Key Provisions of the Commodity and Conservation Titles of the 2014 Farm Bill
By Phillip L. Fraas, Stinson Leonard Street, Washington, DC
On February 7, 2014, President Obama signed into law the new farm bill, the Agricultural Act of 2014. Public Law 113-79; 127 Stat. _____; to be codified in __ U.S.C. _______. The text of the law is set out in H.R. Rept. No. 113-333, Jan. 27, 2014.
This comprehensive agricultural, food, and rural development measure includes important marketing loan, commodity, disaster assistance, conservation, and payment limitation provisions that will affect commercial farm operations. Title I continues marketing assistance loans for farmers, establishes new risk coverage programs for crop growers and dairymen, authorizes disaster assistance for livestock producers and others, and revises the rules that limit the amount of payments individuals can receive and makes high income persons ineligible to receive any payments. Title II extends and consolidates farmland and water conservation programs.
Taking the longer view, the 2014 farm bill begins a shift of commodity program policy away from traditional government safety net mechanisms toward a risk management model that includes a number of multi-peril crop insurance elements.
LOAN AND COMMODITY PROGRAMS
Title I of the 2014 farm bill establishes a suite of loan and payment programs for a number of commodities produced by U.S. farmers—wheat, corn, grain sorghum, barley oats, soybeans, other oilseeds, rice, pulses such as dry peas, and peanuts (referred to in the farm bill and here as “covered commodities”)—and provides loan programs for cotton farmers, sugar crop growers, and producers of wool, mohair, and honey. Upland cotton and milk have unique new safety net programs: cotton has a new crop insurance program in lieu of a payment program and milk has an insurance-like margin protection program.
The loan and commodity provisions will apply to the 2014 through 2018 crops, though with respect to the 2014 crops of covered commodities (which farmers in the south part of the country already are beginning to plant), farmers and their advisers will have some lead time to evaluate the programs before having to sign up for the payment programs. This is important because of the increased complexity of the programs.
Loan and Payment Programs for Covered Commodities
The programs for the covered commodities typically garner much of the attention in any review of the commodity provisions of a farm bill, and for good reason. The number of farms that produce these commodities far exceeds the number of farms that produce the other commodities.
So, how does the farm bill deal with covered commodities? It makes marketing assistance loans available as under prior law but revamps the payment mechanisms for these commodities and creates new options regarding payments that will take careful analysis by producers and their advisors.
The marketing assistance loan program essentially is an extension of the 2008 farm bill program without significant changes. Producers of covered commodities will be able to take out loans from USDA on their harvested crops for a set price per unit of production, commonly referred to as the “loan rate.” The loans are nonrecourse, meaning that, if the farmer does not choose to repay the loan, USDA, as the lender, does not try to force the farmer to repay, but simply takes the crop collateral to satisfy the loan debt.
These loans provide cash to farmers right after harvest to pay crop production bills when farm storage bins throughout the country are bursting with harvested crops and market prices are the weakest. The farmer can wait until crop supplies diminish and the market price moves off of its post-harvest low to pay off the loan and sell the crop. And, the marketing assistance loan program has two wrinkles if commodity prices remain depressed: the farmer can (a) pay back the loan at less than the loan rate, at either the low market price or other low price set by the Secretary of Agriculture to avoid loan forfeitures (this benefit is called a marketing loan gain), or (b) forego taking out the loan entirely and receive a loan deficiency payment (LDP) reflecting the difference between the marketing loan gain repayment rate and the loan rate.
One big change in the marketing assistance loan program under the new farm bill is that now marketing loan gains and LDP benefits will be subject to the payment limitation.
Title I includes a specified loan rate for each covered commodity, The specified loan rates are the same as those in the 2008 farm bill, and considerably less than expected market prices and the “reference prices” for payments discussed below.
Now, how will the payment programs for covered commodities be changed? Direct and counter-cyclical payments, and Average Crop Revenue Election (ACRE), will be gone, replaced by Agricultural Risk Coverage (ARC), Price Loss Coverage (PLC), and Supplemental Coverage Option (SCO), along with the new concept of having the farmer make a risk management election, in 2014 or early 2015, as to the type of program that will govern his or her operations for the life of the farm bill.
