Barry K. Goodwin BOOK LAUNCH Agricultural Policy in Disarray: Reforming the Farm Bill Co-Hosted by IFPRI and American Enterprise Institute DEC 12, 2018 - 12:15 PM TO 01:45 PM EST

1. US Agricultural Policy in
Disarray: Title I Programs
Barry K. Goodwin, Vincent Smith, and Joseph Glauber
December 12, 2018
IFPRI

2. Net Farm Income And Farm Household Income
2
0.0
100.0
1980 1990 2000 2010
REAL FARM INCOME
AND GOVERNMENT
PAYMENTS (2009=100)
Net Farm Income Government Payments
Sources: Economic Report of the President and USDA-ERS.
0
50
100
150
200
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Real Net Farm Income and Net Farm Cash
Income
(2018 Dollars)
Net Farm Income Net Cash Farm Income

3. Spending Under 2014 Farm Bill
3
Source: Schnepf, CRS (7-5700)
CBO projected PLC/ARC costs at $18 billion over 5 years, turned out to be $31 billion

4. Title I in the 2018 Farm Bill
• Conference report released December 11, 2018
• Preliminary CBO scoring predicts increase in Title I costs of $1 billion
• Important Provisions:
• House proposals for relaxed payment limits are in
• AGI limit stays at $900,000 ($1.8 million if married) (Excludes LDP/MLG)
• Limit of $125,000 ($250,000 if married) (separate limit for peanuts)
• “Active management” includes conference call participation
• Nieces, nephews, cousins of farmers eligible for full payments
• Dropped Grassley/Meadows amendment to limit payments to 1 recipient for “management
only” engagement
• SNAP work requirements dropped, modest administrative changes
• Farmers can switch between PLC and ARC annually
• PLC likely choice initially, then jump to ARC if revenue rises
4

5. Title I in the 2018 Farm Bill (continued)
• Loan rates increased
• Limit for USDA marketing loans doubled to $600,000
• RMA yield data will be used in establishing base yields in ARC, with yield plugging of 80% and yield trend
adjustments
• PLC yield updating option, with yield plugging of 75% of county average
• ARC and PLC floor price escalators (Greater of 85% of 5-year Olympic Average or 2014 Reference Price)
• PLC allows yield update on national basis (update based on 2013-2017 national yields, if higher than a farmer’s
base)
5

6. Dairy
• MPP renamed as Dairy Margin Coverage (DMC)
• New coverage levels ($8.50-$9.50) for the first 5 million lbs.
• Reduced premiums on catastrophic coverage levels for larger
producers (88% reduction)
• Eliminates restriction between overlap in the margin program
(formerly MPP, now DMC) and Livestock Gross Margin (LGM) and
Dairy Revenue Protection insurance
• Producers previously enrolled in MPP can choose to receive
• 75% credit of premium paid 2014-2017 on DMC
• 50% refund of premium
6

7. Key Quotes
• Ranking Member Collin Peterson (D-MN):
• “There’s concern on some of the members’ part that when people find out what’s in
the bill it will start unraveling”
• “If you have less than 5 million pounds of milk, and that's about 240 cows, under what
we've put in the bill, you will not be able to lose money, unless you really try"
• “There’s going to be a lot of options available to dairy farmers. Some people say this is
too good”
• “Smaller scale dairy producers will be among the biggest beneficiaries”
• Speaker Paul Ryan (R-WI):
• “Rural America is at the heart of our way of life … Our farmers, ranchers, and rural
communities count on agriculture policy that delivers certainty and support, and this
farm bill achieves that goal.”
• Ranking Member Debbie Stabenow (D-MI):
• "The final bill reflects a hard-fought bipartisan, bicameral agreement … the 2018 farm
bill is a good bill for our farmers and everyone who eats.”
7

8. Other Important/Interesting Issues
• Title XII, Sec. 12613: Report On Inclusion Of Natural Stone Products In
Commodity Promotion, Research, and Information Act Of 1996
• USDA must submit a report within 180 days on establishing a check-off for
natural stone (The “Pet Rock” Check-Off—S. Faber)
• Second round of Market Facilitation Payments (MFP) coming soon
• Allows double-dipping to become triple- or quadruple-dipping
• Revenue insurance indemnity + PLC/ARC + MFP #1 + MFP#2
• National School Lunch Act includes “Buy American” requirement
8

