Choices: Online Magazine – Analysis of the New Farm Bill – Ag Act of 2014 plus Economic and Policy Analysis of Advanced Biofuels and Higher Education’s Role in Supporting a Rural Renaissance

By: Barry Ward, Assistant Professor, The Ohio State University Department of Agricultural, Environmental and Development Economics; Ohio State University Extension Leader, Production Business Management

Choices is an online peer-reviewed magazine published by the Agricultural and Applied Economics Association (AAEA) for readers interested in the policy and management of agriculture, the food industry, natural resources, rural communities, and the environment. Online subscriptions are free of charge through http://www.choicesmagazine.org/choices-magazine

The latest issue of Choices highlights an analysis of the new Farm Bill (Ag Act of 2014), Economic and Policy Analysis of Advanced Biofuels, and Higher Education’s Role in Supporting a Rural Renaissance.

A list of articles is highlighted here:

Theme Overview: Deciphering Key Provisions of the Agricultural Act of 2014

The Agricultural Act of 2014 became law on February 7, 2014. The Act reforms the dairy program, includes changes to commodity programs, adds new supplemental crop insurance programs, consolidates conservation programs, expands programs for specialty crops, reauthorizes livestock disaster assistance programs, and reduces spending under the Supplemental Nutrition Assistance Program.

Agricultural Act of 2014: Commodity Programs

The Agricultural Act of 2014 offers new choices for commodity producers. In previous farm bills, commodity program and crop insurance decisions were not necessarily intertwined. However, with an ever-increasing focus on risk management and an emphasis on crop insurance, the Act introduces new interactions between commodity and crop insurance programs.

Theme Overview: Economic and Policy Analysis of Advanced Biofuels

The current theme presents economic and policy analysis on advanced biofuels. Its aim is to explain the various costs and benefits associated with the expansion and commercialization of advanced biofuels and their co-products.

Political Economy of Biofuel

We argue that biofuel policies in the United States and Brazil have been affected by macroeconomic considerations like balance of trade, government budget and, to a lesser extent, climate change. The oil sector aims to contain the expansion of first-generation biofuel while environmentalists are ambivalent and will only support second-generation biofuel.

Technology Forcing and Associated Costs and Benefits of Cellulosic Ethanol

The revised Renewable Fuels Standard (RFS) is technology forcing to commercialize biofuel production. This article reviews rationale, current cellulosic biofuel supply cost and implicit CO2 reduction costs. The RFS may induce significant biofuel technology improvements, but it may be costly if not phased-in efficiently.

The Potential for Aviation Biofuels-Technical, Economic, and Policy Analysis

Aviation may offer the brightest prospects for a cellulosic biofuel industry. This paper presents economic analysis of the corn stover to jet fuel pathway with fast pyrolysis technology. The focus is on the role of risk in inhibiting investment and policy options that might help attenuate private sector risk.

Are Bioenergy Crops Riskier than Corn? Implications for Biomass Price

Yield risks of growing miscanthus and switchgrass on cropland with moderate risk aversion result in a risk premium over the breakeven price under certainty of 8% and 16%, respectively, on average. Risk premiums and breakeven prices vary regionally and are substantially lower in the South and on marginal land.

Biofuels at a Crossroads

Biomass fuels in the United States may present a viable alternative to fossil-based fuels and address mounting concerns regarding the environment, population growth, and increasing fuel prices. This paper discusses the economic opportunities and challenges facing biomass, and concludes that energy production is but one of several uses for biomass.

Theme Overview: Higher Education’s Roles in Supporting a Rural Renaissance

Land-grant universities were instrumental in transforming American agriculture by unlocking the full potential of the nation’s natural resource base. What if these same institutions, and other higher education institutions, became equally committed to helping unlock the full potential of rural people and places? This special issue helps inform that vision.

Using Rural Innovation Principles for University Renaissance

Integrating the rural development mission of Cooperative Extension into the land grant university has long suffered from a clash of cultures. This article identifies design thinking as a potentially fertile common ground for the out-of-the-box thinking required to generate simultaneously both a rural renaissance and a higher education renaissance.

Extension Reconsidered

This article argues that dominant views of cooperative extension’s purposes and work need to be reconsidered in ways that include attention to extension’s human and community development roles. Previous examples of such reconsiderations are reviewed, followed by suggestions for how deliberations about extension’s future can be approached.