Prior to enactment of the 2014 farm bill, producers of covered commodities did not choose among payment programs; they were uniformly available to all qualifying farmers. Farmers, except producers of pulses, could receive direct payments on their base acreage (the farm’s historical plantings to a program crop), but this type of payment has been criticized because it was made regardless of need. Also, farmers, including producers of pulses, were eligible for counter-cyclical payments on their crops if the market price fell below a specified target price. The payment rate was the difference between the target price and the higher of the market price (which tends to ebb and flow in cycles, thus the term “counter-cyclical”) and marketing assistance loan rate, plus the direct payment rate. In addition, average crop revenue election (ACRE) payments were available starting in 2009. Unlike counter-cyclical payments that guard against low prices, ACRE guarded against low revenue for the commodity involved (which would take into account both price and how much is produced)
Instead of these programs, which are terminated beginning with the 2014 crops, farmers will have to make an irrevocable choice between one of two new programs that provide support payments for 2014 through 2018 crops of the covered commodities: the Price Loss Coverage (PLC) program (which, like counter-cyclical payments, provides price protection) or the Agricultural Risk Coverage (ARC) program (which, like ACRE, provides revenue protection).
Price protection under PLC will be based on what is called a “reference price,” which serves the same function as the target price used in the old counter-cyclical payment program, but the reference prices specified in the 2014 farm bill are higher than the target prices specified in the 2008 farm bill.
ARC covers a portion of the farmer’s losses when crop revenues decline. The farmer will be responsible for the first 14% of losses off of benchmark expected revenue; ARC provides payments for the next 10% of losses; and any deeper losses are to be covered by crop insurance if the farmer has it. Given the portion of losses ARC covers, it has been referred to as a “shallow loss” protection program.
PLC is available on a commodity-by-commodity basis. So is ARC if the farmer elects protection against county-level losses; but if the farmer wants ARC protection for losses at the farm level, ARC would have to be applicable to all the covered commodities produced on the farm.
Neither PLC nor ARC payments are available on farms with 10 acres or less of acreage base, except if the producer is a socially-disadvantaged or limited resource farmer.
If a farmer fails to make an election between PLC and ARC for the 2014 crops, he or she will not be eligible for either program this year, and will be enrolled automatically in PLC for the 2015 through 2018 crops.
Potential 2014 crop payments under either PLC or ARC will not be made until very late in 2015, because the payments are based on the full 2014 marketing year, which does not start until the 2014 crops are harvested.
A farmer who elects to go with PLC price protection also will be eligible for a new area-wide coverage crop insurance product called Supplemental Coverage Option (SCO), authorized in title XI (crop insurance) of the 2014 farm bill. SCO will supplement the coverage the farmer has under his or her individual crop insurance policy, and provide protection based on expected county yields or revenue to cover that part of the farmer’s crop insurance deductible below 86% of expected production. This special policy, then, protects against so-called “shallow losses” in a manner similar to ARC. The farmer will receive a premium discount of 65% on this policy.
When the provisions go into effect
Marketing assistance loans: Since this program is continued from the 2008 farm bill without substantial change, it will be in effect for commodities produced this year.
PLC and ARC: These programs start with the 2014 crops and run through the 2018 crop year. However, sign-up for the programs will not occur until the end of this year or early 2015. Although this is unusually late in the game (by then, the 2014 crops will have been already harvested), the delay was forced by (i) the length of time it took to get the farm bill signed into law, (ii) USDA’s need for adequate time to write the rules governing these complicated new programs, and (iii) each farmer’s need for time to evaluate how the new rules will apply to his or her own farm situation. With this delay in sign-up, the farmer will have the opportunity to learn what the farm’s actual 2014 production and yields are and plug those numbers into the PLC and ARC models to see how they will work for his or her operation before choosing one program or the other. This is important as the farmer’s election to go with either PLC or ARC will be binding through the 2018 crops, and cannot be changed. Also, farmers will have time to consider reallocating their acreage bases among covered commodities as desired for their farm operations (using 2009 – 2012 planting data), which is important because both PLC and ARC payments will be made on base acres, not planted acres. Farmers also can update their payment yields for purposes of the PLC program, using 2008 – 2012 actual production data. Any potential payments under ARC or PLC would not occur until late in 2015 because payments are based on price averages throughout the full marketing year.
