2014 farm bill changes for FSA Farm loans

April 10th, 2014 FSA Andy

Hello Again!

The 2014 Farm Bill made several modifications to the Farm Service Agency farm loan programs. These modifications were implemented as of February 7, 2014 when the President signed the Farm Bill.

The definition of a qualified beginning farmer has been modified. It was based on the median farm size and has been changed to the average farm size owned. A beginning farmer is now defined as “does not own a farm greater than 30 percent of the average sized farm in the county. ”This applies to farm ownership purchase loans before buying farm land.

As an example: Columbiana County, Ohio- the median farm size is 60 acres and 30% is 18 acres while the average farm size is 124 acres and 30% is 37.2 acres. This results in more farm operators qualifying as beginning farmers.

The maximum loan amount for a Direct Down Payment Farm Ownership loans have been increased from $225,000 to $300,000. Direct Down Payment Farm Ownership loans are for beginning farmers and socially disadvantaged farmers to purchase farm real estate. The applicant must have 5% down; FSA loans 45% of the purchase up to $300,000; and another lender loans the remaining 50% of the purchase.

The interest rate charged on Direct Farm Ownership Joint Financing loans made with another lender is now set at 2% below the regular Direct Farm Ownership loan rate with a minimum of 2.5%. The other lender (Farm Credit, bank, etc.) must loan at least 50% of the total amount borrowed. The goal is to encourage joint financing and thereby stretch the FSA direct farm ownership loan dollars.

Limited resource interest rates are now available to beginning and veteran farmers who receive a microloan. Borrowers will be given a choice between the limited resource interest rate or the regular operating loan interest rate. Currently the regular operating loan is lower than the set limited resource rate but this may not always be.

Microloans made to beginning and veteran farmers are to be exempt from the direct loan term limitations. Term limits will still apply for non-microloan direct loans such as regular operating loans and farm ownership loans. Presently applicants are eligible to close direct operating loans in 7 calendar years and a beginning farmer’s eligibility is limited to a maximum of 10 years.

The definition of a “veteran farmer” has been established as: a farmer who has served in the Armed Forces (as defined in section 101(10) of title 38 United States Code) and who (a) has not operated a farm, or (b) has operated a farm for not more than 10 years.

The percentage of guarantee for Conservation Loans will increase to 80% for non-beginning farmers.

For beginning farmers and socially disadvantaged farmers the guarantee percentage for Conservation loans will increase to 90%. Guaranteed Conservation loans can be used for installation of conservation structures to address soil, water, and related resources; installation of water conservation measures; and the establishment or improvement of permanent pasture.

Previously applicants could not receive Guaranteed Operating loans for more than 15 calendar years. This term limit has now been eliminated.

Previously Rural Youth loans were limited to rural areas or towns with populations of less than 50,000. This rural restriction has now been removed and youth loans are now available to all regardless of the population where they reside. The goal is to open the program up to urban youth who are interested in agricultural projects such as urban gardens. The biggest FFA Chapter in the US is located in Philadelphia, Pennsylvania.

Additional information on FSA Farm Loans can be found by visiting a nearby FSA Service Center or online at fsa.usda.gov.

That’s all for now,
FSA Andy

Understanding the new farm bill will take patience

April 3rd, 2014 FSA Andy

Hello again,

I sure have seen a lot of information about the new farm bill in the newspaper. There is some good information out there with most of it being put out by our agency. Like everyone else, I read the information and store it away until a sign-up period becomes a reality.  I compare the news releases to the directives and software that we have actually received in the local county office.

Huge disconnect

Sometimes I see a disconnect in what is being released to the public and what is available to us in the local offices. A program deadline will be published in a newspaper, and that may be the first time we are made aware of it. The administrators will publicize program deadlines without making the forms, software or policy available to us.

The local producer sees it in the paper, calls the office and we have to explain to them that we are aware of what they read, but they have not given us the necessary tools to complete the job.

I often times compare it to spring planting — you have the tractor, you have the planter, you have the field all ready to be planted, but you don’t have any seed because your seed dealer put it on the truck to be delivered but the delivery truck ran into an unforeseen problem.

Frequently that is what happens in our agency — a mission is developed, a time frame is implemented, but it doesn’t always allow enough time for the information to get to the local offices where the program is actually implemented.


Down below is some information about a permanent disaster program that has a deadline of April 15, we already know we will not be trained on this program until the week of April 14. So be patient with your local office, as soon as the information is received your sign-up will be our priority, even when we read the other articles telling us that 250 more local offices will be closed. We are the Farm SERVICE Agency, we take pride in knowing that SERVICE really is our middle “name.”

The 2014 farm bill, formally known as the Agricultural Act of 2014, makes the Livestock Forage Program and Livestock Indemnity Program permanent programs and provides retroactive authority to cover eligible losses back to Oct. 1, 2011.

LFP provides compensation to eligible producers who suffered grazing losses due to drought and fire. LIP provides compensation to livestock producers who suffered livestock death losses in excess of normal mortality due to adverse weather. USDA is determined to make implementing the livestock disaster programs a top priority and plans to open program enrollment by April 15, 2014.

As USDA begins implementing the livestock disaster assistance programs, producers should record all pertinent information of natural disaster consequences, including:

• Documentation of the number and kind of livestock that have died, supplemented if possible by photographs or video records of ownership and losses
• Dates of death supported by birth recordings or purchase receipts
• Costs of transporting livestock to safer grounds or to move animals to new pastures
• Feed purchases if supplies or grazing pastures are destroyed
• Crop records, including seed and fertilizer purchases, planting and production records
• Pictures of on-farm storage facilities that were destroyed by wind or flood waters
• Evidence of damaged farm land.