Opportunities for Rural Development in Cooperative Extension’s Second Century

This article lays out challenges for a healthy rural future and roles Cooperative Extension might play in achieving positive outcomes. Extension can build a stronger rural America through government efficiency, labor market information systems, health programs, and revitalized educational systems on targeted topics.

The New Rural-Urban Interface: Lessons for Higher Education

The urban-rural interface is a space of intense interaction that joins urban and rural communities, economies, and environments. We contend that Land Grant social scientists should increase their attention on issues at the urban-rural interface, that such studies are inherently multi-disciplinary, and that they should be translated into Cooperative Extension programming.

What Can You Do When a Dog is Threatening Your Livestock?

For most people, dogs are a very familiar part of the family. For farm families, dogs may even go beyond the family pet duties and help protect the assets of the farm – the livestock. However, when dogs get loose and go after the livestock of someone else, serious problems can arise. Any livestock that is killed or injured by someone else’s dog is a monetary loss, as well as an emotional loss for some. A question we frequently receive is what can someone do if their livestock is threatened or attacked by someone else’s dog.

2014 Farm Bill: The Big Picture as seen through Spending

By: Carl Zulauf, Professor, Ohio State University, May 2014

 Overview:  This post takes a broad view of the 2014 farm bill and more specifically the farm safety net as seen through the lens of projected spending levels.   In essence, the post examines the who-won/who-lost question and what it tells us about the state of the farm bill debate in the U.S.  Primary sources of information are the (1) U.S. Congress, Congressional Budget Office (CBO) January 28, 2014 letter to the Honorable Frank D. Lucas, Chair, House of Representatives Committee on Agriculture, available http://www.cbo.gov/publication/45049; and (2) Agricultural Act of 2014, available http://www.gpo.gov/fdsys/pkg/BILLS-113hr2642enr/pdf/BILLS-113hr2642enr.pdf.

 Summary Observations

   The field crop safety net (including crop support under the commodities and crop insurance titles) retains nearly 80% of the savings from eliminating direct payments as projected spending increases for the other field crop safety net programs:  price programs, revenue programs, and insurance.  Thus, the farm safety net continues its historical focus on field crops.

   Over 80% of the projected increase in spending on insurance was for the new county insurance products.  However, the farm bill also enhances current insurance products, creates new insurance products, and increases premium reductions for beginning and new farm operators.

   Some of the savings from eliminating direct payments funds a new dairy risk assistance program and a now permanent disaster assistance program, primarily for livestock.  Thus, the livestock sector is a winner at the expense of the field crop sector.

   The previous observation, combined with increased spending on the horticulture title, is consistent with a farm bill policy trend that dates to the 2002 farm bill:  the growing inclusive of farm products in the farm bill and more specifically the farm safety net.

   Spending is shifted from the titles that historically account for the largest share of farm bill spending (commodities, nutrition, and conservation titles) to the other titles, including trade, credit, rural development, research and extension, forestry, energy, and miscellaneous.  While spending remains comparatively very small on these titles, the marginal shift in spending to them likely reflects the need to extend the scope of the farm bill so as to secure its passage.

   In short, the 2014 farm bill is more inclusive in its farm and nonfarm scope and less inequitable in spending across farm products, features key to its legislative success.

Titles, Agricultural Act of 2014 (2014 farm bill)

Title I      Commodities

Title II    Conservation

Title III   Trade

Title IV    Nutrition

Title V      Credit

Title VI    Rural Development

Title VII   Research, Extension, Related Matters

Title VIII Forestry

Title IX     Energy

Title X      Horticulture

Title XI    Crop Insurance

Title XII  Miscellaneous

 

Spending (Direct Outlays) over Fiscal Years (FY) 2014-2023 ▬ Figure 1

    CBO projects spending by the 2014 farm bill to total $956.40 billion over the 10 fiscal years.

    As noted widely, Title IV (Nutrition) dominates projected farm bill spending at a 79.1% share.

    Second largest share of projected spending (9.4%) is for Title XI (Crop Insurance).

    Third largest share of projected spending (6.0%) is for Title II (Conservation).

    The title most associated with farm bills, Title I (Commodities), is 4.6% of projected spending.

    The farm safety net (Titles I plus XI) accounts for 14% (9.4% + 4.6%) of projected spending.