SCO: is to become available for 2015 crops.
Loans and STAX Insurance for Upland Cotton
Title I’s marketing assistance loan program, including the grower’s right to marketing loan gains and loan deficiency payments, applies to upland cotton as well as the covered commodities. The farm bill does not specify the upland cotton loan rate, but establishes a formula to calculate it.
Although in past farm bills, upland cotton was treated the same as the covered commodities for purposes of the commodity payment programs, this time around, PLC and ARC payments will not be made available to upland cotton growers. Instead, the cotton grower is given the opportunity to buy a new crop insurance product (provided for in title XI of the farm bill) called the Stacked Income Protection Plan (STAX), a revenue-based, area-wide policy to supplement the farmer’s individual crop insurance protection. STAX will cover losses when a farmer’s production falls below 90 % of expected production, down to 70% or the production percentage covered by the farmer’s underlying crop insurance policy, whichever is higher. The sting to upland cotton producers from having to pay for this protection is lessened considerably by the fact that they get an 80% discount of the cost of the premium.
Since STAX will not be ready until 2015, upland cotton producers will be eligible for transition payments, which are similar to the old direct payments, in 2014. These payments will be available in 2015 as well for counties where STAX still is not available.
When the provisions go into effect
Marketing assistance loans: Since this program is continued from the 2008 farm bill without substantial change, it will be in effect for upland cotton produced this year.
STAX should be ready to cover all crops in 2015.
for Extra Long Staple Cotton, Wool, Mohair, Honey, and Sugar Crops
Title I continues without major changes the loan program for extra long staple (ELS) cotton, wool, mohair, and honey, which are included in the same loan program authorization with the covered commodities and upland cotton. Sugar’s loan program, which is similar but provided for separately, is continued without any change. Producers of these commodities do not have access to payment programs like PLC or ARC, nor to STAX crop insurance.
Producers of wool, mohair, or honey can capture marketing loan gains or receive loan deficiency payments like producers of covered commodities; however, ELS cotton growers cannot. Their loans must be paid in full and with interest (or the collateral forfeited). Thus, for ELS cotton, the loan program effectively establishes the loan rate as the price floor for the cotton. How so? Well, given that the farm bill sets the loan rate at 79.77¢ a pound, if the market is only offering 79.76¢ a pound, the grower with cotton under loan will not be inclined to repay the loan with interest to redeem his cotton so he can take that offer if instead he can keep the 79.77¢ a pound he got from the loan process and just surrender the loan collateral to the government. Persons interested in buying cotton will have to offer above 79.77¢ a pound plus interest to induce the grower to sell.
The sugar loan program is a different story in several ways. First of all, farmers do not produce sugar, they produce sugarcane or sugar beets, which they provide to processors who extract the sugar from those crops. The federal support program does not provide nonrecourse loans to farmers on the cane or beets they produce; rather it provides the loans to the processors on the sugar they extract from those crops.
Secondly, as with ELS cotton, the sugar loan program does not allow repayment at less than the loan rate, which for raw cane sugar will be 18.75¢ a pound and for refined beet sugar 24.09¢ a pound.
Finally, the sugar loan program is designed to operate at no net cost to the government, so it is important that market prices remain strong enough that processors that take out loans repay them with interest. To strengthen prices, the government can limit the supply of sugar that enters the market through imposing caps on marketings of domestically-produced sugar and tariff rate quota restrictions on sugar imported into the country. In addition, USDA has authority to operate a feedstock flexibility program for bioenergy producers under which sugar the government acquires is sold to bioenergy producers to convert to biofuel rather than put back into the sugar market.
When the provisions go into effect
Since these programs are all continued from the 2008 farm bill without substantial change, they will be in effect for commodities produced this year.
Prior to 2014, USDA supported the price of milk by having an unlimited standing offer to purchase cheese, nonfat dry milk, and butter at specified support prices. USDA also provided subsidies for exporting dairy products through the Dairy Export Incentive Program (DEIP). Title I terminates both the dairy price support program and DEIP.
