The bill does have some good provisions – including a rural microenterprise program, livestock reforms, beginning farmer provisions, grants for value added agriculture, and strong conservation programs. Those positive features are overwhelmed, however, by subsidies for mega farms to drive smaller operations out of business.
No Real Payment Limitation Reform
Congress created the illusion of farm payment limitation reform by eliminating the three entity rule that allows mega farms to receive double the limit by drawing payments through several legal entities. But that will have little impact because mega farms are still allowed to instead double payments by dividing them between spouses. Under current law, mega farms can use either the three entity rule or the spouse rule to get double the limit, but they cannot use both.
Consequently, only unmarried farmers take any cut. Our detailed analysis of the largest payment recipients in seven major farm states (GA, IA, KY, MN, MT, ND, and OK) could identify only five farms that will take any cut in payments. Closing one gate while leaving another open won’t keep the hogs out of the trough.
The bill also denies commodity payments to individuals with non-farm income of more than $500,000. Individuals can have up to $750,000 in net farm income before direct payments are cut off. There is no limit on net farm income for recipients of countercyclical and loan deficiency payments.
These limits are not effective. Here’s why:
1) High-income investors will divide income between spouses to keep at least one below the limit and be able to claim payments. For example, Nancy Pelosi is the 15th richest member of Congress, but according to her financial disclosure reports she’d be eligible for payments. That is because most of the couple’s investments are not in her name.
2) Forty percent of those who would lose farm payments due to the income limits are landlords – who will just switch to cash rent arrangements and capture the payment indirectly through high dollar cash rents.
3) Large farms that approach the income limit will get around it by expanding their operation – purchasing land and other assets to create deductions for interest, depreciation, and inputs.
U.S. Department of Agriculture Secretary Ed Schafer got it right when he said “If there is a farm in America that can’t meet a $500,000 hard cap, they need a new accountant.”
Livestock Reform – USDA Forced to Act
USDA is directed to establish rules governing “undue preferences” by meatpackers, such as volume premiums to mega livestock producers. The 1921 Packers and Stockyards Act prohibits “undue preferences” but has not been enforced.
We have long opposed volume premiums that are not based on verifiable cost savings to the meatpacker. Sweetheart deals for mega producers place family farmers at a competitive disadvantage.
The farm bill leaves the wording of the regulations to USDA, so they could be strong or do nothing. But the farm bill does force USDA to act, and that gives us a fighting chance to make the case and build grassroots pressure for effective rules. Senator Tom Harkin (D-IA) won passage of this provision.
Strong Beginning Farmer/Rancher Provisions
The farm bill has strong beginning farmer and rancher provisions. The Beginning Farmer and Rancher Development Program provides $15 million of competitive grants annually for education, extension, and outreach initiatives to help beginners get started. The Center for Rural Affairs has long been a champion of this idea.
The Conservation Reserve Program Transition provides an extra two years of payments on land enrolled in the Conservation Reserve Program that is sold or rented to a beginning farmer who returns it to production under a conservation plan.
The Beginning Farmer and Rancher Individual Development Account Program is authorized but not funded. If we can secure funds through the annual congressional appropriations process, USDA will launch a 15-state pilot program to provide matching funds to limited-resource beginners saving money to get started.
The nationwide Beginning Farmer and Rancher Contract Land Sales Program offers USDA loan guarantees, such as those available to banks, to individuals who sell land on contract to beginning farmers. The Conservation Loan Program will prioritize loans to beginning farmers and ranchers converting to sustainable and organic agriculture.
Senator Tom Harkin (D-IA) and Representatives Tim Walz (D-MN), Stephanie Herseth-Sandlin (D-SD), and Collin Peterson (D-MN) were instrumental in passage of the beginning farmer provisions.
Rural Development Wins, but Funding Needed
The farm bill established a new Rural Microenterprise Assistance Program to make $4 million of competitive grants each year to assist rural businesses with 10 or fewer employees in acquiring skills, loans, technical assistance, and support networks. The program will support existing efforts like the Center’s Rural Enterprise Assistance Program in Nebraska and fund organizations in other states to start new programs and expand existing programs to foster small business-based rural development.
