ECONOMIC AND
POLICY UPDATE
Department of Agricultural Economics
Vol. 13 No. 1
January 25, 2013
http://www.ca.uky.edu/agecon/index.php?p=209
Will Snell and Kevin Heidemann, Editors
In this issue:




The New Year’s Farm Bill: New Year, Old
Problems? – Aleta Botts
KyFarmStart: Beginning Farmer Training
Program – Lee Meyer and Jennifer Hunter
Estimated Tax Relief 2012 – Jerry Pierce
KY Association of Food Banks: Specialty Crop
Produce Sourcing Project – Tim Woods and
Miranda Hileman
The New Year’s Farm Bill: New Year, Old
Problems?
The 2012 Farm Bill debate is a good reminder
that deadlines are useful tools. No action was taken
with the farm bill until it became apparent that the
United States would have to shake the cobwebs off
outdated policy provisions from the 1950s and
figure out how to implement them in 21st Century
American agriculture. All of that work from 2012
on a five-year bill – the Senate passage, the House
Committee bill, the arguing, the positioning, the
lobbying – now must begin anew.
A one-year extension of most farm bill programs
was included as part of the fiscal cliff tax deal that
passed on January 1. This extension means that
commodity programs that were in place for the
2012 crop year (direct and countercyclical,
marketing loan, Average Crop Revenue Election,
Milk Income Loss Contract) are in place for the
2013 crop year or until December 31, 2013. The
Conservation Reserve Program was extended for
another year at the current acreage cap, which
means additional acreage can be enrolled in the
program provided the total acreage remains under
that cap. Nutrition programs, trade promotion
programs, and other programs were given a oneyear extension as well.
This simple extension did not provide funding for a
group of programs with farm bill funding below a
certain level, and who lacked future budget
authority. These programs lacked a baseline of
funding under the old farm bill to continue under a
new farm bill. Providing money for these
“unfunded” programs would mean taking money
from funded ones, a decision that ended up being
too much for a last-minute farm bill extension. As a
result, these “unfunded” programs – which include
the Farmers Market Promotion Program, the
Organic Certification Cost-Share Program, and all
of the rural energy programs – must now fight for
funding within the annual appropriations process
this year.
No one could have wanted the farm bill debate of
2012 to end where it did. In fact, the result ended up
not meeting the needs of any of the constituencies
involved. At the same time, it may have been the
only option to avoid the alternative of reverting to
agricultural policy last seen in this country in the
1950s, while still preserving the pressure on
Congress to write a more comprehensive bill this
year.
Unfortunately, the dynamics that brought us to this
one-year fix remain largely in place: growing
concerns over budget deficits, a polarized House of
Representatives, a lack of support by some key
leaders, and little movement on major legislation.
Additionally, the spending cuts that were averted by
the New Year’s fiscal cliff deal reappear at the end
of February, creating more uncertainty with regard
to levels of funding for many agricultural programs.
Finally, rumors exist that the 2013 direct payment
might not be made, if Congress acts to take that
funding before it can be paid by USDA.
The New Year’s Day farm bill bought policymakers
time to figure out how they can steer a farm bill
towards completion this year. The 1949 Act that
forced action on that New Year’s farm bill is still in
place, now waiting to come back into force on
January 1, 2014. If this year is any proof, that
deadline may be the only force strong enough to
move farm bills now. (Aleta Botts)
Beginning Farmers Training Program KyFarmStart
Results are in – there is evidence that Kentucky’s
beginning farmer program, KyFarmStart, is
improving farming knowledge among its target
audience. Dr. Ani Katchova and grad student Sierra
Enlow are leading the effort to assess the impacts of
KyFarmStart and found positive impacts.
Since the program started three years ago, almost
400 beginning farmers in more than 40 of
Kentucky’s counties participated in the 10 session
training program, focusing on farm management,
but covering other practical parts of farming as
well. Beginning farmers in KyFarmStart (those
managing a farm for less than 10 years) included all
types of farms, not just small ones. The average
participant’s operation was 513 acres and about
10% of participants were classified as limited
resource. The full time/part time mix was almost
exactly 50%. Many were highly educated – 59% are
college grads. Finally, FarmStart participants’
enterprises matched what we know about Kentucky
agriculture – including beef cattle, as well as grain,
forage and vegetable production.
An exciting finding of the evaluation is the gain of
knowledge - in every category. Participants were
asked to evaluate their level of knowledge of the
topics covered in the 10 session training program,
from “no knowledge” and “beginner” to
“knowledgeable” or “expert.” The data in the table
shows clearly that participants came away with
much more knowledge than they started with.
The impact on involvement in the farm business
was not as great, but still 18% said that they were
significantly more involved in their farm operations.
Other impacts are use of financial statements,
writing farm business plans, improved family
communications and use of government programs.
Almost 80% were satisfied with the program.
Impacts of KyFarmStart on Knowledge Gained
Topic:
Business Goals and Missions
Legal Considerations
Financial Documents
Farm Business Plans
Crop Production
Livestock Production
Gvmt. Programs (FSA, NRCS)
Soils
Marketing
Selecting a New Farm
Enterprise
Resource Evaluation
Leadership Development
Change from "no knowledge"
or "beginner" to
"knowledgeable" or "expert"
43%
53%
39%
57%
30%
35%
45%
41%
41%
53%
31%
38%
With the encouragement of these results, and a
renewal grant from the USDA Beginning Farmer
and Rancher Development program, the
KyFarmStart effort will be continued until at least
2015. Plans are being made now for locations of the
KyFarmStart training program. Beginning farmers
who are interested in participating should contact
their county ANR extension agent or Sarah Lovett
(sarah.lovett@uky.edu 859.257.7272 x 281).