In recent years, dairy farmers could benefit from the Milk Income Loss Contract (MILC) Program, a counter-cyclical payment program. Title I temporarily extends MILC to the earlier of September 1, 2014, or when the new dairy production Margin Protection Program (MPP) is in place (expected no later than that date), with MILC coverage limited to 2.985 million pounds of annual milk production per farm.
The MPP, to be in effect through the end of 2018, will provide production margin insurance to dairy farmers, the margin referred to being the difference between the market price per cwt. of milk and average feed cost per cwt. of milk production. Margin payments will be made at no cost to the farmer (other than the $100 administration fee) when the dairy production margin dips below $4.00 per cwt. Above that margin level, the farmer will have to choose—and pay a premium for—coverage at $0.50/cwt. increments up to $8.00/cwt. The farmer can elect to cover between 25% and 90% of his or her historic average production; and production in excess of 4,000,000 pounds annually has a higher premium rate
A farmer cannot participate both in the MPP and the Livestock Gross Margin (LGM) for Dairy Program, a similar crop insurance product already available to dairy farmers.
In connection with the MPP, Title I also establishes a Dairy Product Donation Program (DPDP) under which USDA will purchase dairy products off the market when the dairy production margin falls below $4.00 per cwt. These purchases would work to boost the margin above $4.00. Products purchased under the program would be distributed to persons in low income groups.
When the provisions go into effect
MILC is extended to the earlier of September 1, 2014, or when the MPP goes into effect, which is scheduled to be no later than September 1, 2014.
DISASTER ASSISTANCE PROGRAMS
Title I of the 2014 farm bill revises and makes permanent four disaster assistance programs for farmers first established in the 2008 farm bill: (i) the Livestock Indemnity Program (LIP), which will compensate ranchers at the rate of 75% of market value for livestock mortality caused by a disaster; (ii) the Livestock Forage Disaster Program (LFP), which will compensate for grazing losses caused by drought or fire, with payments covering up to 60% of feed costs; (iii) the Emergency Assistance for Livestock, Honeybees, and Farm-Raised Catfish Program (ELAP), which compensates producers for losses not covered by the other two disaster programs (spending for ELAP is capped at $20,000,000 annually); and (iv) the Tree Assistance Program (TAP), which pays orchardists and nursery growers to cover 65% of the cost of replanting trees or nursery stock and 50% of the cost of pruning/removal following a natural disaster. The new farm bill also makes payments under these programs available retroactively to October 1, 2011, which was when funding for them under the 2008 farm bill expired.
Not continued in the new farm bill is another disaster assistance program created by the 2008 farm bill, the Supplemental Revenue Assistance Payments Program (SURE), which provided compensation to producers of row crops and other crops for natural disaster losses not covered by crop insurance or NAP.
The 1996 farm bill established NAP, the Noninsured Crop Assistance Program, a permanent program under which USDA makes available disaster payments to producers of crops for which crop insurance is not available. Benefits are only available for losses deeper than 50% of historical yields. Section 12305 of the 2014 farm bill adds authority for USDA to make available, through the 2018 crops, additional NAP coverage on up to 65% of historical yields if the farmer pays a premium for the added coverage.
When the provisions go into effect
Eligibility for LIP, LFP, ELAP, and TAP extends retroactively to losses all the way back to October 1, 2011, with sign-up for these programs starting on April 15, 2014.
CONSERVATION COMPLIANCE REQUIREMENTS
AND CONSERVATION PAYMENT PROGRAMS
Already applicable under previous farm bills, a farmer who produces a crop on highly erodible land without implementing an approved conservation plan or a qualifying exemption, or converts a wetland to crop production, will not be eligible for farm program benefits. This commonly is referred to as the “conservation compliance” requirement. However, this restriction had not been applied to benefits under the crop insurance program since 1996. Title II of the 2014 farm bill changes that and makes the federally funded portion of crop insurance premiums subject to conservation compliance (but the requirements will not be applied to a farm operation until 2016 at the earliest).