Nebraska Senator Ben Nelson sponsored the program and worked tirelessly to win it funding. Representative Bob McIntyre (D-NC) championed it in the House of Representatives. The microenterprise program is one of only three programs to receive funding in the rural development title of the farm bill, and the only new program to receive funding. We will seek additional funding through the annual congressional appropriations process.
The Value Added Producer Grants Program will for the first time prioritize projects that strengthen small and mid-size farms, due to the efforts of Representative Jeff Fortenberry (R-NE), Representative Collin Peterson (D-MN), and Senator Tom Harkin (D-IA). The program makes grants to producers, including cooperatives, for value added marketing and processing.
The bad news is that farm bill funding for the program has been scaled back to $15 million per year, compared to the $40 million provided by the 2002 farm bill and about $25 million actually available after budget cuts. So get ready to work the members of the Appropriations Committee to secure money for the program.
New and Improved Conservation Provisions
The Conservation Stewardship Program, the new and improved Conservation Security Program, received funding to enroll 115 million acres by 2017. Known as the CSP, it will be available nationwide and no longer limited to a few watersheds at a time. The program pays producers according to how well they manage the land to enhance the environment. It includes special payments for resource conserving crop rotations and provisions to encourage enrollment by organic farmers. Senator Tom Harkin (D-IA) championed the program.
The Environmental Quality Incentives Program, a conservation cost-share program to assist farmers and ranchers to implement conservation practices on their agricultural land, includes payments for practices related to organic farming systems as well as for transitioning to an organic farming system along with the development of an organic system plan. The limitation on incentive payments under the program was lowered from $450,000 to $300,000, unless USDA rules that the project is of “special environmental significance (including methane digesters)”. Though a step in the right direction, the change will be of limited impact because USDA allows up to that amount to be paid to each investor in a operation – so one large operation can get many times the limit.
The Cooperative Conservation Partnerships Initiative will provide supplemental grants and payments for area-wide conservation projects involving multiple landowners enrolling in the Conservation Stewardship Program, Wildlife Habitat Incentives Program, and the Environmental Quality Incentives Program. Though it is a good program, we are disappointed that Congress dropped language that would have placed a priority on projects that address conservation and rural community development opportunities simultaneously.
However, most of the project funding decisions will be made at the state level by the State Conservationist with input from the public through what is called the State Technical Committees. This will allow communities and farmers and ranchers to provide input to fund projects that address both conservation and rural community development.
That is important. Public access to natural space can be a development asset for communities. It can draw young families to start businesses, populate schools, and revitalize communities. It also provides a basis for new tourism-related self-employment opportunities involving bed and breakfasts, hunting, horseback riding, hiking, biking, and wildlife viewing, for example.
Sodsaver - The biggest failure in the conservation title is the elimination of the Sodsaver Provision. It will loom large as long as commodity prices remain high. Both the House and Senate bills would have denied federal crop insurance and disaster program payments on native sod converted to cropland.
But the final legislation denies them only in the Prairie Potholes portions of MT, ND, SD, MN, and IA and only if the governor acts to put it in force. Expect marginal grasslands to be destroyed for production of high-priced commodities – and the federal government to pick up the tab when much of the land proves marginal and drought prone.
A Word of Thanks
Thanks to the thousands of you who embraced the responsibilities of citizenship to write letters, make phone calls, send emails, and go to meetings to help achieve a better farm bill. This bill is not all we would like, but your work made it better. And finally, a word of thanks to the staff of the Sustainable Agriculture Coalition and the 25 other member organizations. The coalition played the pivotal role in winning many of the good provisions of this bill.
Contact: Traci Bruckner, firstname.lastname@example.org or 402.687.2103 x 1016 for information. This feature was written by our policy team for our May 2008 Center for Rural Affairs Newsletter.