Farm Bill Update
Dr. Jody Campiche
Oklahoma State University
January 8, 2013
American Taxpayer Relief Act (H.R. 8)

Income tax rates increase from 35% to 39.6% for single individuals making > $400,000/yr
($450,000 for joint filers)

Capital gain and qualified dividend rates will increase from 15% to 20% for single
individuals making more than $400,000 a year ($450,000 for joint filers)

Permanent higher alternative minimum tax (AMT) exemption
 Allow more taxpayers to escape paying AMT

Phase-out of personal exemptions and limitation on itemized deductions was reinstated
for single individuals with adjusted gross income > $250,000 ($300,000 for joint filers)

Various credits and deductions extended (state/local sales tax deduction; educators’
classroom expense deduction; child tax credit; American Opportunity Tax Credit;
adoption credit; and nonbusiness energy property credit)

For estate, gift, and generation-skipping transfer taxes, $5 million exemption extended
permanently and will be indexed for inflation (top estate, gift, and GST rate permanently
increased from 35% to 40%)
American Taxpayer Relief Act (H.R. 8)
Payroll Taxes:
 Everyone will see less money in their paycheck in 2013
 Does not include an extension of the 2 percent payroll tax cut of
the Social Security (FICA) employee tax on the first $113,700 of wages
 Employee-paid portion of the Social Security FICA tax increased on all
wage earners from 4.2 percent to 6.2 percent beginning Jan. 1, 2013
 The portion of the tax paid by employers remains at 6.2 percent of
employee wages, for a total Social Security FICA tax of 12.4 percent
Farm Bill Extension
 1 year extension of farm bill to Sept. 30, 2013
 Extension of hundreds of authorizations for U.S.
Department of Agriculture (USDA) programs
 2 month postponement of the “sequestration” (across-the-
board) budget cuts enacted as part of the Budget Control
Act of 2011
Farm Bill Extension
 Many are upset by the partial extension
 Farm safety net has been extended to another crop year and
permanent farm law will not go into effect
 Producers will continue to be eligible for direct payments,
counter-cyclical payments, ACRE payments, and marketing
loans for the 2013 crop year
 Without this extension, these programs would not be in place
for the 2013 crop year and producers would have much less
certainty about the status of the farm safety net
 Milk provisions in the 2008 farm bill were also continued and
the extension preserves baseline funding
Farm Bill Extension
 Actual details of 2013 commodity payments being worked
out by USDA FSA
 Questions on how to handle the 2013 ACRE program
 Can producers sign up for ACRE or are producers already in
ACRE forced to stay in the program?
Farm Bill Extension –What is not Included?
 Many programs and policies of the U.S. Department of Agriculture (USDA)
were authorized under the Food, Conservation and Energy Act of 2008 (“2008
Farm Bill”) through September 30, 2012
 Many programs with mandatory funding between FY 2008 and FY 2012 were
reauthorized, but without any such mandatory funding
 Gives the power to the appropriations committees
 Long-standing history between what the appropriations committees
appropriate and what the ag committees want appropriated
 Also, during a sequester process, there’s less cover for programs that don’t
have the “mandatory” label, although very little is protected from the
sequester axe
Farm Bill Extension –What is not Included?
 Authority or funding provided under the 2008 Farm Bill for USDA to operate a
number of these programs expired on October 1, 2012

Includes 4 major programs managed by NIFA
 (1) Organic Ag Research & Extension Initiative
 (2) Specialty Crops Research Initiative
 (3) Beginning Farmer & Rancher Development
 (4) Biomass R&D
Program
2008 Farm Bill
Mandatory
Funding
2013 Extension
Appropriations
Organic Ag Research & Extension Initiative
20
25
Specialty Crops Research Initiative
15
100
Beginning Farmer & Rancher Development
19
30
Biomass Research & Development
40
40

Because the authority for these programs has expired, NIFA cannot move forward on the
release of new RFAs for these programs

