1 U.S. 2018 Farm Bill Overview - World Trade Organization · 2019-06-05 · Office of the Chief...

Office of the Chief EconomistOffice of the Chief Economist

U.S. 2018 Farm

Bill Overview

Robert Johansson

Chief Economist, USDA

Feb 2019

1


Agenda

• U.S. farm policy context

• Overview of the Farm Bill process

• What will it cost?

• What’s new in the 2018 law?

• Concluding remarks

2


$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

$-

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

196

9

197

1

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

201

7

201

9

202

1

202

3

202

5

202

7

202

9

Billions

U.S. Budget

Source: CBO

Outlays

Context: Continued budget pressures limit funds for Farm Bill

3

Revenues

Billions

U.S. Budget (f)


What’s happening with the Farm Bill?

4

Stakeholders testify and

lobby for provisions

• USDA provides

consultation on technical

details and may offer

proposals

• Farm organizations

• Agri-business

• Environmental groups

• Taxpayers

• Rural communities

• Research scientists

House Agriculture

Committee (committee

members introduce

legislative proposals)

Senate Agriculture

Committee

(committee members

introduce legislative

proposals)

President

signs bill

into law

House debate and

passage of House

bill

House Budget Committee

sets budget targets

Conference

Committee

Senate passes

conference bill

USDA

establishes rules

and regulations

to implement

Farm Act

House passes

conference bill

Senate debate and

passage of Senate bill

Defeated in House on May 18

Reconsidered and passed on June 23

Voted out of Committee on June 13

Passed by Senate on June 28

Conference report filed on December 10

Voted out of Committee on April 18

Passed on December 11

Passed on December 12

Signed on December 20

We are here

Passed July 20, 2017

*All dates are 2018

except where noted


0

50

100

150

200

250

300

350

400

450

500

1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018F

Farm-

related

income

Government payments

Livestock cash receipts

Crop cash receipts

Government payments make up only a small share of farm gross cash income

Note: Crop insurance net indemnities included in farm-related income.

Source: Farm Income Data, Updated November 2018. Economic Research Service, USDA.

Billi

on

do

lla

rs

5


0

5

10

15

20

25

30

35

40

45

1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Billi

on

do

lla

rs Coupled

Partially decoupled

Decoupled

Emergency

Conservation

Crop insurance

Data: USDA, fiscal year.

Characteristics of US farm programs changing over time; crop

insurance increasing in importance

10-year average = $18.1 billion per year

--- $6.1 billion from crop insurance

6


2018 Farm Bill: 4 titles dominate projected outlays

1. Commodity Policy

2. Conservation

3. Trade

4. Nutrition

5. Credit

6. Rural Development

7. Research, Extension, and Related Matters

8. Forestry

9. Energy

10. Horticulture

11. Crop Insurance

12. Miscellaneous

Commodity, 7%

Conservation,7%

Nutrition, 76%

Crop Insurance, 9%

Other, 1%

5-yr total = $428 billion

Data: CBO 2018 Farm Bill score.

7


Projected outlays for 2019-2023 vary little between the 2014 Farm Bill

and 2018 Farm Bill

Note: Chart in billions of dollars

$0.1

$0.1

$0.6$1.1

$326.0

$38.0

$31.4

$29.3$3.5

Nutrition

Crop Insurance

Commodity Programs (CCC)

Conservation

Other

2018 Farm Bill:

~$428 billion over 5 years

Change from 2014 Farm Bill:

~$2 billion over 5 years

Source: CBO

8


Title I Commodities

Producer Choice: PLC or ARC

Title I: Commodities

Agricultural

Risk

Coverage

Price Loss

Coverage

Election holds until 2121 then annual

decision between ARC and PLC

No generic base acres with introduction of

seed cotton as a covered commodity

9

• PLC payments are made on historical base

acres when the price of a historical covered

commodity is below the statutory reference price.

• ARC payments are made on historical base

acres when the average county revenue for a

historical covered commodity is below a

benchmark revenue guarantee.

• ARC and PLC are decoupled from actual

production. Payments are not dependent on

production of the historical commodity or any

commodity.

• Covered commodities include wheat, corn,

sorghum, barley, oats, rice, soybeans, peanuts,

canola, crambe, flaxseed, mustard, rapeseed,

safflower, sesame, sunflower, chickpeas, dry

peas, lentils, and seed cotton (added 2018).