Still have questions?

Many producers still have questions. USDA is in the process of interpreting Farm Bill program regulations. Additional information will be provided once the enrollment period is announced. In the meantime, producers can review the LIP and LFP Fact Sheets.

Thanks for your patience as USDA works diligently to put Farm Bill programs into action to benefit the farmers and ranchers of rural America.

That’s all for now,
FSA Andy

Dairy producers weighing shift in new farm bill

March 17th, 2014 Other News

UNIVERSITY PARK, Pa. — As the dust settles on February’s enactment of the Agricultural Act of 2014, commonly referred to as the farm bill, experts continue to analyze the bill’s provisions to determine what the legislation means for farmers .

With the U.S. Department of Agriculture busy writing new rules to implement the nearly 1,000-page law, it may be too early to know all the implications.

The Margin Protection Program will go into effect by Sept. 1.  Under the program, dairy farmers who participate will pay a $100 annual enrollment fee that will ensure them indemnity payments if their margin — calculated by USDA using the all-milk price minus the average feed cost — drops below $4 per hundredweight for a defined two-month period.

But one thing is certain, according to an agricultural economist in Penn State’s College of Agricultural Sciences: The bill’s dairy provisions continue the shift toward a greater reliance on risk-management approaches to provide a safety net for farmers.

The biggest thing about the 2014 farm bill is this continued move away from disaster and counter-cyclical payments and price supports to insurance-driven tools, said James Dunn, professor of agricultural economics.

“Typically, the government will subsidize the insurance to make it more attractive for the farmer, but the insurance company basically covers the risk. That makes the budget impact of the farm bill more predictable.”

Margin protection

The most important dairy provision in the bill, Dunn said, is the new Margin Protection Program, which will go into effect by Sept. 1.

Under the program, dairy farmers who participate will pay a $100 annual enrollment fee that will ensure them indemnity payments if their margin — calculated by USDA using the all-milk price minus the average feed cost — drops below $4 per hundredweight for a defined two-month period.

Farm milk prices typically are expressed on a per-hundredweight basis. (One hundred pounds of milk is equal to about 11.63 gallons.)

“The Margin Protection Program supports producer margins and not milk prices,” Dunn said. “It’s designed to help farmers deal with both catastrophic conditions, such as weather extremes, and prolonged periods of low margins.”

Overproduction ‘disincentive’

The program also discourages unsustainable growth and provides a disincentive for overproduction by limiting first-year coverage to a producer’s highest level of annual milk production during the previous three years, Dunn explained.

In subsequent years, any increase in production that exceeds the national average increase will not be protected.

Producers can choose to cover between 25 and 90 percent of their production history and can buy additional protection for margins ranging up to $8 per hundredweight, with higher premiums for larger herds.

Will it help?

Dunn said looking at recent history provides a clue to how the Margin Protection Program might benefit producers.

“In 2009, when the costs of seed, fertilizer, chemicals, diesel fuel and other inputs were extremely expensive, milk prices were in the dumpster, averaging $14.41 per hundredweight for the year,” he said.

“If the Margin Protection Program had been in effect then, producers would have received payments for 11 of the 12 months of that year.

“But under the old system, which provided payments or price supports only when milk prices fell below a certain price, farmers in 2009 received little or no support because the target price wasn’t reached,” he said.

“Unless they had bought insurance or used some other risk-management system, they were on their own. Some went out of business and defaulted on loans because the cost of production was higher than their income from milk sales.”

Product donation

Another provision in the farm bill established the new, margin-based Dairy Product Donation Program.

Under this program, USDA will create demand by purchasing dairy products to donate to food banks or similar nonprofit organizations only if margins fall below $4 for two consecutive months.

The purchases will occur for three consecutive months or until margins rebound above $4.

What’s eliminated

Three dairy programs were targeted for elimination or phase-out in the 2014 farm bill:

  • The Dairy Product Price Support Program, under which the government supported prices with a standing offer to purchase cheddar cheese, butter and nonfat dry milk.
  • The Dairy Export Incentive Program, which offered subsidies to exporters of U.S. dairy products to help them buy products at U.S. prices and sell them at lower international prices.
  • The Milk Income Loss Contract Program, which compensated dairy producers when domestic milk prices fell below a specified level.

Still need safety net

Although many milk producers currently are doing well with milk prices at or near record highs, Dunn said the need for a dairy safety net remains.

“History shows us that one thing is absolutely true — prices will come down again.”

Insurance and the new farm bill

March 10th, 2014 Other News


Though members of Congress often have every intention of enacting a new farm bill well before farmers have to make planting decisions, so farmers can take the new policies into consideration in their planning process, very often planting is under way before the legislation is completed and signed into law by the president.

This farm-bill year is no different.

Guest Commentary

Winter wheat farmers planted their crop months ago, hoping that the rules would not change too drastically.


The regulations needed for the new cotton program, STAX, have not been released for public comment, so cotton producers will receive a lowered level of Direct Payments for the 2014 crop year.

For the program crops covered by crop insurance, the programs that were in effect in 2013 will still be in effect in 2014 with no major changes.

