On Dec. 20, 2018, President Trump signed into law the Agriculture Improvement Act of 2018. Very few modifications were made in this bill compared to the last, so if you liked the 2014 Farm Bill, you will probably like this one, too. Although 76.5% of the farm bill is for nutrition, our focus is on the commodity, crop insurance and conservation titles that make up 23% of the funding. What follows includes information Midsouth landowners need to know about the current farm bill.
- The adjusted gross income (AGI) is still at $900,000, meaning if an individual has a three-year average above $900,000, he or she will be disqualified from farm bill programs. As in the past, the AGI form must be completed annually for any person or entity with an interest in the farmland.
- Title I, the commodity title, contains a few tweaks, but no new programs were added compared to the 2014 bill. Under a crop share lease, a landowner can participate in the commodity programs. The Price Loss Coverage (PLC) is similar to the old counter-cyclical program which paid when the market price was below the “reference price.” The 2018 Farm Bill allows the reference price to increase up to 15% if the Olympic average price of the specific commodity increases. The second change to PLC is the option to update your base yields. Updating the base yield is optional, but there is no downside to improving base yields since PLC payments are calculated with them.
- The county-level Agricultural Coverage Program (ARC-CO) is continued and remains unchanged from the prior farm bill. In 2014, landowners/operators had a one-time decision to place each base crop in either PLC or ARC-CO. Almost all rice and peanuts went into PLC while other crops such as corn, soybeans, wheat and grain sorghum went into ARC-CO. This time the commodity program decision will be made twice: the first is this year and includes the decision for 2019 and 2020, while the second decision for the commodity program allocation will bind the farm for the remaining three years of the farm bill.
- Title II covers conservation. Most non-operating landowners use the Conservation Reserve Program (CRP), Farmable Wetlands Program (FRP) and the Environmental Quality Incentives Program (EQIP). There are other programs, such as the Conservation Stewardship Program (CSP), that are specifically for operators. We encourage all landowners to visit with their operators about CSP and how it can be used on the farm.
- CRP has previously been used to take marginal farmland out of production. Typically, most land in the Mid-south under CRP is either highly erodible or flood prone. The new farm bill adds an additional three million acres to be phased in over five years. Contracts are generally 10 to 15 years with an annual payment. The goal of this program is to improve water quality, reduce soil erosion and increase wildlife habitat. Enrollment for CRP will likely be once per year. FRP falls under the CRP umbrella and is designed to convert farmable wetlands (land that can be cultivated) back into a fully restored wetland status. This program is like CRP in that it pays annually and has a contract length between 10 to 15 years. Another program is Wetland Reserve Easements (WRE), which places a 30-year or permanent easement on cropland that is restored to a functioning wetland.
- In GFM’s opinion, EQIP is the most important program for a landowner. EQIP provides a cost-share payment for completing certain conservation measures, many of which improve productivity and profitability and thus lead to an increase in asset value. For example, EQIP will cost-share to precision level a farm and build surface water confinement structures such as reservoirs and tail-water recovery pits. Funding for EQIP slightly increased from the prior farm bill, so this will hopefully help more landowners improve conservation and profitability.
- Title XI covers crop insurance. Landowners who crop share and meet eligibility requirements can participate in crop insurance, which is partially subsidized under the farm bill. Crop insurance can be used to limit downside risk, and on many farms, can act as a floor that would be similar to cash renting and still allow upside gains under a crop share. Overall, there were no significant changes to crop insurance in the 2018 Farm Bill.
Landowners should be aware that a new farm bill became law. The new law has only slight changes, but landowners will still have several decisions to make regarding the commodity programs and should review how conservation and crop insurance funding can be utilized.