Office of the Chief EconomistOffice of the Chief Economist
U.S. 2018 Farm
Bill Overview
Robert Johansson
Chief Economist, USDA
Feb 2019
1
Office of the Chief EconomistOffice of the Chief Economist
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
Office of the Chief EconomistOffice of the Chief Economist
$-
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Billions
U.S. Budget
Source: CBO
Outlays
Context: Continued budget pressures limit funds for Farm Bill
3
Revenues
Billions
U.S. Budget (f)
Office of the Chief EconomistOffice of the Chief Economist
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
Office of the Chief EconomistOffice of the Chief Economist
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
Office of the Chief EconomistOffice of the Chief Economist
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
Office of the Chief EconomistOffice of the Chief Economist
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
Office of the Chief EconomistOffice of the Chief Economist
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
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Office of the Chief EconomistOffice of the Chief Economist
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
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• 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).
Office of the Chief EconomistOffice of the Chief Economist
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
Office of the Chief EconomistOffice of the Chief Economist
Conservation Title continues primary programs and compliance
requirements
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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)
Office of the Chief EconomistOffice of the Chief Economist
$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
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Office of the Chief EconomistOffice of the Chief Economist
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
Office of the Chief EconomistOffice of the Chief Economist
Voluntary conservation programs support environmental “additionality”
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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.
Office of the Chief EconomistOffice of the Chief Economist
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.
Office of the Chief EconomistOffice of the Chief Economist
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
Office of the Chief EconomistOffice of the Chief Economist
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
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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
Office of the Chief EconomistOffice of the Chief Economist
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.
Office of the Chief EconomistOffice of the Chief Economist
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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