Rules of the Game

The 2014 farm bill overhauls the federal government’s policies governing agriculture, creating a new regulatory landscape.
Rules of the Game
The long-awaited Agricultural Act of 2014, commonly referred to as the 2014 farm bill, sets forth policies that create opportunities and challenges for both growers and their industry partners, set within a framework of overall reduced agricultural spending. A new farm bill always brings with it the chance for growers to re-evaluate their program participation, and the choices growers make this fall will impact their operations for years to come.

Bruce Knight, principal and founder of Strategic Conservation Solutions, sees the trends in the 2014 farm bill, fewer government mandates and more grower choice, as positive, but says the decision-making process for farmers on whether or not to participate is more complicated.

In the past, growers could walk into their local USDA Farm Service Agency (FSA) office, explain their situation, and be told, "You have choices, but 'B' is the best choice."

But Knight says, "This doesn't feel the same way now. FSA folks may not be able to assist farmers in making decisions like they have in the past. These decisions are complicated and personal to each operation."

Opportunities for Growers and Retailers

Changes in the 2014 farm bill's conservation title mean the Conservation Reserve Program (CRP) total-acreage cap will be reduced from the statutory level of 32 million acres to 24 million acres over five years.

Knight says the reduction will make more than 5 million acres nationwide available for grazing or farming. He's seen a steady outflow movement of higher-quality land that had been enrolled in CRP but probably didn't really need to be in the program.

Younger farmers looking for land or those who want to expand should benefit as those acres return to production. "Access to resources, such as land, that are scarce is a huge opportunity for both retailers and growers," he says.

The 2014 farm bill also provides an opportunity for retailers to help qualify growers for conservation programs like the Conservation Stewardship Program, which helps growers adopt or maintain conservation practices to address resource concerns. Now that retailers are designated as "eligible" partners, they can help their customers comply with those conservation programs.

"This is really big," explains Rex Martin, head of external affairs for Syngenta. "Ag retailers have wanted to do this for a long time."

Challenges Ahead

Many in the agricultural community were hoping the 2014 farm bill would address how the Clean Water Act affects certain pesticide applications. Although the House version of the bill included a provision to eliminate the need for permits to apply certain aquatic pesticides, the Senate version did not. Ultimately, the provision was not included in the final bill. The Federal Insecticide, Fungicide and Rodenticide Act already regulates the pesticides in question. Failure to include the provision in the farm bill was a large loss, Martin says.

"The farm bill was a great opportunity to get that through," he explains. "However, we are still pursuing passing it as a solo bill."

But the details of the greatest challenge facing agriculture from the 2014 farm bill are still to come. At press time for this publication, the USDA was still in the process of writing the final rules that will determine how the agency implements two traditional farm programs that the 2014 farm bill reformed, Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC).

Given the pace of rule-making and then training USDA employees, it is likely growers will be making the one-time, irrevocable decision to enroll specific commodities in these programs during harvest. Winter wheat growers may have to plant their 2015 crop without first seeing the final rules.

The success of Average Crop Revenue Election (ACRE), the revenue protection program in the previous farm bill, has made farmers more accepting of revenue safety net programs, says Jon Doggett, vice president for public policy with the National Corn Growers Association.

Yet they still need to take the time to become familiar with ARC and PLC, once the USDA announces the final rules, to learn how these programs differ from ACRE. ARC covers losses at either the individual farm level or at the county level. PLC provides payments when the price of a crop drops below a reference price.

Doggett also encourages growers to ask what crop insurance products are available (growers who elect ARC cannot purchase Supplemental Coverage Option Insurance), how the programs will fit with their operations and, if applicable, what their landlord prefers. Producers also need to be clear about what risks they are attempting to manage: price, yield or quality.

"Price is important, but revenue is what keeps the operation in business," Doggett says. "A target price doesn't do any good if you don't have a crop to sell."

Stay Informed

Given the complexity of the decisions growers will be making in the next few months, Doggett and Knight encourage them to talk with crop consultants, extension educators, marketing advisors and financial planners, as well as their local FSA office. Both are optimistic that the 2014 farm bill will be good for agriculture overall.

"This farm bill provides a certain amount of insurance and assurance to both farmers and retailers to be in business, to be bold, to try new things," Doggett says. "It allows for more innovation when times are good and helps growers and retailers weather the challenges of the really tough times."

This article is intended as information only and not as legal or business advice.