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Spending Under the 2008 Farm Bill Producer Support = Commodity Supports, Crop Insurance, Permanent Disaster
Assistance and Funds for Fruit and Vegetable Producers
21%
9%
67%
3%
Producer Support Conservation Nutrition Other
Conservation Spending (USDA Actual, CBO 2007-2012F)
Highlight of the 2008 Farm Bill
- Same basic structure as the 2002 Farm Bill
- Maintains three-legged safety net• Direct Payments• Marketing Loans – some “rebalancing” – 30 day
PCP• Counter Cyclical Payments or an Optional Counter
Cyclical Revenue Payments
Counter Cyclical Revenue (CCR)
- Same basic principle as CCP
- Triggered by a shortfall in state crop revenue rather than a shortfall in national price
- Brings crop yields and revenue into the equation
Photo: Reuters
Implementation- “If no guidance, use Purple Book”
CCR Regs Important!!
- ACRE starts in 2009 - Required to give up 20% of DP’s- Required to take 30% cut in LR’s
- Winter wheat – no- 20% actual DPs paid vs $40K- One farm in and one out – payment limit?- What prices will be used for 2008?
Payment Limits
• Off-Farm AGI Cap $500,000 – no payments• On-Farm AGI Cap $750,000 – no DPs• Conservation AGI Soft Cap $1,000,000 unless 75%• DP’s capped at $40,000, if ACRE – minus $8,000?• CCP’s capped at $65,000, if ACRE – plus $8,000?• Direct Attribution• No Three entity• Actively Engaged Language – Dorgan/Grassley
(purple book)• 3 year AGI problem if sold land in 2006-2008
Dairy- Changes program support price from fluid milk to
butter, nonfat powder and cheese
- MILC extension• Pays percentage of difference between $16.94 and the
monthly market price (when lower)• 34% through Sept. 2008, 45% through Aug. 2012, back to
34% after
- Feed adjuster to MILC based on corn, hay and soybean prices > $7.35/cwt, then $16.94 target ^ 45%
- MILC eligibility increased from 120 to 165 cows
Livestock- Mandatory COOL, set to be implemented Sept. 2008
• Makes goat meat, chicken, ginseng, pecans, and macadamia nuts covered commodities
• Establishes a grandfather date of July 15, 2008
- Producers can select mediation rather than mandatory arbitration
- Allows producer to settle a dispute in Federal judicial district where he or she lives rather than the company headquarters
- Requires notice before integrator cancels a producer’s contract
Energy
- Extends and increases most programs
- Strong focus on cellulosic development• New credit of $1.01 per gallon for cellulosic ethanol
- Ethanol tax credit reduced from $0.51 to $0.45 per gallon
- Ethanol tariff extended for two years to 2011- USDA committed $1B for cellulosic research
Disaster Assistance – Not Permanent
Elements:• Supplemental Revenue Assistance• Livestock Forage Program• Livestock Indemnity program• Emergency assistance for Livestock,
Honeybee, and Farm-raised Fish• Tree Assistance Program
Designed to:Encourage the use of insurance products (Crop Insurance and NAP)
• Provide whole farm shallow loss coverage • Address problems of declining yields and quality
losses• 80% “normally” designated disaster/contiguous• Entitlement program vs $3.8B
SURE Assistance
Indemnities are paid on 60% of the difference between –- The whole farm guarantee established as the sum of:
» For Insurable Crops, 115% of insured levels after yield adjustments» For Non-insurable crops, 120% of NAP yield times 100% of NAP
price,
AND- Whole farm revenues consisting of: crop production, insurance
indemnities, 15% of the direct payments, marketing loan benefits, and counter-cyclical or ACRE payments accruing to the farm.
SURE Assistance
• Crop production is adjusted for quality losses not accounted for by crop insurance.
• The supplemental revenue guarantee may not exceed 90% of the whole farm’s expected revenue.
• Eligible farms must be located in or contiguous to Secretarial designated disaster counties based on production losses.• Secretarial designations are waived for farms with greater than 50%
production losses.
Livestock Forage Program (LFP)
• Grazing Loss Coverage• Eligibility established by Drought Monitor Index• Each Payment is 60% of supporting livestock for a
month (based on cost of corn)• Drought Monitor
• Any portion of the county meeting standard, qualifies the entire county.
Livestock Forage Program (LFP)
• Payments Increase with Severity of drought during grazing period:• 1 Payment: D2 (severe) 8 consecutive weeks• 2 Payments: D3 (extreme) 1 week• 3 Payments: D4 (extreme) 4 weeks, OR D4
(exceptional) 1 week
Livestock Indemnity Program
• Reimburses 75% of the market value of disaster related livestock deaths in excess of normal mortality.
Payment Limitations
• $100,000 maximum per producer• Adjusted Gross Limitations apply• Direct Attribution• Exception:
• Separate $100,000 limitation for the Tree Assistance Program
Mandatory Country of Origin Labeling
75 Days and Counting…
COOL Four Origin Categories
• Product of the U.S.
• Multiple Countries of Origin
• Imported for Immediate Slaughter
• Foreign Country of Origin
• Product of the U.S.:
• United States country of origin only if “exclusively from an animal that is exclusively born, raised, and slaughtered in the United States”
• Grandfather exception – July 15, 2008
• Multiple Countries of Origin:
• Most complex category: production steps - born, raised, slaughtered – involve more than one country
• Hogs born in Canada and finished and slaughtered in the U.S.
• Feeder cattle from Canada or Mexico and finished and slaughtered in the U.S.
• Recordkeeping:
• Records maintained in the “normal conduct of the business” – animal health papers, import documents, producer affidavits
Section 1619
• FOIA-EWG• Appraisers, real estate agents, crop insurance
agents• Info just harder to get?
10 base acres or less
• Reconsitute• 30 acre dairy – rotate corn, hay and pasture
Conservation
• CRP 39.2 M to 32M• Increases WRP 2.3M to 3M (CP duck hunting)• Permits harvesting of biomass and for wind
turbines if conservation environmental goals and rental rates decreased
• Pilot 1M acres wetlands and buffer strips (including aquaculture)
Three SEPARATE CRP Issues
• Critical Feed Use • May 2008 - $75 fee• Hay and graze 24M acres after primary nesting –
Nov 10• TX, NM, OK = July 2• 11,000 --- 4,000• Built fences, rented CRP ground, didn’t sell cattle,
transported cattle, $40K in haying equipment• NWF TRO in SEA
Second CRP Issue
• June -- early grazing• Disaster and contiguous counties (2000)• Immediately• Next NWF “target”
3rd CRP Issue
• CRP Early-out• Expected 2 weeks ago• 11-15M acres• Primarily due to corn and soybean prices