Farmers will still be able to protect themselves against declines in price and yield. The yields will be based on historic yields, while the prices will be based on prices in effect during the period in which the insured price is set.

Because current prices are much lower than they were a year ago, the level of price protection farmers will be able to obtain in 2014 will be lower as well.

The government’s share of the premium will remain the same as it has been in the past. With lower prices, the premium cost for revenue insurance will be lower than it was last year.

With lower premium levels for a given product, farmers may choose to buy higher levels of protection than they did in 2013.

Beginning with the 2014 crop, conservation compliance is tied to receiving the government supplement for crop insurance. For most farmers that will have little impact on their operations because they previously participated in the Direct Payment program which required conservation compliance as well.

While farmers don’t have to worry about major changes in the crop insurance program this spring — other than the impact of lower prices — they do have crucial decisions to make with regard to which one of two programs — available in the 2014 Farm Bill — they enroll in for each of their major crops.

The crop-by-crop decisions are crucial because they will have to be lived with for the five-year length of the 2014 Farm Bill.


The two choices are Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC).

As we wrote two weeks ago, the “ARC guarantee for a covered commodity in a crop year is 86 percent of the benchmark revenue, which for county coverage is the product obtained by multiplying the average historical yield for the most recent 5 crop years, excluding the high and the low [the Olympic average], by the [Olympic average of the] national average market price received by producers during the 12-month marketing year for the most recent 5 crop years.”


Payments for a crop for which ARC was chosen are paid on 85 percent of the farm’s base acres plus any former cotton base acres planted to the crop. These payments are capped at 10 percent of the benchmark revenue.

Farmers can also choose ARC at the farm level as well the individual crop.


The PLC program operates much like the previous counter-cyclical-payment program with a fixed reference price — known as the target price in the 2008 Farm Bill — for each covered crop.

When the season average price for any covered crop falls below the reference price farmers are paid the difference between that crop’s reference price and national season average price times the farm’s payment yield times 85 percent of the base acres for the covered crop plus former cotton base acres planted to the covered crop.


Reference prices for the PLC program are wheat, $5.50/bushel; corn, $3.70/bushel; grain sorghum, $3.95/bushel; barley, $4.95/bushel; oats, $2.40/bushel; long grain rice, $14.00/hundredweight (cwt).; medium grain rice, $14.00/cwt.; soybeans, $8.40/bushel; other oilseeds, $20.15/cwt.; peanuts $535.00/ton; dry peas, $11.00/cwt.; lentils, $19.97/cwt.; small chickpeas, $19.04/cwt.; and large chickpeas, $21.54/cwt.

As is common for decisions like these, a number of factors will figure into the crop-by-crop enrollment decisions.

Factors like crop yield expectations/history/variability, rotation considerations, landlord wishes and/or cash rent commitments, bankers’ directives on receiving production loans, expectations about future production costs, risk tolerance — both psychological and financial — and so on.

But perhaps most important of all will be producers’ expectations about crop price trends, and crop-price variability, over the term of the farm bill.

Will future crop prices remain above the reference prices in most years or is there a significant risk that prices will fall substantially below the reference prices during the duration of the 2014 Farm Bill.

Answering that question is critical, but it is important to take all considerations into account and to work through the numbers.

Spreadsheet templates and decision aids are available from many of the state extension offices to help you do the analyses for the crop-by-crop ARC vs. PLC decisions.

As for the level of crop insurance to carry for this crop-year, many farmers will make that decision in consultation with their bankers. We are sure producers will be more than casually interested in their bankers’ views about crop prices beyond this crop season as well.

(Daryll E. Ray holds the Blasingame Chair of Excellence in Agricultural Policy, Institute of Agriculture, University of Tennessee, and is the Director of UT’s Agricultural Policy Analysis Center (APAC).)

(Harwood D. Schaffer is a Research Assistant Professor at APAC. 865-974-7407; Fax: 865-974-7298; dray@utk.edu and hdschaffer@utk.edu; www.agpolicy.org.)

New farm bill gives farmers new options for risk management

March 7th, 2014 Other News

CHAMPAIGN, Ill. — The 2014 farm bill gives farm operators and landowners the choice among fixed price supports (PLC) and county- or farm-level revenue coverage (ARC). Although still early, some general conclusions about the programs can be reached.

Assuming trend yield levels in 2014 for corn and soybeans, County ARC payments in 2014 would reach their limits in most Midwest counties at price levels that are above the PLC reference price levels, but below the USDA’s projections for the 2014 marketing year.

In comparing the Individual and County ARC options, Individual ARC seems likely to trigger smaller payments than County ARC under most circumstances. This is because Individual ARC pays on 65 percent of base acres compared to 85 percent for County ARC.

Also, by averaging revenues across crops, Individual ARC will tend to reduce the likelihood and size of payments due to diversification effects.

Individual ARC also has higher reporting requirements than the other choices.

However, Individual ARC does provide revenue protection based on actual farm-level yields which could make it more desirable in areas where there is significant yield basis risk (i.e. the potential for significant difference between county and farm yields).

Second, the choice between ARC and PLC will be fundamentally related to price expectations relative to the reference price.


Take corn as an example with a $3.70 reference price. If MYA prices are expected to be above $3.70 over the next five years, ARC will provide better protection since PLC will never trigger payments.

If prices are expected to be very low, averaging less than $3, PLC will arguably provide better support due to the adjustment in the ARC revenue guarantee to lower prices and the 10 percent cap on ARC payments.