The 2014 farm bill, in title XI, addresses another conservation compliance provision, referred to by many as “sodsaver.” It will limit crop insurance and NAP subsidies to a producer that breaks out native grassland for crop production unless the producer can substantiate that the ground has been tilled before. The limitation would remain in effect for four years after the land is broken out. This provision applies only in Minnesota, Iowa, North Dakota, South Dakota, Montana, and Nebraska.
Title II also continues a number of land and water conservation programs of benefit to farmers and ranchers, but reduces funding by close to $4 billion over the next ten years.
- One of the largest programs, the Conservation Reserve Program (CRP), is reauthorized but its acreage enrollment cap is reduced gradually from 32 million acres now to 24 million acres in 2018. Under the new law, landowners can enroll grassland acres into the program.
- The Environmental Quality Incentives Program (EQIP), which assists producers comply with environmental requirements applicable to their land in production, is reauthorized through 2018 with funding set at $8,000,000,000.
- The Conservation Stewardship Program (CSP), a working lands program that pays farmers part of the cost of installing and maintaining conservation practices on their land is reauthorized through 2018 at a reduced enrollment level of 10 million acres annually, down from the 12.769 million acre level in place before the new law.
- Title II establishes a new conservation program, the Agricultural Conservation Easement Program (ACEP), which consolidates several existing programs authorizing the purchase by USDA of conservation easements on wetlands and agricultural land easements to prevent conversion of the land to other uses. It is funded at $2,025,000,000 for the period 2014 – 2018.
When the provisions go into effect
Crop insurance conservation compliance requirement: will not be applied to a farm operation until 2016 at the earliest.
Sodsaver changes: Go into effect with the 2014 crops.
THE PAYMENT LIMITATIONS
Commodity Program Payment Limitation Rules
Since the 1970s, the programs for covered commodities and upland cotton have imposed dollar limits on the amount of government payments that a person can receive for any crop year. Under the 2008 farm bill, there were two limitations, a $40,000 annual limitation for direct payments, and a $65,000 limitation for countercyclical and ACRE payments. However, there was no limit on marketing assistance loan gains or loan deficiency payments. Peanut producers had a separate but comparable set of payment limits.
Under the 2014 farm bill, there will be a flat $125,000 annual limit per individual, applicable to PLC and ARC payments on covered commodities, and marketing assistance loan gains and loan deficiency payments for these commodities, upland cotton, wool, mohair, and honey. However, peanuts will have its own $125,000 annual limit on these benefits. The 2014 upland cotton transition payments will remain subject to the $40,000 direct payment limit under the 2008 farm bill.
The other payment limitation rules remain unchanged, some of which are as follows:
- When applying the payment limitations to a farming operation, USDA will look through a legally-created entity’s structure and attribute to each individual that shares in ownership of the entity a portion of the payments commensurate with his or her share of ownership.
- Since 1988, payments have been limited to persons considered “actively engaged” in farming. While there are detailed regulations explaining what “actively engaged” means, in general, to be considered as “actively engaged,” a person has to make a significant contribution of (i) land, capital, or equipment, and (ii) personal labor or active personal management to the farm operation. Also, the person’s contributions have to be commensurate to the person’s share of the farm profits and at risk.
- A spouse is considered actively engaged if the other spouse meets the qualification, which allows the applicable payment limitation to be doubled for the couple.
- A landlord who contributes land to a farm operation can be considered actively engaged without more if the rent payment is a share of the crop (and thus at risk).
- Both the Senate and House versions of the 2014 farm bill contained provisions that would have prohibited a person from using active personal management to qualify as “actively engaged,” but would have allowed each farm operation to have one “farm manager” who could be considered actively engaged by providing management services to the operation. These provisions were in response to General Accountability Office (GAO) and other criticisms of the use by some farm operations of the active personal management criterion to qualify numerous of their participants for payments. However, this provision was dropped from the final version of the farm bill. Instead, the farm bill requires the Secretary of Agriculture to write new regulations defining “significant contribution of active personal management,” to become effective for the 2015 crops. The purposes of the new rulemaking are to strengthen the verification process when a participant in a farm operation wants to qualify on the basis of active personal management and to add clarity and objectivity to the “actively engaged” rules to facilitate better enforcement of the payment limitations. The regulations could establish limits on the number of individuals who use active personal management as the basis for being considered actively engaged, but they are not to apply to farms comprised solely of family members.