    The other 8 titles account for only 0.8% of projected spending, with Trade (Title III) the largest.

    Credit (Title V) is a source of revenue for the government, primarily because it is able to borrow money at somewhat cheaper rates than it lends for farm bill credit programs.  This revenue can, in part, be seen as a way to cover the administrative costs of farm bill credit programs.

 

Estimated Changes in Spending over FY 2014-2023 ▬ Figure 2

    CBO projects the 2014 farm bill will spend -$16.50 billion less over the 10 fiscal years than an extension of existing programs, the so-called baseline spending.

    Projected spending declines for Title I (Commodities) but increases for Title XI (Crop Insurance), resulting in a -$8.59 billion decline in spending on the farm safety net.

    Projected spending declines almost as much for Title IV (Nutrition) as the farm safety net: -$8.00 billion vs. -$8.59 billion.  Projected spending also declines for Title II (Conservation) by -$3.97 billion.  For more detail on spending on Title II, see the May 14, 2014 farmdoc post, “2014 Farm Bill Conservation (Title II) Programs” by Carl Zulauf, available http://www.farmdoc.illinois.edu/.

    The projected spending declines in the previous bullet as a share of projected spending on the area are -6.9% for Conservation, -6.4% for the farm safety net, and -1.1% for Nutrition.

    Excluding Title V (Credit), projected spending increases for the other titles, with the largest increase being for Title VII (Research, Extension, and Related Matters).

 

Spending Changes in Title I (Commodities) over FY 2014-2023 ▬ Figure 3

    The largest single source of savings in the 2014 farm bill is the elimination of direct payments, with projected savings of -$40.85 billion over FY 2014-2023.

    Since the projected spending on Title I declines by only -$14.31 billion, 65% ($26.54 billion / $40.85 billion) of the savings from eliminating direct payments remain in Title 1.

    Projected spending on price programs increases $11.84 billion, primarily because price support levels in the Price Loss Coverage (PLC) program are higher than in the Price Countercyclical (PC) program it replaces.

    Projected spending on the revenue program increases $9.39 billion, primarily because participation is projected to be higher in the Agriculture Risk Coverage (ARC) program than in the Average Crop Revenue Election (ACRE) program it replaces.

    Projected spending is $3.67 billion on a permanent Supplemental Disaster Assistance Program.  It contains the (1) Livestock Indemnity Program for livestock losses from adverse weather or attacks by federally reintroduced animals; (2) Livestock Forage Program for losses from drought or fire; (3) emergency relief for producers of livestock, honey bees, and farm raised fish not covered by the two previous programs; and (4) Tree Assistance Program for natural disasters.

    Projected spending on the dairy safety net is $0.91 billion higher as a Dairy Production Margin Protection Program based on the difference between the price of milk and feed cost of producing milk replaces the Dairy Product Support and Milk Income Loss Contract programs.

 

Spending Changes in Title XI (Crop Insurance) over FY 2014-2023 ▬ Figure 4

    Projected spending on the new county insurance products for crop production yield and revenue risk is $5.00 billion.  These products are the Supplemental Coverage Option (SCO) for all crops except cotton, which has a slightly different Stacked Income Protection Plan (STAX).  Both provide farms the option to buy subsidized county insurance to cover part of the deductible of their individual yield and revenue product (STAX is also available as a stand-alone product).

    Projected spending on enhancements for current insurance products is $1.06 billion.  They include (1) a new option for determining the minimum Actual Producer History (APH) insurance yield, (2) separate insurance contracts, including enterprise insurance, for dryland and irrigated land, and (3) new price elections for insurance for organic crops.

    Projected spending on new individual insurance products is $0.25 billion.  They include revenue insurance for peanuts, weather index insurance, and margin insurance with rice the initial crop.  Studies are authorized for a wide variety of new products, including insurance for catastrophic disease in swine and poultry, business interruption in poultry production; and food safety.

    Projected cost to reduce insurance for new and beginning farmers and ranchers is $0.26 billion.

    Projected savings from changes to existing products are $0.54 billion.  They include changes to catastrophic insurance premiums and limits on crop production on native sod in selected states.

    Interactions between Title I (Commodities) programs and Title XI (Crop Insurance) programs are projected to reduce demand for insurance, thus generating savings of -$0.46 billion.

 This publication is also available at http://aede.osu.edu/publications.