Price expectations in the $3 to $3.70 range make the comparison and decision more difficult.

ARC will potentially make larger payments than PLC toward the higher end of that price range, particularly during early years of the farm bill. However, PLC could make larger payments at the lower end of the range, particularly in later years.

For corn and soybeans, price expectations offered by contracts on futures markets suggest that County ARC will make larger payments. This expectation of higher payments should be weighed against the higher payments offered by PLC at low, but unlikely, prices.

Supplemental off table

Finally, the choice of either ARC option will make the producer ineligible to purchase the supplemental coverage option (SCO) crop insurance program on that farm, which will be made available beginning in the 2015 crop year.

Related to this, in addition to price expectations, producers should also consider how the base acreage on their farms compares to what they expect to plant over the next five crop years.

The PLC and ARC commodity programs tie payments to base acreage while the SCO program covers planted acreage.
(Source: farmdocdaily.illinois.edu; issued by Jonathan Coppess and Nick Paulson, Department of Agricultural and Consumer Economics, University of Illinois.)

Experts analyze dairy policy in 2014 farm bill

February 11th, 2014 Other News

(By Marin Bozic, John Newton, Andrew M. Novaković, Mark W. Stephenson, and Cameron S. Thraen.)

COLUMBUS — The dairy subtitle of the new agricultural act offers a total revamping of the safety nets that have been in place for the dairy sector going back to the middle of the 20th Century.

The Margin Protection Program for Dairy Producers (MPP) might be considered a variation of the countercyclical payments (MILC) that began in 2002, but it is notably different in two important ways.

Related: The 2014 farm bill brings dairy policy change

First, it substitutes Milk Income Over Feed Costs for farm price as the measure by which we economically evaluate market conditions and support dairy farms. Second, it does not restrict eligibility for the program by farm size. Larger farms have to pay a higher premium, but they are not categorically limited in participation.

The Dairy Product Donation Program uses the mechanics of the old Dairy Price Support Program to purchase dairy products, but it really does so as an extension of existing programs that allow USDA to purchase dairy products on behalf of a variety of food assistance programs.

Advocates of a new approach argued that the limitations of existing programs were vividly revealed during the economic events of 2009, and repeated in 2012. Hence, they argued, bold new programs are needed. Whether the programs proposed here will prove to be the answer farmers seek is something that will be debated and estimated, but we won’t really know unless and until they are tried.


The Agricultural Act of 2014 was passed by the U.S. House of Representatives Jan. 29 and was passed by the Senate Feb. 4 and signed by the president Feb. 7.

The dairy provisions of the act are primarily a variation of H.R. 2642. Existing safety net programs are repealed and replaced with two new programs:

  1. The Dairy Product Price Support Program (DPPSP), effective immediately.
  2. The Milk Income Loss Contract (MILC), effective once the new Margin Protection Program for Dairy Producers becomes operational, or Sept. 1, 2014, whichever is earlier.
  3. The Dairy Export Incentive Program (DEIP), effective immediately.

(Note that the DPPSP, passed in the Food, Conservation and Energy Act of 2008 (i.e. 2008 farm bill) is repealed, but the permanent Dairy Price Support Program that is contained in the 1949 Agricultural Act is not. MILC and DEIP do not have underlying permanent authority and are forever gone.)

Continued programs

Certain other authorities are continued, including extensions of:

  1. The Dairy Forward Pricing Program — allows non-cooperative buyers of milk who are regulated under federal milk marketing orders to offer farmers forward pricing on Class II, III, or IV milk, instead of paying the minimum federal order blend price for pooled milk.
  2. The Dairy Indemnity Program — provides payments to dairy producers in the unlikely event that a public regulatory agency directs them to remove their raw milk from the commercial market because it has been contaminated by pesticides, nuclear radiation or fallout, or toxic substances and chemical residues other than pesticides. Payments are made to manufacturers of dairy products only for products removed from the market because of pesticide contamination.
  3. Certain provisions to augment the development of export markets under the National Dairy Promotion and Research Program.

New programs

The new programs are:

  1. The Margin Protection Program for Dairy Producers (MPP) — a voluntary program that pays participating farmers an indemnity when a national benchmark for milk income over feed costs (the actual dairy production margin or ADPM) falls below an insured level that can vary over a $4 per cwt. range.
  2. The Dairy Product Donation Program (DPDP) — a program that requires the secretary of agriculture to immediately procure and distribute certain dairy products when the ADPM falls below a the lowest margin level specified for the MPP. These products would be targeted for use in domestic, low-income family, food assistance programs.

In addition, there is language related to the promulgation of a federal milk marketing order that covers California. The act also repeals the authority for a federal milk marketing order review commission. Originally authorized in the Food, Conservation and Energy of 2008, the commission was never funded and never appointed.

Margin protection plan

The new MPP contains several basic elements that combine to determine how, when and how much money dairy farmers can receive in periods of financial stress.

The main items are:

  1. An Actual Dairy Production Margin, which is a national estimate of dairy farm income from the sale of milk less an estimate of an average cost of feed for a hypothetical but nationally representative dairy herd.
  2. An Actual Dairy Production History (ADPH) for each participant.
  3. A coverage percentage, which is simply a percentage of the ADPH selected by each producer, to determine how much of their eligible milk they wish to cover. The resulting quantity applies to the calculation of total premiums and indemnities.
  4. A coverage level, which is a $/cwt. figure that defines the degree of margin protection desired by a participating farm. It corresponds to a range of outcomes as measure by the new Actual Dairy Production Margin.

