympic average county yield calculations will increase the yield floor (substituted into the formula for each year where the actual county yield is lower) to 80%, up from 70%, of the transitional county yield This yield calculation is used to calculate the ARC benchmark county revenue guarantee.

Unchanged from the 2014 farm bill, both ARC and PLC programs are subject to an Adjusted Gross Income test (three year $900,000 AGI) and payment limits of $125,000 per individual ($250,000 per married couple). No changes were made to the "actively engaged in farming" criteria used to determine whether an individual is eligible for farm program payments. The definition of family farm is expanded to include first cousins, nieces, and nephews, thus increasing the potential pool of individuals eligible for individual payment limits on family farming operations.

The payment limit includes marketing loan payments as well. Marketing assistance loan rates are increased for nearly all program crops including corn and soybeans. Marketing assistance loan rates are used to establish the maximum payment under PLC. Thus, raising the loan rate for a commodity lowers its potential PLC program payment rate.

The 2018 Farm Bill expands payments for livestock losses caused by disease and for losses of unweaned livestock that occur before vaccination. The law amends the limits on payments received under select disaster assistance programs—of the four disaster assistance programs, only the livestock Forage Program (LFP) is not subject to the $125,000/person payment limit. The AGI requirements are left unchanged.

Conservation Programs

The Agriculture Improvement Act of 2018 reforms the Conservation Reserve Program (CRP) to allow for an increased acreage cap of 27 million acres by FY2023 compared to the FY2019 acreage cap of 24 million acres. This 12.5% acreage increase will be implemented in conjunction with reductions in rental rates, cost-share and incentive payments to participants. General CRP enrollment will be capped at 85% and continuous CRP will be capped at 90% of the average cash rental rates in the county for soil types that are similar.

The enacted farm bill addresses agricultural conservation on several fronts. For one, it reauthorizes the two largest working lands programs—the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP)— while reducing the overall funding allocated for these two programs. CBO projects that the enacted bill would increase funding for conservation by $555 million in the short term (FY2019-FY2023) and reduce funding by $6 million in the long term (FY2019-FY2028).

The Agricultural Conservation Easement Program (ACEP) is reauthorized and amended in the 2018 farm bill. ACEP provides financial and technical assistance through two types of easements: (1) agricultural land easements that limit nonagricultural uses on productive farm or grasslands and (2) wetland reserve easements that protect and restore wetlands. Most of the changes to ACEP focus on the agricultural land easements in which USDA enters into partnership agreements with eligible entities to purchase agricultural land easements from willing landowners.

The law also expands grazing and commercial uses on CRP acres and provides options for new and limited resource producers for transitioning CRP land.

Crop Insurance

The federal crop insurance program offers subsidized crop insurance policies to farmers. The Federal Crop Insurance Corporation (FCIC), a government corporation within USDA, pays part of the premium (about 63% on average in crop year 2017) while policy holders—farmers and ranchers—pay the balance. No adjusted income (AGI) test is applied to the crop insurance program.

Within the 2018 farm bill's Crop Insurance title, the section with the highest projected increase in outlays ($90 million increase over FY2019-FY2028, Section 11109) expands coverage for forage and grazing by authorizing catastrophic level coverage for insurance plans covering grazing crops and grasses It also allows producers to purchase separate crop insurance policies for crops that can be both grazed and mechanically harvested on the same acres during the same growing season and to receive independent indemnities for each intended use. The section in the 2018 farm bill with the highest projected reduction in outlays ($125 million over FY2019-FY2028, Section 11110) raises the administrative fee for catastrophic level coverage from $300 to $655 per crop per county.

The 2018 Farm Bill adds hemp to the definition of eligible crops for federal crop insurance subsidies.

The 2018 Farm Bill includes improvements to the Whole Farm Revenue Protection (WFRP) policy that will provide more meaningful risk protection, especially for small and beginning farmers.

Related Documents

Agriculture Act of 2014