When the provisions go into effect
New payment limitation rules: effective for 2014 crops and programs.
“Actively engaged” rules: Secretary Vilsack has said USDA will promulgate the new regulations for determining who is an “actively engaged” farmer by the end of the year.
Disaster Program Payment Limitations
There is a combined program annual payment limit of $125,000 for LIP, LFP, and ELAP, with a separate $125,000 annual limit for TAP. Also, NAP has its own annual pay limit of $125,000.
Conservation Program Payment Limitations
CRP: Retains the $50,000 limit on annual rental payments to a participant.
EQIP: There will be a limit of $450,000 per participant on cumulative payments under EQIP during the period 2014 – 2018.
CSP: There will be a limit of $200,000 per participant on cumulative payments under CSP during the period 2014 – 2018.
Adjusted Gross Income (AGI) Limit
In addition to the payment limitations, there are eligibility requirements based on adjusted gross income (AGI). Under the 2008 farm bill and effective through 2013, program benefits, including direct and counter-cyclical payments, along with payments to dairy farmers under milk income loss contract (MILC) program and the non-insured crop assistance program (NAP), were prohibited to any individual whose annual non-farm adjusted gross income exceeded $500,000; and there was a specific prohibition on direct payments to anyone with more than $750,000 in farm adjusted gross income (or, beginning in 2012, $1,000,000 in combined farm and non-farm adjusted gross income.) To receive conservation program benefits, the AGI limit was $1,000,000 in non-farm adjusted gross income unless more than 66.66% of all adjusted gross income was farm income. These AGI limits expired in 2013.
Under the 2014 farm bill, there will be just one $900,000 limit on combined farm and non-farm annual adjusted gross income that will apply for a person to be eligible to receive PLC or ARC payments, marketing loan gains or loan deficiency payments, disaster assistance, NAP, and (beginning in 2015) conservation program payments. Also, this AGI limit will not expire in 2018, but is permanent law.
When the provisions go into effect
The new AGI limit will be effective in 2014, except conservation payments become covered in 2015.
SOME FINAL THOUGHTS
Added roles for crop insurance. In the last 30 years, reliance by farmers on federally-supported and regulated multi-peril crop insurance to protect their growing crops from natural disasters has mushroomed. According to National Crop Insurance Services web site, in 2013, 1.2 million policies were sold protecting more than 120 different commodities covering 296 million acres, an area larger than Texas and California combined, with an insured value of $124 billion Furthermore, since the federal government covers part of the cost of premium and administrative costs, the federal investment in crop insurance has grown as well, so much so that it now overshadows spending in the traditional federal safety net programs for farmers. The Congressional Budget Office projects that the programs under the 2014 farm bill will reduce spending for the government-operated commodity programs by $14 billion over 10 years—they will spend $44 billion over that time span—while the federal share of premium and administrative costs for crop insurance will increase $5 billion to total $90 billion during those 10 years.
This trend will not be challenged by the 2014 farm bill, which envisions continued growth in producer use of crop insurance as a risk protection tool. The farm bill goes further—it assigns new roles to crop insurance in assisting farmers deal with risks. As described above, the upland cotton support program goes entirely to the crop insurance model; SCO is being offered to supplement PLC price support; the dairy program is converted to a margin protection program that has all the hallmarks of an insurance program; and additional insurance-like coverage is made available under the Noninsured Crop Assistance Program (NAP).
So, while this summary of the farm bill does not focus on crop insurance—nor does it need to since the federal crop insurance program is permanent law and does not need a farm bill every few years to keep it going—its contributions to the federal safety net for agriculture are just as critical to the farmer as the loan and commodity programs.
What lies ahead this year. Most immediately affected by the new farm bill will be livestock producers who, this month, will be able to begin signing up for payments to cover 2012 and 2013 disaster losses. Then, as 2014 progresses, field crop farmers will have their hands full: producers of covered commodities will be reviewing their commodity base acreages for possible reallocation and their payment yields for possible updating, as well as evaluating the new PLC and ARC programs so they can decide which way they will want to go. Upland cotton farmers will be getting used to their new area-coverage STAX crop insurance program. By the end of the year, many large farm operations will be reviewing with interest USDA’s proposed new active personal management regulations. In sum, farmers affected by the new farm bill could be busy all through the year adjusting to the new programs and rules.