Issues and challenges

While the new dairy title was designed in good faith and with great attention to detail, some unintended consequences may still occur:

  1. While market conditions may rapidly change, MPP premiums never do. The upside of this provision is that the MPP can serve as a protection against protracted low margin periods that cannot be managed using CME futures and options contracts. 

    A possible adverse side effect is the crowding out of private risk markets by subsidized government-provided margin insurance. In other words, if dairy farmers use the MPP heavily and stop participating in CME futures markets, those markets will lose valuable participants and liquidity that could threaten their viability.

  2. The MPP provisions may inadvertently result in a policy framework that gives advantage to “lumpy” over “incremental” growth at the farm level. 

    As described earlier, insurable production at any single location is determined by a combination of the historical milk production over 2011-2013 and the subsequent growth in national milk per cow.However, producers who choose to grow their business by building a brand new separate dairy operation at a new location would likely be able to enroll that operation in the program under the provisions governing “new entrants.” The act, as is commonly done for crops programs, includes a reconstitution provision.

    This purpose of this provision is to allow USDA to prohibit or control farmers who attempt to gain more benefits by reorganizing their business structure. USDA will clearly specify what producers may and may not do with respect to how they expand their milk production and qualify it for the MPP program. Nevertheless, it is likely that some opportunity will exists for new dairy farm businesses started by people already in dairy farming.

  3. There are several reasons why producers faced with very low margins may find it optimal to reduce milk production by culling. 

    First are the basic economics of milking a cow. When a cow’s production no longer justifies the cost of feeding and keeping her, she will be culled. Second, even if the cow is carrying her own economic weight, culling of cows on the margin may still be necessary due to cash flow needs on the farm.Third, cows on the margin may be culled or culled early because of favorable cull cow prices, which is currently the situation due to tight beef supplies. Because indemnities received under MPP should lessen cash flow challenges, culling that might otherwise have occurred is forestalled.

    This is consistent with the whole point of the program, but the effect is to maintain milk production and potentially prolong the duration of low margin periods. This is no different than the effect of the MILC program.

    The extent to which these kinds of countercyclical subsidy programs impact milk supply is subject to debate. Existing research about this effect is inconclusive. Further research will no doubt examine if this effect will or does materialize and to what degree.

  4. Actuarially fair premiums imply that the premium equals the expected long-term indemnity — insured businesses, in total, do not get more than they put in. 

    LGM-D is based on actuarially fair premium calculation methods. Observers of that program know that its premiums vary each month, depending on the outlook for milk and feed prices, and they generally have been high enough to give most farmers pause.We cannot say how heavily subsidized the premiums for MPP are, but it is easy to guess that, over a period of several years, the indemnities paid out will exceed the premiums collected. Indeed, it is quite possible that the level of taxpayer subsidy will be very large. If this is true, it implies that the MPP will reduce, and quite possibly very significantly reduce, market risk in dairy farming.

    It will not reduce the risks of disease or local weather effects faced more individually or regionally, but it would reduce the risk of price changes that are disadvantageous to all farmers.

    To the extent this is true, it could give incentives for investments or production decisions that otherwise would be deemed too risky.

    This means more production than would otherwise occur, which in turn means a lower price structure for milk.

    These kinds of effects are not unique to MPP. They can and historically did occur with the Dairy Price Support Program. The issue is not the design of the program, per se, but the extent to which a program subsidizes long term risks.

  5. To the extent the DPDP is triggered, it could send distorted market signals to various dairy product sectors, in essence inflating the true underlying demand for products that were sold to the government for donations.
  6. The MMP operates from a margin formula that defines income or returns over feed costs. Declines in the MMP margin can come about from any combination of movements in milk prices vs. costs. 

    In 2009, the situation could be described as declining milk prices relative to feed prices. In 2012, this situation might more aptly be described as rising feed prices relative to milk prices. The trigger for the use of DPDP does not distinguish the cause of a low MMP margin.

Much of the public discussion of the previous versions of a new dairy program seemed to assume that a low margin necessarily means a low milk price, meaning low relative to historical patterns of milk price.

An incremental government demand presumably will increase the milk price relative to feed prices and thereby raise the margin.

However, if the margin is low as a result of rising and high feed prices with an already adequate or even high milk price, as was the 2012 drought experience, it is not clear how effective these purchases will be in boosting the milk price and in turn the MMP margin.

It is not clear how much an already high milk price can be further accelerated. Clearly, strengthening dairy product demand will not reduce high feed prices in such situations.

(Marin Bozic is assistant professor in the Department of Applied Economics at the University of Minnesota and associate director of Midwest Dairy Foods Research Center. John Newton is assistant professor in the Department of Agricultural and Consumer Economics at the University of Illinois Urbana Champaign. Andrew M. Novaković is the E.V. Baker Professor of Agricultural Economics in in the Charles H. Dyson School of Applied Economics and Management at Cornell University. Mark W. Stephenson is director of dairy policy analysis and director of the Center for Dairy Profitability at the University of Wisconsin. Cameron S. Thraen is associate professor in the Department of Agricultural, Environmental and Development Economics at Ohio State University.)

Breaking: President signs 2014 farm bill

February 7th, 2014 Chris Kick

WOOSTER, Ohio — The president today (Feb. 7) signed the Agriculture Act of 2014 into law — the nation’s new five-year-farm bill — saying it will give farmers and consumers more opportunity, more security and risk management tools.