NIFA can continue to manage existing grant awards that were made in FY 2012 and
previous years
Farm Bill Extension – What is not Included?
 Two mandatory-funded programs, Community Food Projects and Risk
Management Education, receive funding that is subject to the Office of
Management and Budget operating guidance and legislative provisions
of the FY 2013 Continuing Resolution
 These programs are not impacted by the expiration of the 2008 Farm
Bill
 With the exception of the 4 programs with mandatory funding in the table, all
reauthorizations sought by the land-grant community acting through the
APLU Board on Agriculture Assembly’s Committee on Legislation and Policy
(CLP) have been extended for one-year
 H.R. 8 increases certain payments to dairy producers by $110 million in 2013
and reduces spending on nutrition education by the same amount
Farm Bill Extension – What is not Included?
 House and Senate Ag committees agreed to a 1 year extension of the farm bill
that included additional dairy provisions and mandatory funding for
Supplemental Agricultural Disaster Assistance

Livestock Forage program, Livestock Indemnity Program, Tree Assistance Program,
and the Emergency Livestock Assistance Program
 Senate removed mandatory funding for the disaster programs and new dairy
provisions

Includes an authorization of appropriations for the disaster programs which means
that the funding could be discussed in the appropriations cycle

Funding for the disaster programs could also be included as part of other disaster
discussions (such as the Hurricane Sandy Relief Bill) or could be part of the 5 year
farm bill
What Happens Now?
 Now that the new Congress has convened, there are two likely options to finish
the FY 2013 appropriations process
 (1) Pass individual appropriations bills
 either singly or in one or more “omnibus” bills
 (2) Enact a second continuing resolution that runs through Sept. 30, 2013
 Under congressional rules, all bills expire at the end of each Congress, so both
the House and Senate must start over again


Farm Bill process may be expedited as a result of the substantial progress each
chamber made in 2012
Changes in Congress
 Mississippi Senator Thad Cochran replaces Kansas Senator Pat Roberts as the
ranking member on the Senate Agriculture Committee
 Some view the move as advancing Southern interests in the next farm bill
 Could be more support for commodity payments for southern
commodities
 Sen. Richard Shelby (R-AL) becomes Vice-Chair of Senate Appropriations
 In the House, Robert Aderholt (R-AL) becomes the new Chairman of
the House Ag Appropriations panel
On the Democratic side of the Senate, Sen. Herb Kohl's (D-WI) retired and the
chair slot of Senate Ag Appropriations Subc. has opened up (Possible
candidates include Sen. Diane Feinstein (D-CA), Mark Pryor (D-AR), Sherrod
Brown (D-OH), or Tom
Harkin (D-IA)
113th Congress
Ag Committee (25 R; 19 D)
R: Lucas (OK) Chairman