(Lee Meyer and Jennifer Hunter)
Mixed Signals for Filing 2012 Tax Returns
The Internal Revenue Service (IRS) will waive
late payment penalties for farmers who are unable
to file and pay their 2012 taxes by the March 1
deadline. The announcement came on January 18,
2013. The relief is given to farmers who are unable
to file because the IRS will be delayed in processing
farm returns because of late passage of a final tax
relief package. Farmers may request the penalty
waiver by attaching Form 2210-F to their return.
As of this writing there is NO relief for Kentucky
income tax returns. Kentucky's Individual Income
Tax Law is based on the 2006 Internal Revenue
Code. Taxpayers with two-thirds of gross income
from farming must have paid the entire amount of
estimated 2012 tax by January 15, 2013, or file the
Kentucky tax return and pay the entire amount due
by March 1, 2013. A penalty equal to 10 percent of
any underpayment may be assessed.
All businesses, including farmers, are required to
make quarterly payments of estimated income
taxes. Qualified farmers have two special
alternatives: 1) make one payment of all estimated
taxes by January 15th of the year taxes are due and
file by April 15th, or 2) make no estimated payments
and file and pay-in-full by March 1. A farmer
qualifies if two-thirds of all gross income is from
farming, including the sale of livestock used in
draft, breeding, sport, or dairy.
Congress passed the American Taxpayer Relief Act
(ATRA) on January 2, 2013. The Act reinstated
many of the previous tax provisions, including the
“marriage penalty” relief. It adds a new top income
tax rate of 39.6% and a top capital gains rate of
20%. The Act also made permanent the Gift and
Estate Tax exemption of $5 million, with
“portability” between spouses, but increased the top
estate tax rate from 35% to 40%. The popular
American Opportunity Tax Credit was continued
through 2017 to provide tax credit for qualified
higher education costs.
ATRA extended Code Section 179 Expensing of up
to $500,000 on $2 million total investment
retroactively for 2012 and for 2013. Section 179
Expensing had been limited to $139,000 on
$560,000 total investment. It also set the First Year
Special Depreciation Allowance (Bonus
Depreciation) at 50% for next year.
The IRS has announced it will not begin processing
individual tax returns until January 30, 2013,
because of the late tax law changes made by ATRA.
The IRS expects to begin processing returns for
those who must file certain business forms,
including depreciation, in late February or March.
(Jerry Pierce)
Impact of the Kentucky Association of Food
Banks Specialty Crop Produce Sourcing Project
The mission of the Kentucky Association of Food
Banks (KAFB) is to end hunger by providing food
and quality services to increase the capacity of
Kentucky’s Feeding America food banks. The
Association is comprised of seven food banks that
reach 620,100 people annually, or 1 in 7
Kentuckians in all 120 counties. The Kentucky
Department of Agriculture provided a Specialty
Crop Block Grant to KAFB in 2011, for the “Farms
to Food Banks” program. This program intended to
increase consumption and awareness of fresh fruits
and vegetables among low-income consumers,
through a targeted fresh produce distribution
program; the competitiveness of Kentucky’s
specialty crop market was also enhanced.
A survey of food bank clients showed the
following:
1. The vast majority of responses came from
persons primarily responsible for the
grocery shopping (94%) and preparing the
main meals at home (92%). The average
client responding prepared 13.2 meals at
home per week – equivalent to
approximately 52 meals per month. This is
compared to an average of 11.0 meals per
month prepared at home by the average
Kentucky food consumer.
2. Awareness and familiarity with fresh
produce increased some for 25.2% of the
clients, and increased by a lot for 26.2%,
compared to the previous year.
3. Consumption of fresh produce increased
some for 29.3% of the clients, and increased
by a lot for 30.3%, compared to the previous
year.
4. A total of 88.5% of the clients indicated an
intention to use more fresh produce in 2012
compared to 2011. The grocery store had
previously been the largest supplier to many
respondents. Sourcing shifted slightly to
heavier reliance on the food banks – this is
in share of sourcing rather than measuring
absolute consumption amounts.
5. To examine barriers to sourcing and
consuming fresh produce, we employed a
Likert scale, using 1 = “less of a barrier” and
7 = “more of a barrier”. This rating scale
provided us with interesting insight into how
food bank consumers think about food. Cost
was identified most frequently as “more of a
barrier”, with an average weight of 5.42—
well ahead of the other potential barriers.
Family interest and home storage were rated
at 3.09 and 3.07 respectively. Bulky
transport (2.74), knowing how to prepare it
(2.51), and no access to stores that sell it
(2.50) were less significant barriers.
6. There was a strong interest in seeing more
fresh produce available through the food
pantry – 21.7% of consumers indicated they
would like to see more of the same kinds of
items currently being received, and 74.9%
indicated wanting more of the same, but also
additional produce offerings.
the Farms to Food Banks program. According to
our results, food bank clientele produce a significant
amount of their food at home and lean heavily on
groceries and food banks for produce. There was
interest in an expanded program – both in volume
and in the variety of items. Cost is clearly the major
barrier for these individuals. Food banks
significantly help consumers overcome cost barriers
that deny them access to more fresh produce.
(Tim Woods & Miranda Hileman)
For more information on this study, contact
tim.woods@uky.edu.
More details will be posted at:
http://www.ca.uky.edu/agecon/index.php?p=25.
There is strong evidence of expanded awareness
and use of fresh produce among food bank clients in
University of Kentucky
Department of Agricultural Economics
400 Charles E. Barnhart Bldg.
Lexington, KY 40546-0276
Phone: 859-257-5762
Fax: 859-323-1913
http://www.ca.uky.edu/agecon/index.php