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A primer on the new Farm Bill

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The farm bill that was finally passed by Congress and signed Friday by President Barack Obama is not your father's farm bill. Direct subsidy payments are a thing of the past, as predicted, and some conservation programs that were eliminated or rolled into other programs represent the biggest change to farm policy in several decades.

Most farm organizations released statements supporting the bill following the House's approval, and livestock organizations applauded the resumption of a livestock disaster assistance program. However, groups representing the meat packing industry did not support the bill because it fails to eliminate the Country of Origin (COOL) labeling law.

Those who had hoped to eliminate other subsidy programs and to impose a more meaningful cap on what any single farm can earn and still qualify for subsidies were disappointed, along with those who had hoped to see more money cut from food stamps. The most immediate impact of the bill will be the dropping of direct subsidy payments, which were based on the number of acres owned regardless of the condition of the crop or if there even was one.

“Obviously, the end of direct payments is the biggest change,” George Knapek with the Agricultural and Food Policy Center at Texas A&M University said. “It's going to change the way people do business. Bankers used the direct payments to help them lend. The bankers are going to have to learn about the new programs as well as the farmers.”

Instead of direct payments, farmers now have two options related to losses. One is the Agriculture Risk Coverage (ARC) program, which is designed to supplement crop insurance. ARC is a revenue protection program that gives farmers a one-time choice of coverage at the individual level or the county level, providing a county is approved for the program.

The ARC would apply to each commodity based on a five-year Olympic yield that tosses out the high and low years multiplied by the five-year Olympic average of national marketing year prices. Each crop's revenue would then be calculated by yields times the mid-season price for that commodity. Payments would be made if the revenue fell below the guarantee. ARC pays when prices fall below the five-year average but it goes away if prices stay low.

The county-triggered program is commodity-specific and uses county yields in its formula and is paid on 85 percent of base acres. The farm-level program will be paid on 65 percent of a producer's base acres.

The second option is the Price Loss Coverage (PCL) that works with a more traditional countercyclical model of fixed, government-set target prices instead of a five-year average on covered crops — corn, peanuts, long and medium grain rice, grain sorghum, soybeans and wheat. Payments are triggered when the market year average price for each individual commodity falls below the reference price. It covers 85 percent of a producer's base acres.

Farmers who choose PLC can also sign up for a secondary policy, the Supplemental Coverage Option (SCO).

Knapek said that farmers will have to learn about the new programs to know which one will be best for their particular operation.

“It's going to depend on what you grow and where prices are,” he said. He added that Texas AgriLife Extension Service will conduct a series of meetings across the state to help farmers make those decisions once the final bill is in place and the USDA writes and releases rules associated with the bill.

Livestock disaster programs, which ran out in 2011 during the worst of the Texas drought, have been restored as permanent law under the Livestock Indemnity program. It covers 75 percent of market value for excessive livestock losses due to adverse weather, including drought and blizzards. The new livestock program includes $7 billion in funding for livestock disaster assistance, conservation funding, export promotion, veterinary service grants and research.

Dairy provisions were among the most contentious topics in this farm bill. Under the new provisions, dairy farmers will be able to purchase margin protection insurance. The amount will depend on how much protection they sign up for and how much milk they produce.

Other provisions include an $8 billion cut in food stamps (which will not affect Texas) and a $200 million increase in funding for U.S. food banks. It also provides full funding for farmers looking to switch to an organic operation and includes $6 billion in cuts to conservation programs.

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