•
Southern Region – 9 Members – 1 Female

•
North Central – 7 Members – 1 Female

•
Southwest (OK/TX) – 3 Members – Could be included as South

•
West – 3 Members

•
Northeast – 3 Members
D: Peterson (MN) Minority Leader

•
North Central Region – 6 Members – 2 Female

•
West – 6 Members – 1 Female

•
Northeast – 3 Members – 1 Female

•
South – 2 Members

•
Southwest (TX) – 2 Members

•
Spanish Surname Members – 3 all D

•
Female – 6 Members – 2 R – 4 D

Source: James Novak
Changes in Congress – Lucas Ag committee
Republicans
 Rep. Bob Goodlatte (VA)
 Rep. Scott DesJarlais (TN)
 Rep. Steve King (IA)
 Rep. Chris Gibson (NY)
 Rep. Randy Neugebauer (TX)
 Rep. Vicky Hartzler (MO)
 Rep. Mike Rogers (AL)
 Rep. Reid Ribble (WI)
 Rep. K. Michael Conaway (TX)
 Rep. Kristi Noem (SD)
 Rep. Glenn Thocmpson (PA)
 Rep. Dan Benishek (MI)
 Rep. Bob Gibbs (OH)
 Rep. Jeff Denham (CA)
 Rep. Austin Scott (GA)
 Rep. Doug LaMalfa (CA)
 Rep. Scott Tipton (CO)
 Rep. Richard Hudson (NC)
 Rep. Steve Southerland (FL)
 Rep. Rodney Davis (IL)
 Rep. Rick Crawford (AR)
 Rep. Chris Collins (NY)
 Rep. Martha Roby (AL)
 Rep. Ted Yoho (FL)
Changes in Congress – Peterson Ag committee
Democrats
 Collin Peterson (MN)
 Filemon Vela (TX)
 Mike McIntyre (NC)
 Michelle Lujan Grisham
 David Scott (GA)
(NM)
 Jim Costa (CA)
 Ann Kuster (NH)
 Tim Walz (MN)
 Rick Nolan (MN)
 Kurt Schrader (OR)
 Pete Gallego (TX)
 Marcia Fudge (OH)
 William Eynart (IL)
 Jim McGovern (MA
 Juan Vargas (CA)
 Suzan DelBene (WA)
 Cheri Bustos (IL)
 Gloria Negrete McLeod
 Sean Patrick Maloney (NY)
(CA)
Politics of Farm Program Payments
Source: Larry Sanders
2012 Farm Bill: Proposed Cuts
CBO Scores: Senate vs. House
2012 Farm Bill Safety Net
Farm Bill Safety Net
 Risk management (i.e. crop insurance) is a key
component of both the House & Senate farm bills
 Both bills offer choices among commodity and
insurance programs
 Recognize diversity among crops/regions
Crop Insurance
 Supplemental Coverage Option (SCO) – An area-wide crop
insurance product that can be purchased in addition to
individual buy-up coverage. Designed to cover a portion of the
crop insurance deductible
 Coverage by practice – Beginning with the 2014 crop year,
producers who grow a crop on both dry land and irrigated land
may elect a different coverage level for each production practice
 70% Yield Plug – For all crop years within a producers 10-year
APH the yield plug is increased to 70% of the applicable
transition yield
Crop Insurance
 Enterprise Units – Makes the premium subsidy for enterprise
units permanent
 Information Sharing – Requires FSA to provide an authorized
agent or an approved insurance provider (AIP) information that
may assist in insuring the producer
 Authority to Correct Errors – Authorizes AIPs and agents to
correct unintentional errors to ensure accuracy of all insurance
information
 Cotton – Cotton producers are ineligible for Title 1 programs but
may purchase an enhanced area-wide crop insurance product
(STAX) with a $0.6861/lb reference price
Role of Commodity Programs

Elimination of Direct Payments
 (1) most bankable
 (2) most trade-compliant
 (3) direction much of the rest of the world is heading

