Ag outlook: Farm bill support not as substantial as it may seem

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LOUISVILLE, Ohio – Ohio State agricultural economists are telling producers of increased support from this year’s farm bill, but are also warning them that those supports aren’t as substantial as they may seem.

The economists will continue a statewide tour of agricultural policy and outlook meetings through mid-December.

Farm bill. The Farm Security and Rural Investment Act touts the addition of $47.7 billion to the agriculture budget baseline in the next six years.

But the budget’s increase is not that much because of ad hoc spending, according to economist Barry Goodwin.

“It is an increase in support but not nearly as extreme as the numbers sound.”

The political balance shift since the November election will play an important part in determining dollars for disaster relief across the country for the next growing season.

Those payments were described as “so much more remote, much less likely with the Republicans in control now,” by Goodwin.

Still, producers and policymakers are concerned with safety nets that aren’t as strong as many would like.

Loan Deficiency Payments (LDP) are coupled to production and counter-cyclical payments are tied to price only. There will be no counter-cyclical payments this year for any grains or oilseeds, so low yields and high prices could mean little support for crop production risks.

The only sure safety net is the purchase of crop insurance, the economist said.

Payment limits. “For the first time ever, there’s been more negative discussion on farm payments from the non-farm media than ever before,” Goodwin said, specifically noting the effects of the Environmental Working Group’s fully accessible online database of producer payments.

Producers with a three-year adjusted gross income over $2.5 million will not be eligible for payments unless at least 75 percent of that income is from agriculture. That rule helps eliminate the Scottie Pippens, Ted Turners and other celebrity ‘farmers’ from taking payments.

Under the latest bill, payment limit changes are weak, Goodwin said.

Fixed payments are limited at $40,000 per person; $65,000 CCP and $75,000 LDP/marketing loan gains.

For help on calculating yield or payment updates under the program, economists have developed tools specific to Ohio available online at http://aede.osu.edu/programs/outlook/farm_bill/index.html.

A national tool developed by the Farm Service Agency is online at www.afpc.tamu.edu/models/bya.

Tenants and owners. Perhaps one of the issues that has raised the most questions regarding the new farm bill is the relationship between tenants and landowners, Goodwin said.

Nearly 50 percent of land farmed in the United States is rented.

“It’s been a pretty big factor in the debates. It’s about who benefits, the owner or the operator,” Goodwin said.

The newest legislation forces landowners to make signup, base and yield and payment decisions.

A landowner is not entitled to payments if the entire farm is cash leased, but payments must be shared if crop-share rented.

Under the bill, the landowner will receive 60 cents of each dollar paid, but the policy has implications for land values. Programs aimed at raising profitability and lowering risk will raise land values and rents in return.

Research has shown the program generally adds 15 percent to 20 percent to overall U.S. land values. Closer to home, the program adds 30 percent value to land in the Corn Belt and up to 69 percent in the Northern Great Plains.

Each dollar of LDP payment adds more than $9 value per acre, and $1 of disaster payments adds more than $6 per acre to land values, effectively raising rents for farmer-producers.

Other provisions. Other provisions of the bill include a $6.6 billion (67 percent) increase in crop payments for the eight major U.S. crops and a $198.2 million (43 percent) increase in Ohio crop payments.

Also included is $13.2 billion in increased spending on conservation programs including farmland preservation and land retirement.

For a schedule of remaining outlook meetings across the state, visit http://aede.osu.edu/programs/outlook.

(You can contact Andrea Myers at 1-800-837-3419, ext. 22, or by e-mail at amyers@farmanddairy.com.)

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