Early in his speech, Barack Obama compared the farm bill to a Swiss Army knife, due to the many things the farm bill does, including support for farmers, conservation, job growth, local foods and nutrition programing.

“It helps rural communities grow, it gives farmers some certainty (and) it puts into place important reforms,” he said.

The signing ceremony took place at Michigan State University’s Mary Anne McPhail Equine Performance Center.

Note: Farm and Dairy watched the signing via C-SPAN.

The $1 trillion bill reduces spending by about $23 billion, while ending direct payments to farmers and providing farmers new opportunities for crop insurance and disaster relief.

Congress ‘can’ agree

The president said the bill is a “good sign” that Congress can work in a bipartisan way “and actually get stuff done.”

See what ag groups think of the bill 

He said he hopes the bipartisanship will continue as Congress considers other parts of his agenda, including raising the minimum wage and immigration reform.

“Let’s keep the momentum going here,” he said.

Obama also praises the success of trade, saying the last five years have seen the “strongest stretch of farm exports in our history.”

Nutrition funding

Obama reminded the crowd that the farm bill is also about feeding people, especially the needy. About 80 percent of the bill goes toward food stamps and nutrition programing.

This bill cuts about $8 billion in food stamp spending over 10 years, but mostly by reducing loopholes.

Obama said the bill “helps make sure America’s children don’t go hungry. … We sure don’t believe that children should be punished when their parents are having a tough time.”

He also announced a new initiative to help further exports and farm commodity sales, called the Made in Rural America Initiative. And, he mentioned the local foods movement and how the farm bill supports local producers, as well as large-scale farming.

The House passed the bill Jan. 29 by a vote of 251-166.  The Senate passed the bill Feb. 4 by a vote of 68-32.

Senate approves farm bill, ag groups react

February 7th, 2014 Chris Kick

(Updated Feb. 4, 2014)

SALEM, Ohio — The U.S. Senate approved a new five-year farm bill in a floor vote today (Feb. 4) by a vote of 68-32.

Sen. Ag Chairwoman Debbie Stabenow praised the $1 trillion bill for balancing the interests of agriculture, conservation and nutrition programs.

She called it “a farm bill that works for all of America, for families and farmers, for consumers, for those who care so deeply about protecting our land and our water.”

Republicans and and Democrats have debated a new bill for more than three years, and Stabenow said it’s been 491 days since the last five-year farm bill expired.

“It’s time to pass it, it’s time to get it to the president for his signature,” Stabenow said, adding “our constituents need us to get this done.”

Note: Farm and Dairy watched the Senate and House votes via C-SPAN.

The House passed the same bill Jan. 29, following a bipartisan conference report that cut overall spending by $23 billion, cut $8 billion from food stamps, and ended direct payments to farmers, while providing farmers new insurance and risk management options.

Both Ohio Senators, Sherrod Brown, D-Cleveland, and Rob Portman, R-Cincinnati, voted in favor of the bill, which will now be sent to the president, where it is expected to be signed into law.

(Update: The U.S. House of Representatives approved the farm bill 251-166 in a floor vote today (Jan. 29).

SALEM, Ohio — Top negotiators for the Agricultural Act of 2014 — better known as the farm bill — said Jan. 28 in a call with reporters that they expect swift action by the House and Senate.

Senate Ag Chairwoman Debbie Stabenow said the Senate will act as quickly as it can, and the White House will most likely sign the bill into law.

Related: House and Senate reach farm bill agreement.

What they’re saying

The farm bill agreement has set off a long list of reactions from farm and conservation groups — most who say they are in favor of the bill — with some, including the National Cattlemen’s Beef Association — strongly against.

Bob Stallman, president of the American Farm Bureau Federation

The bill will provide farmers and ranchers certainty for the coming year and allow the Agriculture Department to begin planning for implementation of the bill’s provisions.

We appreciate the hard work of the conferees to get the farm bill to this point. They had many tough decisions to make, but were able to move forward with a solid bill that includes many Farm Bureau-supported provisions. We are particularly pleased with provisions to provide risk management to fruit and vegetable farmers and to support livestock farmers during disasters.

Roger Johnson, president of National Farmers Union

The bill includes fixed reference prices to provide assistance to farmers only when truly necessary. It provides a strong crop insurance title and approximately $4 billion in livestock disaster assistance. The bill increases funding for the Farmers Market and Local Foods Promotion Program and related initiatives.

We are also encouraged by the inclusion of robust mandatory funding levels for renewable energy programs. We’re also very happy that the bill preserves the ability of American family farmers and ranchers to distinguish their products in the marketplace through the existing Country-of-Origin Labeling (COOL) law.

Against COOL

On the flipside, The COOL program is partly why the NCBA opposes the bill, saying that Country of Origin Labeling has hurt producers financially and has created trade prejudices against other countries.

Scott George, NCGA president:

We are disappointed in all members of Congress and especially the members of the Conference Committee for allowing this process to go this far without a solution. Failure to fix MCOOL at this juncture will lead to retaliatory tariffs on a host of commodities and it is only a matter of time before the World Trade Organization rules in favor of Canada and Mexico. Once that happens, producers will realize the full costs of this failed legislation.

This farm bill is foundationally flawed and the livestock sector is standing shoulder-to-shoulder in opposition of a farm bill that will only serve to cause greater harm to rural America.

