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California Association of Wheat Growers (CAWG)

June 20, 2008

FARM BILL FINALLY FINISHED.  On Wednesday, President Bush vetoed the second coming of the 2008 Farm Bill.  Previously, the President vetoed a less than complete version – as a clerical error omitted a key section of the bill.  Congress was then forced to re-approve the same bill and send it back to the President.  Again, on Wednesday the House and the Senate voted to override the President’s veto; the House by a 317-109 vote and the Senate by a 80-14 vote, signaling the end, at last, of the farm bill’s legislative journey.  We’ll all have to stay tuned on how well the USDA begins implementation. 

COMMODITY TITLE

The 2008 Farm Bill’s commodity title largely keeps the 2002 Farm Bill’s commodity program structure in place while adding an optional revenue program, ACRE. The commodity title adjusts target prices and loan rates and reduces direct payments slightly in 2009, 2010 and 2011.

 Title I Safety Net Levels for Wheat

Average Crop Revenue Election (ACRE)

The new farm bill creates an optional, state-level revenue program beginning in 2009. Growers who opt into the new program will be in it for the life of the farm bill and will agree to take a 20 percent reduction in direct payments and 30 percent reduction in target prices in order to participate. Payments will be made to a producer if actual state per-acre revenue is less than the guarantee AND the producer suffers an actual revenue loss for the crop in question.

Supplemental Revenue (SURE) Program

The 2008 Farm Bill also creates a $3.8 billion trust fund to be used during disasters in crop years 2008 through 2011. The program is intended to complement crop insurance and will make payments based on loss of crop revenue at the whole-farm level relative to an established benchmark, generally 115 percent of crop insurance purchased.

Payment and Adjusted Gross Income (AGI) Limits

To address calls for greater payment limits, the 2008 Farm Bill eliminates the three-entity rule and generic certificates; requires the direct attribution of payments; keeps a direct payment limit of $40,000; and sets a counter cyclical limit of$65,000.

For farmers, there is a hard cap on eligibility for direct payments if AGI is more than $750,000 (three-year average). For non-farmers, there is a hard cap for all programs of $500,000 (three-year average). There is also a $1 million AGI limit for conservation payments, but it will not apply to those making 2/3 of their incomes from farm, ranch or forestry operations. The farm and non-farm limits can be combined, and the AGIs of a married couple can be counted individually if separate tax returns are filed.

Hard White Wheat

The bill includes a hard white wheat incentive program that, if money is appropriated, would pay up to 20 cents/bushel for production plus $2/acre for planting “eligible” seed.

Prohibition on Charging Fees

The bill added language to prohibit the USDA from charging a fee to state marketing programs (e.g. the California Wheat Commission) for collecting grower assessments or making changes to their computer programs.   The USDA had begun efforts to ask commissions around the US for thousands of dollars to offset their costs.  

CONSERVATION TITLE

Conservation Reserve Program (CRP)

The 2008 Farm Bill reduces the cap for the Conservation Reserve Program to 32 million acres. It also specifies that alfalfa, multi-year grasses and legumes in rotation are considered commodities for the purpose of a four-year cropping history, and permits managed harvesting of biomass on CRP land with reduced payments. In some cases, the bill will also allow retiring farmers or ranchers to modify their CRP contracts to sell or lease land to beginning or socially disadvantaged farmers so they may bring the land into production.

Conservation Stewardship Program (CSP)

CSP, newly renamed the Conservation Stewardship Program, is by far the biggest conservation program in the 2008 Farm Bill calling for the addition of 12.7 million acres per year between 2008 and 2017 at a national average goal price of $18 per acre.

For CSP, the Secretary must develop science-based conservation measurement tools and, based on state recommendations of local resources of concern, identify three to five resource concerns within an area. Contracts are then to be ranked by the level of conservation on priority concerns.

The bill allows CSP to be available to eligible producers on a continuous enrollment basis. Contracts will run for five years with an option for renewal for five additional years if certain qualifications are met. Payments are to be based on costs incurred by the producer, income forgone by the producer and expected environmental benefits as determined by conservation measurement tools.

Environmental Quality Incentives Program (EQIP)

Though there were few big program changes to EQIP, funding for the program is set to rise from $1.2 billion in 2008 to $1.7 billion in 2012. EQIP contracts are to be evaluated on cost-effectiveness and efficiency in achieving environmental goals; they are to run from one year after practice implementation up to 10 years, with payments equaling 75 percent of costs plus 100 percent of forgone income. Though contract payment limits for EQIP were reduced from $450,000 to $300,000, the limit can be waived. EQIP acres are also now eligible for Conservation Innovation Grants, including practices for the storage of carbon in soil.

Wetlands Reserve Program (WRP)

The 2008 Farm Bill provides $1.3 billion for WRP through 2012, enough to enroll 746,200 acres of wetlands over the next five years, bringing total acreage in the program to more than 3 million.

Environmental Services Markets

The 2008 Farm Bill directs the Secretary to develop technical guidelines for farmer participation in emerging environmental services markets, specifically in regard to measurement, recordkeeping and reporting of environmental services and with priority given to guidelines for farmer participation in carbon markets. These guidelines are to be established in consultation with producers.

NAWG, OTHERS REQUEST HEARINGS ON FOOD PRICE DEBATE.  A coalition of commodity and general farm organizations wrote Congressional leaders this week requesting they schedule hearings to examine the causes of increasing food prices.

The letter read, in part:  “As representatives of farmers and ranchers across the country, we urge your committee to initiate hearings to examine all the reasons for increased food prices...[A] series of reports in various media have attributed higher commodity prices paid to farmers as the cause of the higher costs passed on to consumers.  Such a perspective is a great disservice to the general public because it ignores the facts behind higher prices…

“…some of the nation’s biggest food companies, through an umbrella organization, have initiated a high-dollar media campaign to blame the production of biofuels for increased food costs. At the same time food companies are blaming corn-ethanol, many are reporting record profits in the first quarter of 2008…”

USDA data shows less than 20 percent of the total food costs paid by consumers go to farmers, and only about 4 percent of increased food costs can be attributed to increased biofuels production.   The letter went to the heads of five committees in each chamber as well as the Speaker of the House and Majority and Minority Leaders.

Other signatories of the request included National Farmers Union; American Farm Bureau Federation; National Corn Growers Association; American Soybean Association; and National Sorghum Growers Association.

NAWG VOICES CONCERN ON SUSTAINABILITY DRAFT CONTENT.  NAWG called this week for draft industry standards that define sustainability in agriculture as organic production to be discarded as both exclusionary and premature.

The letter was addressed to the head of the Leonardo Academy, the group leading the drafting process:  “Standards should arise out of broad industry consensus and be based on recognized scientific principles, and the DSTU fails both of those tests.

“The [draft standard] equates ‘sustainable’ with ‘organic’ – an assertion we and the majority of mainstream agriculture organizations soundly reject…[A]s the DSTU currently stands my only conclusion is that the entire document needs to be discarded as flawed and premature.”

Coppock said the focus of any standard should be on science-based and performance metrics that can be objectively weighed against goals.

The letter also questioned the process by which the draft standard has been formulated. Mainstream agricultural organizations have voiced opposition to this process, which has not included groups like NAWG and other commodity representatives.