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