Livestock Building Rental Agreements

By: Rory Lewandowski, Extension Educator Wayne County

Livestock building rental questions are generally framed something like: “Can you tell me how much I should charge to rent my livestock building?  What is a fair amount?”  These are difficult questions to answer because there is not just a single figure or amount that is right or correct across rental situations.  A figure can be arrived at, but it may only serve as a starting point in negotiation between the building owner and the potential building renter and it can only be arrived at with a little work on the part of the building owner and potential renter.

A best case scenario involving the least amount of work and pencil pushing by the building owner and prospective renter is that there is a reliable, current “going rate” established for various types of livestock buildings.  In order for this situation to exist there has be some number of buildings that are being rented in the area and a demand for renting buildings.  What is that number?  If you hear of one livestock building owner getting such and such a rate for his building is that enough to set a going rate?  What if there are 5 or 6 buildings that were rented in the past year in the area and you knew those rental values?  The more livestock buildings that have been rented in the recent past, the more confidence you might have in those numbers as a going rate.  Unfortunately I don’t see a lot of market activity for livestock building rental and it is hard to get a going rate that is useful for the occasional livestock building rental question that I receive.

The North Central Farm Management Extension Committee recently completed a survey of farm operators, farm owners, professional farm managers and rural appraisers in the north central region of the U.S. asking about farm building rental.  Barry Ward, OSU Extension Ag Production Leader, provided me with a summary of those survey results.  Overall, the lowest response rate was for information about livestock building rental.  Anywhere from 3 to 16 responses came back depending upon the type of livestock facility.  The response rate was much better for machinery storage and grain storage buildings/facilities.  From the survey I can see that if someone wants to rent a small (200-300 head) beef finishing facility consisting of an open lot and shed, the average survey response indicated an average rental rate of $0.12/head/day.  A dairy heifer housing building with no labor or feed provided had an average rental of $0.31/head/day. A 1000 plus swine finishing facility had an average rental charge of $12.93/finished hog.   The usefulness of this type of survey is to provide a starting place to look at rental rates.

The livestock building owner must know his/her costs to begin to determine a building rental rate or to use survey numbers.  Those ownership costs include fixed and variable costs.  Fixed costs are those that are incurred regardless of whether or not the building is actually being used.  Those fixed costs include: depreciation, interest, repairs, taxes and insurance.  Variable costs are those costs that are associated with the use of the building and generally increase as the building is used.  Variable costs include such expenses as: water, electricity, and repairs/maintenance associated with building use.

If the choice is between rental and letting the building sit empty and idle, then the building owner should be motivated to rent when variable costs are covered plus at least some additional income towards paying some of the fixed costs.   As rental demand for the building increases, more of the fixed costs should be included in the rental rate.  At a high demand level, all of the variable and fixed costs may be covered in the rental rate.

The potential renter must know what renting the livestock building means to his/her operation in terms of added value.  That added value can be in terms of added income as a result of using the building, reduced production costs, or a combination of both.   The potential renter then needs to subtract from that added value any added costs that would be incurred as a result of renting, for example, travel and time to and from the rented facilities.

When both the livestock building owner and the potential renter are looking at the facility they need to consider the age and adequacy of the facility.  Is the facility appropriately sited for today’s environmental concerns and regulations?  Is the facility design and stall size adequate for the livestock that will be put into the building?  Is the building outdated for some livestock enterprises?  Rental rates are lowered with outdated buildings and inadequate facilities.

Other pertinent questions include: what is the owner covering in regard to building costs and what is the renter expected to cover.  In the north central farm building survey that I mentioned earlier, it was assumed that building renters would provide the labor and management associated with the building rental and the resulting livestock enterprise and in addition would cover the utility costs as well as any minor upkeep/maintenance expenses.  Building owners were expected to cover major repairs and insurance coverage.

Just as in land rental situations, there are other intangible factors that should be considered when renting a livestock facility.  What is the relationship between the building owner and renter?  Do their personalities mesh?  Can they get along and have a cordial relationship?  Do their philosophies about building care and maintenance match?  Is the renter going to provide some other services such as mowing around the buildings, hauling trash away, keeping snowed plowed etc. that maintains a good appearance and is of some intrinsic value to the owner?

