1. Federal Changes in Budget and Policy Rural Outlook Conference October 17, 2018
Amy Hagerman
State Specialist in Agricultural and Food Policy

2. Risk and Risk Management
U.S. Net Farm Income Real 2018$, 1970 to 2018
Data Source: USDA-ERS, Graphic Source: Brad Lubben

3. Risk and Risk Management
Source: Cowley and Kreitman “Decline in Farm Income Slow but Persists” Main Street Views, Policy Insights from the Kansas City Fed, May, 2018

4. Risk and Risk Management
Source: USDA-ERS
In 2018, we will also see the Market Facilitation Program payments included

5. Federal Policy and Budget
Tax Cuts and Jobs Act
Bipartisan Budget Act
US, Mexico, and Canada Agreement
Ongoing efforts
2018 Farm Bill
USDA Appropriations
Trade negotiations

6. FEDERAL POLICY CHANGES
IN 2018

7. Tax Cuts and Jobs Act (Dec 2017)
Overall goal was to reduce tax rates
Changing tax brackets
Reducing corporate taxes
Stimulate employment
8 year time horizon
For more information, contact:
JC Hobbs
316 E. Oxford Enid, OK (580) (phone) (405) (fax)

8. Bipartisan Budget Act of 2018 (February 2018)
Wildfire and Hurricane Indemnity Program (WHIP)
Crops, trees, bushes and vines
Margin Protection Program for dairy
1-time new coverage election
Monthly calculation of the margin
Greater coverage of production at the lowest premium level
Exception on admin fees for some dairy operators
Seed cotton a covered commodity
1-time yield update
Reallocation of generic base
“unassigned crop base”
1-time election to PLC or ARC
Limitation of Stacked Income Protection Plan beginning in the crop year.

9. USMCA overview (September 2018)
US, Mexico, and Canada Agreement (USMCA) replaces NAFTA
For the US and Mexico, very few changes for agriculture
Some agriculture related changes for the US and Canada
More US access to Canadian dairy markets
Dispute resolution w/independent courts
Doesn’t address US tariffs on steel/ aluminum
Next steps:
All parties sign by late Nov.
Congress approves within 90 days
For more information, contact:
Larry Sanders
509 Ag Hall Stillwater, OK (405) (phone) (405) (fax)

10. ONGOING POLICY AND BUDGET AGENDA ITEMS FOR 2018 AND 2019

11. The next farm bill… 2018…2019??? HOUSE
H.R. 2 Agriculture and Nutrition Act of 2018
June 21
SENATE
S. 3042: Agricultural Improvement Act of 2018 June 28, 2018
July 18
August 3
CONFERENCE
September 5
2014 Farm Bill expired September 30. Will we see a 1-year extension? ? ?
FULL HOUSE
Floor Vote
FULL SENATE
Floor Vote ? ?
WHITE HOUSE
Signature

12. Overview of versions under discussion
Focus is risk management
ARC/PLC, Crop Insurance
Maintains omnibus concept
Nutrition and farm programs remain together
Sharp partisan differences may stall progress in conference
Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps)
Conservation
Overall effort to increase efficiency and cut costs, with very different philosophies for achieving it.

13. Farm Bill Issues Commodity programs Crop insurance programs
These four areas represent 99% of spending in the 2014 farm bill.
Commodity programs
ARC mechanics
Yield data and history
Reference prices
ARC v. PLC decision
Dairy and cotton
Crop insurance programs
Program features
Eligibility limits
Premium subsidy
Conservation
CRP
Acreage enrollment cap
CRP rental rates
Working lands programs
EQIP and CSP funding
Nutrition (Supplemental Nutrition Assistance Program)
Supports and eligibility levels
Not a source of funds for farm program spending

14. 2018 Farm Bill Comparison
Note: Analysis by CBO of legislation as passed by the House and by the Senate. Changes in 10-year baseline relative to projected April 2018 baseline of $867.2 billion for farm bill programs for FY

15. Let’s break it down… Commodity Programs Nutrition Livestock
Specialty Crop and
Organic Programs
Conservation
Rural
Development
Crop
Insurance
Trade

