No doubt about it!

Yes Curt, There Is a Santa Claus!

There is no doubt about it, Santa delivers!  We have a new Farm Bill!

The economic outlook facing farm country is undeniably bleak, considering net farm income is expected to drop another 10-15% in 2018 and possibly further in 2019.  With this uncertainty looming over agriculture, I was pleased to see that the 2018 Farm Bill has passed with the largest bipartisan support of any measure in recent history.  Only 37 congressional members declined to support the final version that will be sent to the president’s desk for a signature.  I was surprised that both houses and parties could agree to anything, let alone at this level of support.  So what is the final outcome for farmers?

First and foremost, crop insurance came through the process with unparalleled support.  Most members of Congress could see the overall benefit of this stabilizing force in the farm sector.  Knowing that there is a safety net in place will make planning for 2019 much easier for ag producers.  With lower commodity prices and lingering effects from the tariff tussle, many farmers are dealing with tight margins and the reality that, if less than ideal weather conditions occur, it will be a struggle to break even.  Break-even doesn’t sound like too severe a situation until we compare this same scenario to another business type.  If I owned a store, and I borrowed money to purchase items to sell, sold them for the same amount of dollars as I spent initially, and then had to pay for operating costs (labor, lights, heat, etc.).  I couldn’t operate my store for very long.  Break-even is the outlook in farm country right now.

Two safety net options that were introduced in the 2014 Farm Bill were PLC and ARC.  Farmers were given the opportunity to choose between Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC).  These two programs will be reopened to farmers in early 2019.  The 2014 Farm Bill made our previous selections permanent through the life of that bill.  The 2018 version will now allow farmers to again select, by farm and county, whichever program looks to be the most beneficial to their operation, and then reconsider again in 2021 and yearly after that.  ARC uses Olympic average of a commodity price as a baseline for a county revenue guarantee and individual production is not considered in the calculation.  PLC uses a reference price established in the current law and the ability to update individual yields by farm and county.  Given the better yields we have experienced in recent years, the PLC option looks very attractive for the upcoming years.

Conservation is still a major focus of farm bill policy.  The CRP (Conservation Reserve Program) acre cap is back up to 27 million acres and the CSP (Conservation Stewardship Program) is expanded and is enhanced with increased flexibility.

With the passage of the 2018 Farm Bill my Christmas wishes have come true.  I can sleep with visions of a solid safety net dancing in my head.  The gloom of the Break-even scenario is lifting.  Thanks, Santa!  Happy New Year!

Image Credit: Angelo Amboldi

Leave a Reply

Your email address will not be published. Required fields are marked *