Crop insurance is very important but it does not perform well under
multiple years of price declines
 If prices drops (similar to late 1990s), how do we avoid ad hoc
disaster assistance
 House wants to provide multi-year price protection in the
commodity title to complement crop insurance
House vs. Senate Commodity, Crop Insurance, and
Livestock Programs
Component
Senate
House
Direct Payments
No
No
CCP Payments
No
No
ACRE
No
No
SURE
No
No
County Revenue Protection
Yes
Yes
Farm Revenue Protection
Yes
No
Price Protection
No
Yes
STAX
Yes
Yes
SCO
Yes
Yes
Marketing Loans
Yes
Yes
Livestock Disaster Programs
Yes
Yes
2008 Commodity Programs - Reminder
 Direct Payments
 Paid on historical base acreage – not tied to current prices or
production
 Average $15/acre payment for wheat
 CCP
 Paid on historical base acreage and current prices
 Target price program
 No CCP payments on wheat
 ACRE
 Based on a state and farm level trigger
 Payment based on state benchmark yield (not individual or county)
$100
$90
$80
$ per base acre
$70
$60
$50
$40
$30
$20
$10
$0
Corn
Grain Sorghum
Wheat
Upland Cotton
Rice
Peanuts
Soybeans
2011/12
2010/11
2009/10
2008/09
2007/08
2006/07
2005/06
2004/05
2003/04
2002/03
$ per Base Acre
80
70
60
50
40
30
20
10
0
Senate Commodity/Insurance Programs
 Agriculture Risk Coverage (ARC) – similar to ACRE
 Individual Coverage (paid on 65% of eligible planted acres)
or
 County Coverage (paid on 80% of eligible planted acres
 Supplemental Coverage Option (SCO)
 Area-wide policy to cover a portion of the crop insurance deductible
 Producers pay 30% of the premium
 2 options
 1) Enroll in ARC, get SCO coverage up to 79% (79% -
insurance plan coverage level)
 2) No ARC, get SCO coverage up to 90%
 Triggered if county losses exceed 10% of normal levels
 Not available for producers enrolled in STAX
 STAX for cotton
House Commodity/Insurance Programs
 Price Loss Coverage (PLC)
 Similar to CCP program
 Payment triggered if effective price (max mid-season price or LR)
< references price
or
 Revenue Loss Coverage (RLC)
 Similar to Senate ARC program
 Supplemental Coverage Option (SCO)
 Only available to producers enrolled in PLC – coverage up to 90%
 Not available to producers enrolled in RLC
 Triggered if county losses exceed 10% of normal levels
 Not available for producers enrolled in STAX
 STAX for cotton
House vs. Senate Commodity Programs
Component
Senate
House
Farm ARC
County ARC
RLC
PLC
Guarantee
Farm revenue
County revenue
County revenue
National price
Benchmark
5-yr Olympic avg
yield x 5-yr
Olympic avg
national price*
5-yr Olympic avg
yield x 5-yr
Olympic avg
national price*
5-yr Olympic avg
yield x 5-yr
Olympic avg
national price**
Fixed reference
prices**
Payment trigger
Revenue<89% of
benchmark
Revenue<89% of
benchmark
Revenue<85% of
benchmark
National price<
reference price
Payment coverage
79 - 89% of
benchmark
79 - 89% of
benchmark
75 - 85% of
benchmark
Reference price –
loan rate
Payment rate
65% of planted
acres (45% of
prevent-plant)
80% of planted
acres (45% of
prevent-plant)
85% of planted
acres (30% of
prevent-plant)
CCP yield x 85%
of planted acres
(30% of preventplant)
Loan rate
Same as 2008: Corn = $1.95, Soybeans = $5.00, Wheat = $2.94
*Min. benchmark reference price for peanuts ($530/ton) and rice ($13.00/cwt)
**Min. benchmark reference price for wheat ($5.50), corn ($3.70), soy ($8.40), sorg hum (3.95), rice ($14), peanuts ($535 )
House vs. Senate SCO Coverage
Senate
SCO Coverage
House
Enrolled in ARC
Not Enrolled in
ARC
RLC
PLC
Available?
Yes
Yes
No
Yes
Deductible
21%
(100%-79%)
10%
(100%-90%)
N.A.
10%
(100%-90%)
70%
70%
N.A.
70%
Subsidy Rate
Senate & House ARC & RLC vs. SCO
• Both may compete against individual farm
crop insurance
• Producers may decide to lower the coverage
level of their individual crop insurance and
buy SCO or STAX coverage
• ARC and RLC:
• No premiums
• 65-85% coverage on acreage
• Payment limits
STAX
 Stacked Income Protection Plan
 Separate insurance program for upland cotton
 Shallow-loss, area-wide revenue insurance
 Voluntary program - farmers can supplement existing revenue insurance
with an area-wide insurance product subsidized at 80%
 “Stacked” feature
 Provides shallow-loss coverage that would sit on top of the producer’s individual crop
insurance deep-loss product
 Uses an area-wide revenue product or group risk income protection (GRIP)
program
Losses determined at the county level rather than the farm level
 Area-wide policies such as GRIP are generally cheaper than farm-level policies since
the risk of loss is pooled at a more aggregate level

House vs. Senate STAX (Cotton Only)
STAX Coverage
Senate
House
Coverage Band
10-30% of expected
county revenue
10-30% of expected
county revenue
Minimum Price
N.A.
$0.6861 / lb
Subsidy Rate
80%
80%
Payment Rate
Multiplier
80-120%
80-120%
Questions?
Jody Campiche
528 Ag Hall
405-744-9811
jody.campiche@okstate.edu
http://agecon.okstate.edu/agpolicy/index.asp?type=newsletters