Livestock support,

However, not everyone in the livestock sector is “shoulder to shoulder” in opposition.

Jim Mulhern, president and CEO of the National Milk Producers Federation

Despite its limitations, we believe the revised program will help address the volatility in farmers’ milk prices, as well as feed costs, and provide appropriate signals to help address supply and demand.

The program that we have worked to develop establishes a reasonable and responsible national risk management tool that will give farmers the opportunity to insure against catastrophic economic conditions, when milk prices drop, feed prices soar, or the combination. By limiting how much future milk production growth can be insured, the measure creates a disincentive to produce excess milk. The mechanism used is not what we would have preferred, but it will be better than just a stand-alone margin insurance program that lacks any means to disincentivize more milk production during periods of over-supply.

Importantly, the program doesn’t discriminate against farms of differing sizes, or preferentially treat those in differing regions.

Support for produce farms

United Fresh, the nation’s largest produce organization, said the bill does many good things for fruit and vegetable growers.

United Fresh:

The bill contains the most significant government investment ever in the competitiveness of the fruit and vegetable industry, with support for research, pest and disease prevention, state block grants, child nutrition, trade and more. In all, the Farm Bill contains a 55 percent increase in new resources dedicated to these important industry priorities.

Key provisions of this legislation include increased access to fresh produce in federal nutrition programs, expanded research opportunities to enhance our food safety efforts, stronger efforts to address ongoing pest and disease threats, and targeted programs to help us expand trade opportunities.

New farm bill less than ‘miraculous’

February 6th, 2014 Alan Guebert

House Ag Committee Chairman Frank Lucas, a fast talker by birth and trade, spared few superlatives when describing, in a telephone press conference Jan. 28, the finally finished, modestly named Agricultural Act of 2014.

“Historic in many ways,” Lucas said of the pending law as he shared the call with his Senate counterpart, Debbie Stabenow, a Democrat from Michigan.

What’s more, he continued, the three-years-in-the-making legislation was “amazing” and, in fact, “a reform bill.”

Caught up in his expansive rhetoric, Lucas finished describing the law’s bigger elements with a flourish: “This is not just a good farm bill, it’s almost a miraculous farm bill!”

Not miraculous

Truth be told, the 950-page bill is not a near-miracle, not amazing, not very reforming and, most definitely, not historic. It is a very late, very dense, and very status quo law that further institutionalizes scale over substance and insurance over economics.

On the face of it, there’s nothing wrong with either growth or insurance. Under this law, however, the two are tied tightly together; growth is all but guaranteed by heavily subsidized revenue insurance.

The market is, well, in there somewhere. How that policy will work is certain to be tested in 2014. Right now corn is scraping along at $4 per bu., ethanol is poised to lose some of its government-mandated demand, the export market is increasingly crowded and competitive and U.S. farmers will grow between 13.9 billion and 14.3 billion bu. of corn this year, or about 2 billion bu. more than forecasters predict will be needed.

Dropping prices

As such, Iowa State University economist Robert Wisner estimates cash corn prices will drop from an already-thin average of $4.40 per bu. in 2013-14 to a well underwater season average of $3.75 to $3.90 in 2014-15. The new farm law, with its higher insurable levels and fatter insurance subsidies, makes this corn-choking outcome quite likely.

So likely, in fact, that the Jan. 29 Wall Street Journal editorialized that the cost of this new “shallow loss” insurance program could “balloon to $14 billion a year” if overproduction results. (Visit the editorial and all supporting documents).

Likely to pass

Implementation, however, hinges on whether the bill will clear Congress and be signed into law by the president (a near-slam dunk since the House passed it Jan. 29 on a solid, 251-166 vote) and if the rules to administer it can be done in — what — no more than 60 days?

Good luck on the second thing, says a well-placed farm bill watcher.

“The operating language of what will be allowed under this insurance program is very complicated,” the friend offers, “and writing the rules for it will be even more complicated.”

Complicated, yes. Different, no.

No excuses

And that’s the biggest irony to this whole, bloody bill: There’s nothing in it that might have required the best part of three years to write or provided all the fuel to the fierce, bitter partisanship that dogged its every agonizing step.

After all, this bill never got within a mile of very difficult discussions on whether ethanol still holds a place in America’s renewable fuels future or how a farm bill might address the nation’s increasing health problems. Moreover, Congress didn’t convene one public hearing or one ag committee meeting over what the United States and its farmers and ranchers can do to ensure sustainable food production in a world steeply challenged by expanding population, increasing climate change and tougher, narrower economics.

No, this farm bill was the easy one — despite the delays and politics — so we took the easy way out. The hard farm bill — the one that tackles more than subsidized insurance and government-supported markets like ethanol and sugar, the one that views consumers and agribusiness as equals, the one that makes soil and water as important as corn and soybeans — lies ahead.

That’s the one that will be historic, reforming, amazing and a near-miracle.

Farm, food and wildlife groups react to Senate farm bill vote

February 5th, 2014 Chris Kick

SALEM, Ohio — The U.S. Senate approved a new five-year farm bill in a floor vote Feb. 4 by a vote of 68-32.

The House passed the same bill Jan. 29, following a bipartisan conference report that cut overall spending by $23 billion, cut $8 billion from food stamps, and ended direct payments to farmers, while providing farmers new insurance and risk management options.