16. Commodity Programs Reauthorizes ARC and PLC
H.R. 2
S. 3042
Reauthorizes ARC and PLC
Producers can reelect
Defaults to PLC if all producers on a farm cannot agree between PLC and ARC
Payment limit is $125,000 per entity
Change to the IRS definition of a pass- through entity
Each entity limited to a single payment limit
Reauthorizes ARC and PLC
Producers can reelect
Defaults to ARC if all producers on a farm cannot agree between PLC and ARC
Reduces the Adjusted Gross Income limitation to $700,000 from $900,000
Expands familial definition to include nieces, nephews and cousins
Active engagement rules tightened

17. Commodity Programs Price Loss Coverage (PLC) Price Loss Coverage (PLC)
H.R. 2
S. 3042
Price Loss Coverage (PLC)
Areas affected by severe drought in could update yields (one time)
References prices increased in times of high historical prices.
Eliminates ARC-IC
No payments permitted in the future if an eligible crop was not planted from
Price Loss Coverage (PLC)
No big changes
“Unassigned Base”

18. Commodity Programs Agricultural Risk Coverage (ARC-CO)
H.R. 2
S. 3042
Agricultural Risk Coverage (ARC-CO)
Risk Management Agency (RMA) data used rather than National Agricultural Statistics Service (NASS)
Physical farm location is used for payments
Yield update for drought- affected counties
Separate revenues for irrigated and dryland
Agricultural Risk Coverage (ARC-CO)
Use the data with the greatest national coverage first (RMA versus NASS)
Physical farm location is used for payments
Increases benefits by adjusting yields used in its calculation (trend adjusted 5-year Olympic average yield).

19. Yield Updating for Drought Affected Counties

20. Commodity
Programs
Nutrition
Livestock
Specialty Crop and
Organic Programs
Conservation
Rural
Development
Crop
Insurance
Trade

21. Livestock Programs Emergency Response H.R. 2 S. 3042
Expands the Livestock Indemnity Program (LIP)
Eliminates payment limitation for the Emergency Assistance for Livestock, Honey Bees, and Farm- Raised Fish program (ELAP)
Establishes national Animal Disease Preparedness and Response Program
Establishes a US only vaccine bank
Expands support to the NAHLN
Emergency Response
Establishes national Animal Disease Preparedness and Response Program
Establishes a US only vaccine bank
Expands support to the NAHLN

22. Commodity
Programs
Nutrition
Livestock
Specialty Crop and
Organic Programs
Conservation
Rural
Development
Crop
Insurance
Trade

23. Conservation
H.R. 2
S. 3042
Working Lands Programs
Folds the Conservation Stewardship Program (CSP) into the Environmental Quality Incentives Program (EQIP)
Raises EQIP budget, but by less than CSP budget
Eliminates EQIP livestock share
Increases Conservation Reserve Program (CRP) acreage to 29 million acres
Caps CRP rental rates at 80% of county average rental rate and targets acreage
Increases budget for easement programs and regional conservation partnership programs.
Initiates a feral swine eradication program
Reduces CSP annual authority
Reduces annual eligible acreage enrollment in Conservation Stewardship Program (CSP)
Reduces EQIP authority
Reduces EQIP livestock share (55% from 60%)
Increases Conservation Reserve Program (CRP) acreage to 25 million acres
Caps CRP rental rates at 88.5% of county average rental rate
Increases budget for easement programs and regional conservation partnership programs.
Creates a new Conservation Reserve Easement Program

25. Commodity
Programs
Nutrition
Livestock
Specialty Crop and
Organic Programs
Conservation
Rural
Development
Crop
Insurance
Trade

26. Crop Insurance
H.R. 2
S. 3042
Allows separate policies for land that can be both grazed and harvested
Imposes higher administrative fees for catastrophic coverage
Makes adjustments to funding for research, development and education assistance
Authorizes insurable land units to cross county lines
Increases pasture and rangeland premium subsidies for members of Indian tribes
You are likely to see crop insurance choices similar to what you had under the 2014 bill.