There are some good resources available that can be used to help answer the livestock building rental question, but it will take some work and pencil pushing by the building owner and/or potential renter.  Resources that I have found to be useful include:

Finally, any livestock building rental agreement should be put in writing.  Responsibilities and expectations of both the owner and the renter should be included in the written agreement.  Expenses that will be covered by each party should be clearly spelled out.  Conditions for renewal and termination of the agreement should be included.  Sample lease agreements can be found at the ag lease 101 web site.

Ohio Legislature Grants Invasive Species Authority to Ohio Department of Agriculture

The Ohio House of Representatives gave final approval on May 21, 2014 to a bill initiated in the Senate that addresses invasive plants.  As approved by both chambers, Senate Bill 192 grants regulatory authority over invasive plants to the Ohio Department of Agriculture (ODA).  While ODA, Ohio EPA and Ohio’s Division of Forestry already have programs in place to educate and assist in the identification and removal of invasive species, the new law clarifies that the director of ODA has “sole and exclusive authority to regulate invasive plant species in this state.”  This authority includes th

Farmers may be Eligible for Livestock Forage Disaster Program under New Farm Bill

By: Chris Bruynis, OSU Extension Educator, Ross County

The Livestock Forage Disaster Program (LFP) was made a permanent program with the 2014 Farm Bill legislation. Additionally the legislation provided retroactive authority to cover eligible losses dating back to October 1, 2011.  This is important because this loss program provides com­pensation to eligible livestock producers who have suffered grazing losses due to drought or fire. Counties declared eligible due to the 2012 drought in Ohio include: Butler, Clinton, Darke, Defiance, Fayette, Franklin, Fulton, Greene, Hamilton, Henry, Montgomery, Paulding, Pickaway, Preble, Putnam, Ross, Van Wert, Warren, and Williams.

Producers are eligible for drought LFP payments equal to 60 percent of the monthly feed cost for up to five months. Livestock species that are eligible include: Beef, Dairy, Buffalo, Sheep, Goats, Deer, Equine, Swine, Elk, Poultry, Reindeer, Alpacas, Emus, and Llamas. A Ross County example for a farmer with 20 mature beef cows and 26 acres of improved pasture would be eligible for 60% of one month’s feed cost. The program payment in this example would equal an estimated $621.72.  A sheep producer with 50 head of sheep and 26 acres of improved pasture would receive an estimated payment of $388.80.

Interested producers should contact their local FSA office to schedule an appointment. Sign-up to receive program payments related to the 2012 drought under this program ends January 30, 2015.

 

2014 Ohio Field Crop Enterprise Budgets

By: Barry Ward, Leader, Production Business Management, Department of Agricultural, Environmental, and Development Economics

Budgeting helps guide you through your decision making process as you attempt to commit resources to the most profitable enterprises on the farm. Crops or Livestock? Corn, Soybeans, Wheat, Hay? We can begin to answer these questions with well thought out budgets that include all revenue and costs. Without some form of budgeting and some method to track your enterprises’ progress you’ll have difficulty determining your most profitable enterprise(s) and if you’ve met your goals for the farm.

Budgeting is often described as “penciling it out” before committing resources to a plan. Ohio State University Extension has had a long history of developing “Enterprise Budgets” that can be used as a starting point for producers in their budgeting process.

Newly updated Enterprise Budgets for 2014 have been completed and posted to the Farm Management Website of the Department of Agricultural, Environmental and Development Economics. Updated Enterprise Budgets can be viewed and downloaded from the following website:

http://aede.osu.edu/research/osu-farm-management/enterprise-budgets

Enterprise Budget projections updated for 2014 include: Corn-Conservation Tillage; Soybeans-No-Till (Roundup Ready); and Wheat-Conservation Tillage.

Our enterprise budgets are compiled on downloadable Excel Spreadsheets that contain macros for ease of use. Users can input their own production and price levels to calculate their own numbers. These Enterprise Budgets have color coded cells that allow users to plug in numbers to easily calculate bottoms lines for different scenarios. Detailed footnotes are included to help explain methodologies used to obtain the budget numbers. Budgets include a date in the upper right hand corner of the front page indicating when the last update occurred.