Here are some of the top reactions to the Senate vote:

Jack Fisher, executive vice president of Ohio Farm Bureau Federation:

“The bill demonstrates considerable fiscal responsibility while providing security to farmers and the public.

We appreciate the bill’s strengthening of crop insurance as a risk management tool. We support its provisions that allow farmers to act on market signals for planting decisions and its programs aimed at assisting livestock farmers. We also appreciate its strong conservation measures, and its commitment to feeding programs for children, the elderly and poor.”

Ohio Sen. Rob Portman, R-Cinn.:

“I am pleased that this bill helps restore the integrity of the SNAP entitlement program, which is riddled with loopholes that have allowed the program to grow faster than economic conditions would have otherwise allowed. By reducing the LIHEAP loophole and terminating SNAP benefits to lottery winners, this farm bill will work to reduce abuse in the program — but more needs to be done.

In addition, this bill takes another commonsense step by eliminating the direct payments, which provides subsidies to farmers regardless of how much a farmer grew or profited in a given year.”

Robert Guenther, United Fresh Produce Association’s senior vice president for public policy:

“Even though the overall bill took many unexpected twists and turns, one thing was consistent: strong, bipartisan support in the House and Senate for fresh fruit and vegetable policies. Throughout the long process, Farm Bill programs for fruits and vegetables were maintained or strengthened. This is a clear sign that policymakers recognize the importance of our industry to the nutritional well-being of all Americans and to the overall U.S. economy.”

Ohio Farmers Union:

“It is good that agreement has been reached on a final bill.  More than two years in the making is too long.  Most of what National Farmers Union advocated for is in total or in part in the final bill.  That increased farm market funding and livestock disaster relief is included is vital.

It supports family farmers, ranchers and fishers and most importantly consumers.  It is unfortunate that the National Cattleman’s Beef Association is so opposed to the outcome.  They are willing, in their opposition, to Country of Origin labeling (COOL) to jettison disaster relief and throw family farmers under the bus in favor or corporate packers, multinational interests and profit.

Carol Goland, executive director, Ohio Ecological Food & Farm Association:

“Senator Sherrod Brown recognizes the diversity of agriculture in Ohio. The vital role he played in reinstating funding for programs like the National Organic Certification Cost Share Program, Value Added Producer Grants, and the Farmer’s Market and Local Foods Promotion Program will bolster local food and farm economies throughout Ohio,”

Brent Hostetler, President, Ohio Corn and Wheat Growers Association:

“This day has been a long time coming as farmers from all corners of Ohio have spent years tirelessly advocating for a new farm bill to ensure a safety-net is in place for those years we are faced with circumstances far beyond our control. I join my fellow farmers in thanking Ohio’s Congressional delegation who supported a bill to help protect one of Ohio’s greatest resources, our agriculture industry, which helps to maintain the most secure and affordable food supply in all of the world.”

Jerry Bambauer, President, Ohio Soybean Association and Auglaize County soybean farmer:

“It’s been a long road, but today we’re celebrating the Senate passage of the 2014 Farm Bill. OSA thanks Senator Brown for his support of this vital piece of legislation.  Soybeans are a big part of Ohio’s economy and the top agricultural export for Ohio.  The farm bill will provide market stability and certainty for Ohio’s 24,000 soybean farmers.”

Larry Schweiger, president and CEO of the National Wildlife Federation:

“With so many competing interests, it is a huge victory for wildlife that the conservation of our nation’s natural resources was prioritized and included in the final bill. By re-linking conservation compliance to crop insurance, funding key conservation programs, and including a sodsaver provision in key states to protect grasslands, this bill will help wildlife from across our prairies to our oceans.

We congratulate the agriculture committee leaders on forging a bipartisan bill that will serve the interests of wildlife and farmers.”

Lisa Hamler-Fugitt, executive director, Ohio Association of Foodbanks:

“As Ohio’s largest charitable response to hunger, we cannot emphasize enough how important federal nutrition programs are, not only to food insecure Ohioans, but to our state’s economy as a whole. While we are thankful that more severe cuts to SNAP have not been included in this Farm Bill, we know that current SNAP benefits are inadequate for the millions of children, adults, seniors and people living with disabilities that struggle to provide nutritious food for themselves and their families.

“Our emergency food assistance network is grateful for the increase in TEFAP funding, which will help our foodbanks come closer to meeting record-high demand for help with the basic necessity of food. But most of all, we want to see Ohioans moving out of our emergency food pantry lines and into grocery store lines, where their SNAP benefits are infused back into local economies.”

Pennsylvania Gov. Tom Corbett:

“Farmers and agribusinesses drive Pennsylvania’s economy, with $68 billion in total economic impact annually,” said Corbett. “I commend Pennsylvania’s congressional delegation, especially Congressman Glenn G.T. Thompson, for their leadership on behalf of agriculture and the many citizens who depend on the farm bill.

“I urge the president to sign this bill as soon as possible, because it helps ensure our farmers remain competitive.”

Gildo Tori, a director of public with Ducks Unlimited:

“The 2014 Farm Bill is a real victory for all who care about clean water, healthy soils, and abundant fish and wildlife. Key programs like the Regional Conservation Partnership Program, Agricultural Easement Program, CRP and CSP will provide landowners key provisions to ensure our Great Lakes watershed stays healthy and productive. Our Senators and members of Congress did a fine job of negotiating through a difficult bill that yields great benefits for everyone – farmers, ranchers, hunters, anglers and every citizen that makes their home among the Great Lakes.”