27. Commodity
Programs
Nutrition
Livestock
Specialty Crop and
Organic Programs
Conservation
Rural
Development
Crop
Insurance
Trade

28. Nutrition H.R. 2 Reauthorizes SNAP, with over 35 changes
Increases grants to states
Adjusts categorical eligibility requirements from up to 200% of the federal poverty level to 130% of the federal poverty level
Implications for school lunch programs
Earned Income Deduction increases from 20% to 22%
Creates a national gateway for electronic benefits transfers
Heating and cooling actual costs are used for the standard utility allowance
Requires SNAP recipients with children under 18 to cooperate with child support payments
Reauthorizes SNAP, with over 35 changes
Reduces SNAP outlays by $2.3 B over and $5 B over
Imposes employment or training requirements, unless waived, to receive benefits
20 hours per week in 2021; 25 hours per week in 2026
CBO estimates 17% of current SNAP recipients would be subject to these changes.
Only 24% of the 17% (or 4% of SNAP recipients) would not be eligible for a waiver.

29. Nutrition S. 3042 Reauthorizes SNAP, with minor changes
Extends the certification period from 24 months to 36 months
Expands training program options, administrative requirements, and grants to states.
Increases administrative cost of implementing electronic benefit transfers
Increases benefits for food insecurity assistance
Reduces incidents of duplicative benefits
Eliminates bonuses to states for reducing performance and error rates.

30. What happened when the 2014 Farm Bill Expired September 30?

31. So “What happens when the Farm Bill expires?”
The answer is, “It depends on which program you are talking about AND how long we have to wait.”
Conservation Reserve Program:
Is authorized and funded through the farm bill.
An expired Farm Bill halts all activities associated with CRP!
Crop Insurance:
Permanently authorized in 1980 and funded separately through annual appropriations.
An expired Farm Bill means crop insurance reverts to 1980 law, but is funded.
An expired Farm Bill doesn’t impact this program heavily in 2018.
Title I, Commodities:
The commodity title would revert back to the 1949 agriculture act.
BUT ARC/PLC contracts were signed by September 28 and seed cotton under the BBA will be signed by December 7.
Dairy Prices would revert to 1949 levels starting in January.
Supplemental Nutrition Assistance Program (SNAP or Food Stamps):
Permanently authorized and funded separately through annual appropriations.
An expired Farm Bill doesn’t impact this program heavily in 2018.

32. It could be a long road
November midterm elections and the possible change in the House majority could throw a wrinkle in timely Farm Bill passage.

33. Trade Negotiations Trade negotiations with Japan
“Trade war” with China
Tariffs
Retaliatory tariffs affecting agriculture

34. What is the Market Facilitation Program?
July, 2018
Up to $12 billion in funds
Aimed at targeted commodities
August, 2018
3 different mechanisms
Market Facilitation Program ($4.7 billion)
Food Purchase and Distribution Program ($1.2 billion)
Agricultural Trade Promotion Program ($200 million)
Corn
Dairy
Sorghum
Wheat
Sweet Cherries
Shelled Almonds
Cotton
Pork
Soybeans

35. Market Facilitation Program
Sign-up September 4 to January 15
Payment of 50% of actual production
Requirements
Active engagement
AGI < $900,000
Conservation Compliance
Separate $125,000 payment limits for crops and dairy/hogs.

36. How much is being paid?

37. How were the amounts decided for each commodity?
Step 1: Trade value without retaliatory tariffs (2017 data)
Step 2: Trade value with the retaliatory tariffs (Trade model)
Step 3: Subtract step 1 from step 2 to get gross “trade damage”
Step 4: divide the trade damage by 2017 crop year production to get the payment rate

38. How were the amounts decided for each commodity?
2017 US exports to China $956 million
25% tariff estimated to drop that export value to $642 million
Gross trade damage of $314 million
$314m/364m bushels = $0.86/bu
For more details on the trade damage estimate

39. That should sound familiar!

40. Full circle: Risk versus Risk Management
Federal farm income safety net is complex and still evolving
Farm programs integrate with, complement, and substitute for crop insurance
Decisions
ARC-IC vs. ARC-CO vs. PLC
ARC/PLC and crop insurance
Producers need to manage policy risks, not just policy tools
Uncertainty and volatility of policy developments have economic implications for both the short and long-term
Risk management decisions are complex
Risk management decisions need to be based on portfolio analysis, not program-by-program decisions
Producer decision tools and education are a critical need

41. Questions?
Amy Hagerman