New name for dairy risk management program but very similar

to 2014 Farm Bill

MPP-Dairy—

2014 Farm Bill

Dairy Margin Coverage (DMC)—

2018 Farm Bill

Coverage: $4/cwt - $8/cwt Coverage: $4/cwt - $9.50/cwt

Premiums begin at $4.50/cwt Premiums begin at $4.50/cwt

Payments calculated bimonthly Payments calculated monthly

Minimum of 25% of production history must be

covered

No minimum production coverage

Producer must choose between Livestock Gross

Margin (LGM) insurance and MPP

No restriction on LGM and DMC participation

10

Evolution of U.S. dairy policy

Market price support MPS + Income support (MILC) Risk management (MPP, DMC)

No MPS or MILC in 2014 Act


Conservation Title continues primary programs and compliance

requirements

11

Land Retirement

Conservation Reserve

Program (CRP)

Agriculture Conservation

Easements Program (ACEP)

Working Lands

Environmental Quality

Incentives Program (EQIP)

Conservation Stewardship

Program (CSP)

Mixed

Regional Conservation Partnership

Program (RCPP)


$9.9 $10.1

$2.1 $1.3

$7.8 $8.8

$8.1 $8.0

$1.3 $0.6

0

5

10

15

20

25

30

2018 FB 2014 FB

Billi

on

do

lla

rs

Land

retirement

$12.0

Mixed

CRP

CSP

Conservation spending projections show small adjustments

EQIP

ACEP

RCPP

Source: CBO baseline projections, April 2018 and January 2019.

Working

lands

$15.9

Working

lands

$16.8

Land

retirement

$11.4

Mixed

12


Soil erosion declined sharply during HELC implementation, but…

How much of the reduction was caused by HELC?

• Previous ERS

research: up to 25

percent of 1982-

1997 soil erosion

reduction could

have been due to

HELC

• Soil erosion also

reduced on land not

subject to HELC

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

1982 1987 1992 1997 2002 2007 2012

Bil

lio

n T

on

s P

er

Year

Soil erosion on cultivated cropland, 1982-2012

Sheet and Rill Wind

HELC Implemented 1985-95

Source: USDA-ERS with data from USDA-NRCS

13


Voluntary conservation programs support environmental “additionality”

14

Source: USDA-ERS

• Voluntary programs deliver

“additional” conservation or

environmental improvement if the

practice would not otherwise

have been adopted.

• “Additionality” is a key measure

of conservation program

performance.


Research Title prioritizes funding for public R&D

• New Agricultural

Advanced Research and

Development Authority

(AGARDA) will focus on

basic and long-term

research not supported

by industry.

• Provides support for

international capacity-

building partnerships.

15

Source: USDA-ERS

0

1

2

3

4

5

6

Food/feedman.

Cropprotection

Animal health Farmmachinery

Naturalresources

Nutrition/foodsafety

Econ, stat,policy

Social devel.

Allocation of R&D spending by sub-sector in 2013

Public sector

Private sector

$bil.


Rural Development Title focuses on medical and digital

services

• Prioritizes program funding for projects that address substance abuse disorders

• Expands focus on providing and enhancing high-speed broadband and other digital services to underserved communities, including to support adoption of precision agriculture

• Requires reinstatement of the Under Secretary for Rural Development position

16


Few changes to Nutrition Title

• Funding is increased for SNAP

employment and training

program; no changes to work

requirements

• A proposed rule is in process for

stricter work requirements for

able-bodied adults without

dependents

17

0

20

40

60

80

100

120

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

All Other Programs School Breakfast Program

Child and Adult Care Food Program WIC

National School Lunch Program SNAP

$ bil.SNAP Outlays Largest Share of Nutrition Spending


Trade Title increases and consolidates funding for market promotion

• Consolidates market

development programs to

enhance effort to build new

markets for U.S. agriculture

and food products

• Expands international

technical assistance and

extension programs to

improve trade and address

global food insecurity

18

0

50

100

150

200

250

300

2014 2015 2016 2017 2018e 2019 2020 2021 2022 2023

Priority Trade Fund Specialty Crop Tech Assistance Emerging Markets Foreign Market Development Cooperator Market Access Program

Agriculture Trade Promotion

and Facilitation Program

Data: CBO budget projections Mar 2016-Apr 2018; Agriculture Improvement Act of 2018.


Concluding Remarks

• 2018 Farm Bill is largely a continuation of the 2014 law in terms of policy

orientation and expenditure levels

• Largest share of expenditures help poor people purchase food

• Commodity support continues to emphasize risk management and income support

• Conservation, research, and rural development remain key elements of U.S. agricultural policy

• USDA is in the process of implementing the new law

• Will be holding listening sessions with stakeholders, developing program rules and outreach

plans

• Useful websites:

• https://www.ers.usda.gov/agriculture-improvement-act-of-2018-highlights-and-implications/

• https://www.usda.gov

• https://www.congress.gov/115/bills/hr2/BILLS-115hr2enr.pdf

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https://www.ers.usda.gov/agriculture-improvement-act-of-2018-highlights-and-implications/

http://www.usda.gov/

https://www.congress.gov/115/bills/hr2/BILLS-115hr2enr.pdf

1 U.S. 2018 Farm Bill Overview - World Trade Organization · 2019-06-05 · Office of the Chief...

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