9. “Safety Net” Spending
9
Source: Schnepf, CRS (7-5700)

10. Government Support as Share of Value of Production
10
Source: Schnepf, CRS (7-5700)

11. 2014-2016 Outlays Per Acre
11
Source: Schnepf, CRS (7-5700)

12. ARC Enrollment
• ARC vs. PLC Election -- Nationwide, 96 percent of soybean farms, 91 percent of corn farms, and 66 percent of
wheat farms elected ARC-County. Seventy-six percent of all base elected ARC-County. Over 90 percent of
long grain rice, medium grain rice, and peanut farms elected PLC. Few farms, regardless of the commodity
mix, elected ARC-Individual. Election results can vary significantly across states.
• Base Reallocation -- The base reallocation results indicate that corn and soybean base increased the most
relative to 2013 enrolled base—by 12.8 million and 4.7 million acres, respectively. Wheat base declined by
nearly 9.9 million acres.
• Yield Updating -- Updated yields are relevant only for the PLC program. For those farms electing PLC and
updating yields, the yields for corn, soybeans, and wheat all increased by about 30 percent relative to the
counter-cyclical payment program (CCP) yield. For some pulse and minor oilseed crops, the increase was
significantly higher. Many CCP yields date back to the early 1980s.
• Cotton base reinstated as cottonseed in 2018 Bipartisan Budget Act, with PLC reference price of 36.7
cents/lb. Generic cotton base eligible for PLC/ARC, with PLC appearing to be most attractive option
12

13. Table 2: Percent of Farms and Base Acres that Made an ARC/PLC Election -- National
by Crop
Percent of Farms Electing …
PLC ARC-CO ARC-IC Total
BARLEY 57% 42% 1% 100%
CANOLA 93% 7% 1% 100%
CORN 9% 91% 0% 100%
CRAMBE 59% 40% 1% 100%
DRY PEAS 44% 53% 3% 100%
FLAXSEED 59% 40% 1% 100%
GRAIN SORGHUM 54% 46% 0% 100%
LENTILS 51% 44% 5% 100%
LARGE CHICKPEAS 32% 60% 8% 100%
LONG GRAIN RICE 99% 1% 0% 100%
MEDIUM GRAIN RICE
(SOUTHERN) 94% 6% 0% 100%
MUSTARD 53% 42% 4% 100%
OATS 23% 76% 0% 100%
PEANUTS 99% 1% 0% 100%
RAPESEED 47% 50% 3% 100%
SAFFLOWER 57% 40% 2% 100%
SESAME 76% 24% 0% 100%
SMALL CHICKPEAS 28% 62% 10% 100%
SOYBEANS 4% 96% 0% 100%
SUNFLOWERS 49% 50% 1% 100%
TEMPERATE JAPONICA RICE 68% 30% 2% 100%
WHEAT 34% 66% 0% 100%
U.S. Total 1/ 1/ -- 100%
1/ Farms elect ARC-CO and PLC on a commodity-by-commodity basis. A given farm
may have elected PLC for some commodities and ARC-CO for other commodities.
13

14. CBO Projections of ARC and PLC Outlays
14

15. PLC Target Price as Share of Market Price
15
Source: Schnepf, CRS (7-5700)

16. Base Acres Versus Planted Acres
-- A hot button issue
-- Distortion versus risk protection
-- Annual PLC/ARC choice and updating a WTO issue
16
Source: Schnepf, CRS (7-5700)

17. Summary
• 2018 Bill represents a step backward in AGI means testing
• Payment limits now apply to the extended family tree
• Was Congress (excepting Grassley and a few others) ever serious about
limiting payments?
• Annual selection of ARC/PLC could lead to significant cost increases
• Decoupled support becoming recoupled
• Dairy producers treated especially well
• No substantial changes in SNAP
17