2014 Farm Bill Conservation (Title II) Programs

by: Carl Zulauf, Professor, Ohio State University

May 2014

Overview:  This post contains a summary of the Conservation title (Title II) of the 2014 farm bill.  The post begins with a set of summary observations, followed by an overview of spending on Title II Conservation programs and a description of key Title II provisions.  Primary sources are the (1) Agricultural Act of 2014 (2014 farm bill), available at http://www.gpo.gov/fdsys/pkg/BILLS-113hr2642enr/pdf/BILLS-113hr2642enr.pdf; (2) U.S. Congress, Congressional Budget Office January 28, 2014 letter to the Honorable Frank D. Lucas, Chair, House of Representatives Committee on Agriculture, available at http://www.cbo.gov/publication/45049; and (3) Congressional Research Service Report 4-5700, “The 2014 Farm Bill (P.L. 113-79):  Summary and Side-by-Side,” coordinated by Ralph M. Chite, February 12, 2014, available at http://www.farmland.org/programs/federal/documents/2014_0213_CRS_FarmBillSummary.pdf.

Summary Observations

►   Consolidation of Title II Conservation programs is a key feature of the 2014 farm bill.

►   The 2014 farm bill in a sense creates a farm conservation program pyramid.  The 4 sides of this pyramid are: (1) retirement of environmentally sensitive land from agricultural production, (2) environmental enhancements on working agricultural lands, (3) purchase of easements to protect natural resources and the agricultural nature of the land, and (4) partnerships to address regional environmental issues.

►   Funding is shifted from the first 2 types of programs to the latter 2 types of program, implying that at the margin the 2014 farm bill favors a different mix of Title II Conservation programs.

►   The reduction and redistribution of spending on Title II Conservation programs is a reflection of many factors, including high crop prices and the focus on reducing spending to reduce the federal budget deficit.  But, the author believes that Congress is also signaling an important policy question:  What should be the level of spending on each type of program that makes up the farm conservation pyramid?  The answer to this question depends on the magnitude of the benefits from each type of conservation program.  Thus, Congress is in part asking that the assessment of the benefits and cost of current Title II Conservation programs be intensified.  In summary, the author believes the benefit-cost question by type of farm conservation program could become the focus for the 2018 farm bill debate over Title II Conservation provisions. 

►   The increased emphasis on the purchase of easements and regional partnerships continues a recent farm bill trend of Congress favoring working land conservation over land retirement.  Thus, another topic that could become a focus for the 2018 farm bill debate over Title II Conservation provision is the evolving view of interrelated farming and conservation.

►   The maximum allowable acres in the Conservation Reserve Program (CRP) is reduced, reflecting in part the net movement of land out of CRP due to the high returns to crop production since 2006.  However, CRP’s maximum allowable acres remain 24 million.  In contrast, during the 1970s price run up, almost no acres were removed from production as a fence row-to-fence row planting mentality dominated.  The continued size of CRP during a period of high crop prices represents a profound change in the U.S. farm policy culture.  In short, CRP’s objective has changed from an initial emphasis on supply control to its current focus on conservation.

►   In making eligibility for the crop insurance premium dependent on conservation compliance, the 2014 farm bill reflects the emergence of crop insurance as a core farm safety net program while acknowledging that U.S. society expects U.S. agriculture to participate in improving environmental quality in exchange for the provision of subsidies to farmers.  Crop insurance cannot be both a core farm safety net program and excluded from the expectation of conservation performance in order to receive farm subsidies.

►   The 2014 farm bill provides farmers considerable time to adjust to the insurance conservation compliance requirement.  It will be interesting to see if the next farm bill tightens enforcement.

Big Picture Overview of Conservation Program Spending

●    Congressional Budget Office estimates spending on Title II Conservation programs will total $57.6 billion over fiscal years (FY) 2014-2023

●    Spending on Title II programs is estimated to be -$4.0 billion less than an extension of existing programs (so called baseline spending) over FY2014-2023

●    In comparison, the 2008 farm bill increased spending on Title II programs by $4 billion above the 2007 baseline over FY2008-2017

●    Spending relative to the 2013 baseline is cut -$3.3 billion and -$2.3 billion for the Conservation Reserve (CRP) and Conservation Security Program (CSP), respectively, over FY2014-2023  ▬ in contrast, comparable spending for all other Title II programs is increased +$1.6 billion

●    Relative to the 2013 baseline, spending is reduced -$0.2 billion for FY2014-2018, implying spending cuts are backloaded into the last 5 fiscal years (FY2019-2023) ▬ the backloading reflects the additive effects of progressively larger reductions in the acres enrolled in CRP and CSP and to frontloading spending increases for other conservation programs in FY2014-2018

