The Food, Conservation, and Energy Act of 2008 General Overview Crop Programs Dairy Provisions

Key Features No change in direct payments. Higher target prices and loan rates for most crops starting with the 2010 crop year. Eligibility requirements for receipt of payments tightened a little, but still not very restrictive. A new voluntary gross revenue insurance program for crop producers (Average Crop Revenue Election, or ACRE). Expanded eligibility for countercyclical payments (but not direct payments) to producers of several pulse crops.

Key Features (Continued) The Conservation Reserve Program (CRP) is re- authorized, but the acreage cap is reduced from 39.2 million acres to 32 million acres in Funding for the he Environmental Quality Incentives Program (EQIP) is increased by 3.4 billion. The Conservation Security Program is re-named the Conservation Stewardship Program. Funding of $1.1 billion will go for cost sharing of conservation practices on working land.

Key Features (Continued) Livestock now has its own Title (XI). The title deals mostly with competitive practices and country of origin labeling (COOL), but also legalizes out-of-state sales of meat products by state-inspected facilities. Horticultural Crops and Organics Title (X) is also new. Promotes farmers’ markets and other means of local access. Increases cost sharing for organic conversion. The Energy title contains several new grant programs and a Biomass Crop Assistance program to encourage farmers to divert land to cellulosic biofuel crops.

Fixed (Direct) Payments 2002 Act 2008 Act Corn$0.28 Wheat$0.52 Soybeans$0.44 Sorghum$0.35 Barley$0.24 Oats$0.024 Not tied to current production. Paid on 85% of base acres in 2008 and 2012; 83.3% in Acreage and yield bases are not updated from those used in 2002 Act.

2002 Farm Bill 2008 Farm Bill (2007 Rates) Corn$1.95 Wheat$2.75 $2.94 Soybeans$5.00 Sorghum$1.95 Barley$1.85 $1.95 Oats$1.33 $1.39 Loan Rates Used to compute Loan Deficiency Payments (LDPs). Paid on actual production.

Target Prices Corn$2.63 Wheat$3.92$4.17 Soybeans$5.80$6.00 Sorghum$2.57$2.63 Barley$2.24$2.63 Oats$1.44$1.79 Used to determine counter-cyclical payments (CCPs). No updating of base yield and acreage from those used in 2002 Act. Payment on 85% of base acres. CCP rate = Target Price – Fixed Payment – (higher of loan rate or season avg. farm price).

Expected CCP for Corn Target Price $2.63 Less Fixed Payment $0.28 Less Higher of Market Price or Loan Rate $5.00+ (?) Equals CCP per Bushel $0.00 PLUS LDP IF MARKET PRICE IS LESS THAN LOAN RATE.

ACRE Program Available for 2009 crop year through life of the Farm Bill. To participate, must give up 20 percent of direct payments. Applicable loan rate is also reduced by 30 percent. In exchange, guaranteed gross revenue on 83.3 percent of acres planted. Commodity revenue guarantee is 90 percent of Wisconsin 5-year lagged moving average yield (throwing out high and low years) times lagged 2-year national average price.

Dairy Subtitle Milk Price Support Program is now Dairy Product Price Support Program. Subtle change, but could help meet WTO obligations. MILC program now has flexible target price that is tied to feed prices. Payout percentage is higher, as is cap on milk marketings eligible for payment. Pilot dairy forward contracting program that operated from 2000 through 2004 is reauthorized.

Dairy Subtitle (Continued) Dairy Promotion and Research program modified to assess all U.S. milk production and the milk equivalent of dairy imports, Import assessment is one-half of domestic assessment. Continues Dairy Export Incentive and Dairy Indemnity Programs. Requires USDA to take steps to speed up the federal milk order amendment process. Mandates independent study of milk marketing orders.

Dairy Product Price Support Program CCC purchase prices for butter, nonfat dry milk and cheese are no longer tied to a minimum support price for milk. Purchase prices are the same as those previously tied to a $9.90 milk support price. Purchase prices can be lowered if government removals exceed specified trigger levels - unlikely any time soon. Change from supporting milk price to supporting product prices could help the U.S. meet future WTO commitments. Program is expected to be dormant during life of new Farm Bill.

Modified MILC Program Feed prices are used to adjust the Target Price ($16.94 per hundredweight Class I price at Boston, which is equivalent to a Class III or Class IV price of $13.69). If the combined value of 51 pounds of corn, 41 pounds of alfalfa, and 8 pounds of soybeans is greater than $7.35, then the percentage difference multiplied by 45 percent is used to adjust the target price. Example: if the feed value for a month were $10.00, then the target price would be calculated as: (10.00 – 7.35) = 2.65 = 36% X.45 = 16% X $16.94 = $ $16.94 = $19.65

Modified MILC Program (Cont.) Payout rate (percentage of the difference between the target price and the market price paid on eligible milk) is raised from 34 percent to 45 percent starting October 1, Production cap (maximum producer milk eligible for payment in any fiscal year) is raised from 2.4 million pounds to million pounds. This means about 560 more Wisconsin herds will receive payment on all their milk. Total milk covered in the state will go from about 68 to 72 percent.

Subjective Assessment Maintaining direct payments in the face of continued high crop prices seems counterintuitive. Conformance with WTO commitment not clear. Resistance to tightening income eligibility standards is obviously very strong and backed by political support. Greener than in the past, but not very much.