On April 14, 2014, USDA published the first rulemaking to administratively implement title I of the 2014 farm bill. The rule can be found, along with an extensive introductory preface, in the April 14 edition of the Federal Register, on pages 21086 – 21118. In this rule, USDA (i) revises existing regulations governingpayment limitations and adjusted gross income limits (7 CFR pt. 1400) to implement the policy changesmandated by title I; and (ii) enacts new regulations (7 CFR pt. 1416) to govern the disaster assistance programs authorized in title l. The final rule (and thus the regulations it promulgated) became effective when it was published on April 14, 2014.
Payment Limitation/Adjusted Gross Income Limit revisions: Just a few amendments are made to current regulations in 7 CFR pt. 1400 to replace several existing payment limitations and adjusted gross income limits with a uniform $125,000 payment limitation and a single $900,000 AGI limit, respectively.
Disaster assistance programs: The 2014 farm bill extended without major changes, and made permanent,four disaster assistance programs first provided for in the 2008 farm bill—the Livestock Indemnity Program (LIP), the Livestock Forage Disaster Program (LFP), the Emergency Assistance for Livestock, Honeybees, and Farm-Raised Catfish Program (ELAP), and the Tree Assistance Program (TAP). USDA’s new regulations under this final rule are based on the language of the regulations for the 2008 farm bill versions of these disaster programs. However, rather than simply revise the old farm bill regulations, which can be found in pt. 760 of 7 CFR chapter VII ( Farm Service Agency (FSA) regulations), the final rule places theregulations for the 2014 farm bill disaster programs in an entirely different chapter of 7 CFR, Chapter XIV (Commodity Credit Corporation (CCC) regulations) at part 1416. The Federal Register notice, at 21086,explains that the regulations were moved because the funding for the 2014 farm bill disaster aid comes fromCCC’s budget, while the 2008 programs were funded from a different source, a special FSA-administeredDisaster Relief Trust Fund.
A few additional points about the April 14 final rule:
o Although generally the new payment limitation and adjusted gross income limit are intended to go into effect beginning with the 2014 crops and programs, in the special case of the disaster assistance programs, the new rules will apply retroactively to payments for fiscal year 2012 and 2013 losses as well.
o The application period for disaster assistance to cover fiscal year 2012 – 2014 losses opened on April 15, 2014, which is probably why USDA pushed to get this rule out on April 14. Under the final rule, this initial application period closes as follows:
§ LIP and LFP: For losses occurring on or after October 1, 2011, and before January 1, 2015, applications must be filed by January 30, 2015.
§ ELAP: Applications for payments on fiscal year 2012 and 2013 losses must be filed by August 1, 2014. For fiscal year 2014 losses, applications have to be in by November 1, 2014.
§ TAP: For losses occurring on or after October 1, 2011, and before January 1, 2015, applications must be filed by the later of January 31, 2015, or 90 calendar days after the disaster event or the date when the loss is apparent to the producer.
o It is stated in the preface (at 21095) that, before any judicial action can be brought regarding the provisions of the final rule, the administrative appeal provisions of 7 CFR parts 11 and 780 must be exhausted; however, this requirement is not set out in 7 CFR pt. 1400, as revised, or in new 7 CFR pt. 1416.See 7 USC 6912(e), which is the statutory source for this statement.
This final rule is just the opening salvo in the farm bill administrative implementation process; there will be other proposed and final rules issued over the course of the rest of this year, and into next year, to administratively implement provisions of the farm bill discussed in this article. However, the disaster program regulations under this first final rule are critically important to farmers who have suffered disaster losses over the past couple of years and need assistance right away; and the revisions to the paymentlimitation/AGI limit regulations had to be made at the same time because they will govern the calculation and award of payments made under the disaster programs (as well, of course, as payments made under the other 2014 farm bill programs to be implemented later).
Posted: April 2nd, 2014