America’s Farm Bill

The United States Farm Bill (2008), better known as the Food, Conservation, and Energy Act of 2008 is envisaged to strengthen farmland  conservation through a series of initiatives like price support, farm credit and risk management.  The Act provides a cost-effective government safety net for farmers and provides support for local foods, farmers’ markets, and healthy diets.  The Act also provides for the funding of renewable energy to advance environmentally responsible energy production.  Further, the Act endeavors to significantly increase food assistance for families struggling with rising food costs.  The Act also provides funding for protecting farm and ranch land.

The Act came into force in June 2008 and has 15 Titles which include administrative and funding authorities for programs that cover “income and commodity price support, farm credit, and risk management; conservation though land retirement, stewardship of land and water resources, and farmland protection; food assistance and agricultural development efforts abroad and promotion of international access to American farm products; food stamps, domestic food distribution, and nutrition initiatives; rural community and economic development initiatives, including regional development, rural energy efficiency, water and waste facilities, and access to broadband technology; research on critical areas of the agricultural and food sector; accessibility and sustainability of forests; encouraging production and use of agricultural and rural renewable energy sources; and initiatives for attracting and retaining beginning and socially disadvantaged farmers and ranchers.”

The Bill provides for several new programs for the benefit of farmers and augments the existing benefits for farmers.  For instance, there is a new program under the Conservation Title of the Bill to encourage retired or retiring owners or operators to transition their land to socially disadvantaged farmers or ranchers or beginners.  The program is intended to provide annual rental payments to retiring farmer for up to two additional years after the date of the expiration of the Conservation Reserve Program (CRP) contract, provided the transition is not to a family member.  In order to be eligible, the retired or retiring farmer or rancher should have land enrolled in the CRP that is in the last year of the contract.  The retired farmer/rancher should agree to allow the beginning or socially disadvantaged farmer or rancher to make improvements in the land.  In addition, the retired farmer/rancher should agree to sell, have a contract to sell, or agree to lease for a long-term, at least for five years, the land under the CRP contract to a beginning or socially disadvantaged farmer or rancher by October 1 of the year the CRP contract expires.

Title I of the Act deals with commodities and provides income support with new payment and eligibility limits for wheat, feed grains, cotton, rice, oilseeds, and pulses through direct payments (except pulses), counter-cyclical payments, marketing loan assistance program, and new average crop revenue election payments.  The Act also adjusts sugar loan rates and adds a program to use surplus sugar for bioenergy production.  Further, the Act revises dairy price support.

As part of the income support initiative, direct payments are available for producers with eligible historic acreage of wheat, corn, barley, grain sorghum, oats, upland cotton, and rice.  The Act has extended direct payments to soybeans, other oilseeds, and peanuts.  The Act has retained the Counter-cyclical payments (CCPs), which were available for producers with eligible historic acreage of covered commodities whenever the effective price was less than the target price.  In addition, as an alternative to receiving counter-cyclical payments, the 2008 Act has envisaged an optional revenue-based counter-cyclical program, Average Crop Revenue Election (ACRE) program, from the 2009 crop year[i].  The ACRE Program Guarantee stipulates that participants are eligible for State-based revenue coverage equaling 90% of product of five-year ACRE benchmark State yield and two-year ACRE program guarantee price[ii].

The Act contains provisions for Nonrecourse commodity loans and commodity loans were given for up to 9 months.  In order to be eligible, the producers have to comply with conservation and wetland requirements.  The Act carries forward the liberalized repayment scheme under the old law whereby repayment of loans at less than full principal plus interest are allowed when prices were below loan rates.  Marketing loan provisions have also been extended to peanuts, wool, mohair, honey, small chickpeas, lentils, and dry peas.  The Act has also simplified the loan provisions.

Title II of the Act emphasizes conservation on working land by increasing funding for the Environmental Quality Incentives Program and the new Conservation Stewardship Program  The new legislation has reduced the Conservation Reserve Program acreage cap to 32 million acres beginning on Oct 1, 2009. Wetland restoration and farmland preservation with expansion of  the Wetland Reserve Program, Farmland Protection Program, and Grassland Reserve Program are given due priority under the Act.

The provisions relating to trade have repealed the Intermediate Export Guarantee Program (GSM-103), the Supplier Credit Guarantee Program, and the Export Enhancement Program.  The Act has also increased the requisite spending on nonemergency food assistance and added a small pilot program for the local or regional purchase and distribution of food assistance in food security crises.

Title IV of the Act deals with nutrition and the Act increases funding for the Emergency Food Assistance Program, the Fresh Fruit and Vegetable Program, and the Senior Farmers’ Market Nutrition Program. Several programs have been initiated for ensuring community food security and promoting locally produced foods.  The Act also contains provisions for ensuring child nutrition.

The credit provisions in the new Act authorize “new conservation loan program, expands and enhances programs and preferences for beginning and socially disadvantaged farmers and ranchers, increases loan limits for all borrowers, and makes equine farmers eligible for emergency loans[iii].”  Under the Act, utility loans become qualifying loans under the Federal Agricultural Mortgage Corporation (Farmer Mac) rules.

With respect to the conservation loan and loan guarantee program, the Act replaces the previous authority with authorities to make or guarantee loans used to cover the costs of qualified conservation projects of eligible borrowers.  The Act further stipulates that projects must be part of a USDA-approved conservation plan.  Eligible conservation plans include “projects for construction or establishment of conservation structures, forest and permanent cover, water conservation and waste management systems, improved permanent pasture, or other projects that comply with Section 1212 of Food Security Act of 1985, and other purposes approved by Secretary[iv].”

The Act gives priority to the development of rural areas and provides funding to planning, coordination, and implementation of rural community and economic development programs.  There are also provisions for renewable energy and locally and regionally produced agricultural products.  The Act also revises the definition of “rural” for program eligibility.  Under the new law, certain fringe areas in urbanized areas are treated as rural and the USDA Under Secretary for Rural Development has the discretion to determine the rural character of an area in question.

The Act puts great emphasis on energy conservation and increases funding for federal agency procurement of biobased products, construction and development of advanced biofuel refineries, biomass research and development, and biodiesel education.  New programs encourage renewable energy use by biorefineries and development of next generation feed stocks.  The various energy sufficiency programs conceived under the Act include bio diesel fuel education programs, rural energy self sufficiency intitiative, forest biomass for energy, biomass crop assistance program, research on biobased energy technologies, bio fuels infrastructure study, etc.

The Act further provides for crop insurance[v] and reduces subsidies to insurance companies for selling and servicing crop insurance policies.  The Act also introduces the Supplemental Agricultural Disaster Assistance Program which supplements crop insurance coverage and provides disaster assistance for livestock (including aquaculture and honey bees), forage, tree, and nursery crops.

Under the Supplemental Agriculture Disaster Assistance, assistance is given to producers of eligible commodities like crops, farm-raised fish, honey, and the assistance is given only for losses incurred as result of a disaster, adverse weather, or other environmental condition that occurs on or before Sept 30, 2011.  For this reason, the producers have to obtain crop insurance.

The Act also contains provisions for the improvement of forestry, livestock, horticulture, and organic farming.

The Act creates an Agricultural Disaster Relief Trust Fund to fund Supplemental Agricultural Disaster Assistance and introduces various tax provisions affecting customs fees, conservation and commodity program payments, timber investment, biofuel production, and agricultural income[vi].

[i] http://www.ers.usda.gov/FarmBill/2008/Titles/TitleIcommodities.htm.

[ii] Id.

[iii] Id.

[iv] Id.

[v] Title XII.

[vi] Title XV.


Inside America’s Farm Bill