Program Repeals and Mergers

●    Repeals these programs: Wetlands Reserve, Grassland Reserve, Comprehensive Conservation Enhancement, Emergency Forestry Conservation Reserve, Farmland Protection, Farm Viability, Agricultural Water Enhancement, Wildlife Habitat Incentive, Great Lakes Basis, Chesapeake Bay Watershed, Cooperative Conservation Partnership Initiative, and Environmental Easement

●    Merges the Wetlands Reserve, Farmland Protection, and Farm Viability Programs into the Agricultural Conservation Program

●    Merges the Grassland Reserve Program into the Conservation Reserve Program.

●    Merges the Wildlife Habitat Incentive Program into the Environmental Quality Incentives Program

●    Merges the Chesapeake Bay Watershed, Cooperative Conservation Partnership Initiative, Great Lakes Basin, and Agricultural Water Enhancement Programs into the Regional Conservation Partnership Program

●    Provides bridge administration and funding for contracts, agreements, and easements that currently exist under the repealed programs

Conservation Reserve Program (CRP)

●    Reauthorizes CRP through FY2018.

●    Adds grasslands (including improved rangeland and pastureland) to the list of eligible land provided grazing is the dominant use; the area is historically dominated by grasslands; and the land could provide habitat for animal and plant populations of significant ecological value

●    Reduces the maximum acres allowed in CRP from the current 32 million to 27.5 million (FY2014); 26 million (FY2015); 25 million (FY2016); and 24 million (FY2017-FY2018)

●    Caps grassland enrollment at 2 million acres during FY2014 through FY2018 ▬ gives expiring CRP acres priority for enrollment as grassland contracts

●    Permits specified activities under stated conditions, including, but not limited to: (1) emergency harvesting and grazing with no reduction in rental rate, (2) grazing by a beginning farmer or rancher with no reduction in rental rate, and (3) certain activities, such as harvesting (including managed harvesting for biomass),
grazing, wind turbines, and control of invasive species, with a minimum 25% reduction in rental rate ▬ permitted activities must be consistent with an approved conservation plan and are subject to restrictions for nesting birds that are economically significant, in decline, or conserved by law

●    Under specified conditions, various activities are allowed on enrolled grasslands, such as grazing, harvesting, and fire suppression ▬ incentive payments are allowed for tree and shrub thinning activities

●    Adds land in the Conservation Reserve Enhancement Program (CREP) to the list of land ineligible for early termination

●    Reauthorizes the Farmable Wetland Program within CRP through FY2018 ▬ maximum acres in the program is reduced from 1 million to 0.75 million

Conservation Stewardship Program (CSP)

●    Reauthorizes CSP through FY2018

●    Identifies eligible land as private or tribal land used to produce agricultural commodities, livestock, or forest-related products

●    Requires that renewal of a CSP contract must (1) meet the threshold for 2 additional priority resource concerns or (2) exceed the threshold for 2 existing priority resource concerns

●    Reduces the acre enrollment goal for CSP from 12.769 to10 million acres per fiscal year

●    Allows additional payment to producers in CSP if they adopt or improve a resource-conserving crop rotation

Environmental Quality Incentives Program (EQIP)

●    Reauthorizes EQIP through FY2018

●    Adds to EQIP’s purpose wildlife habitat improvement and development practices ▬ lists various wildlife habitat improvement areas, including pivot corners and other irregular areas of a field

●    Removes the 1 year minimum contract length

●    Continues the requirement that 60% of EQIP payments be for livestock production

●    Specifies that a minimum of 5% of EQIP funds must go to payments for wildlife habitat

●    Adds veteran farmers and ranchers to the list of producers eligible for EQIP cost-share up to 90% and advanced payments

●    Limits EQIP payments to an individual entity to an aggregate of $450,000 over FY2014-FY2018

●    Authorizes mandatory EQIP funding of $1.35 billion (FY2014); $1.6 billion (FY2015); $1.65 billion (FY2016-FY2017); and $1.75 billion (FY2018)

Agricultural Conservation Easement Program (ACEP)

●    Establishes ACEP as the combined purposes of the current Wetlands Reserve, Farmland Protection, and Grassland Reserve Programs

●    Defines agricultural land easement as an easement or other interest in eligible land conveyed for the purpose of protecting natural resources and the agricultural nature of the land

●    Allows a landowner to continue agricultural production and related uses subject to the easement plan

●    Prioritizes wetland reserve easements based on the value of such easements for protecting and enhancing habitat for migratory birds and other wildlife

●    Authorizes mandatory ACEP funding of $400 million (FY2014); $425 million (FY2015); $450 million (FY2016); $500 million (FY2017); and $250 million (FY2018)

Regional Conservation Partnership Program (RCPP)

●    Combines and streamlines the functions of the Cooperative Conservation Partnership Initiative and Agricultural Water Enhancement, Chesapeake Bay Watershed, and Great Lakes Basin Programs

●    Establishes RCPP to be a tool for local, regional or watershed areas to innovatively address conservation issues, such as water quality, water quantity and reducing or preventing regulatory liabilities; by creating partnerships among government entities, agricultural groups, conservation groups, and institutes of higher education and by leveraging public and private funds

●    Eligible partners include state or local governments, American Indian tribes, agriculture or forestry producer associations, farmer cooperatives or other groups of producers, institutes of higher education, municipal water or waste treatment entity, water and irrigation districts, and conservation-focused nongovernmental organizations

●    Activities include (1) partnership agreements with eligible partners and (2) contracts for technical and financial assistance to producers participating in projects with eligible partners, or producers within a project area or critical conservation area not working through an eligible partner

●    Competitive partnership agreements cannot exceed 5 years with a possible 1 year extension

●    Authorizes mandatory RCPP funding of $110 million annually for FY2014-FY2018 and allows for 7% of funding from CSP, ACEP, and EQIP

●    Allows the Secretary of Agriculture to target funding to areas where it is most needed

Other Conservation Programs include Conservation of Private Grazing Land, Grassroots Source Water Protection, Voluntary Public Access and Habitat Incentive, Agriculture Conservation Experienced Services, Small Watershed Rehabilitation, Emergency Watershed Protection, Soil and Water Resources Conservation, and Terminal Lakes Assistance (a new program)

Conservation Compliance for Crop Insurance Subsidy

●    To be eligible for the federally funded portion of crop insurance premiums, a producer must comply with wetland conservation (swampbuster) and highly erodible land conservation (sodbuster) requirements

●    If subject to conservation compliance for the first time, a producer is given 5 reinsurance years to develop and comply with an approved conservation plan

●    Violations only apply to reinsurance years subsequent to the date of final determination of a violation, including all administrative appeals

●    Requires reports to Congress concerning (1) the impact of conservation compliance on specialty crop growers, (2) the amount of technical assistance provided for compliance (annual report), and (3) the operation and implementation of conservation compliance (annual report)

●    For a more complete discussion of insurance conservation compliance see the May 2, 2014 farmdoc post, “Conservation Compliance and Crop Insurance in the New Farm Bill” by Jonathan Coppess  ▬ available at http://www.farmdoc.illinois.edu/

Technical Assistance

●    Technical assistance can be funded from Commodity Credit Corporation (mandatory) funds for conservation programs ▬ CRP is a possible exception at Secretary of Agriculture’s discretion

●    Priority is given to producers who request technical assistance to meet insurance conservation compliance

 This publication is also available at http://aede.osu.edu/publications.

 

Ohio Senate Introduces Agritourism Legislation

A new bill in the Ohio Senate addresses several legal issues for Ohio agritourism operators.  Senators Jones (R-Springboro) and Peterson (R-Sabina) introduced S.B. 334 on May 7.  The bill would impact Ohio agritourism operators in regards to civil liability, property taxation, zoning regulation and amusement ride standards.

Civil Liability Protection

Understanding Crop Year Price Changes in Estimating PLC Payments

By: Carl Zulauf, Professor, Ohio State University,  2014

Overview

The 2014 farm bill provides a choice between a Price Loss Coverage (PLC) program and an Agricultural Risk Coverage (ARC) program.  The choice is not a 1 year decision; it is a 5-year decision.  This post therefore examines one potential price behavior that may occur over multiple crop years.  It suggests a simple method for estimating PLC payments.  Results of this study should be used as an illustration of the strategic thinking that needs to occur regarding this 5-year decision. Click here to read entire article