Federal farm policy aims to support farm incomes, encourage conservation, and manage risks. Key policies include: 1. Commodity support programs like PLC and ARC that make payments when crop prices are low. 2. Conservation programs that provide funding for practices like soil and water conservation on working lands. 3. Crop insurance that protects farmers from losses by subsidizing premium costs. Participation is high across major crops. 4. Other policies address trade, nutrition, credit, and rural development. The document provides an overview of these various federal farm programs and policies.

1. Brad Jordahl Redlin
October 3, 2019
Context and Policies
Colloquium in Sustainable Agriculture

2. 1. Federal Farm Policy in Context
2. Production Policy
3. Conservation Policy
4. Risk Management Policy
Context and
Policies

3.  51 percent of total U.S. land is in agricultural use
(61 percent of lower 48 states).
 Urban land use is 2.7 percent.

4. ►Number of U.S. farms for 2018 is estimated at 2.03 million, down 12,800
farms from 2017.

5. More than 50% of farms sell less than $10,000 from 9% of farm land
More than 40% of farm land is in 7% of farms that sell more than $500,000

6.  Crop prices, once strong, are mired in a low cycle...

7.  …and not just crops….

8. TRADE WAR
Swanson, K., G. Schnitkey and J. Coppess. "Reviewing Prices and Market
Facilitation Payments." farmdoc daily (8):188, Department of Agricultural and
Consumer Economics, University of Illinois at Urbana-Champaign, October 11, 2018.
Soybeans 2015: MY 29.6 million tons
Soybeans 2017: MY 36.6 million tons
Soybeans 2019: MY 14.2 million tons
*Soybeans 2018: MY 27.8 million tons
(April 5, 28.9 million tons)
retaliatory TARRIFS!
TARRIFS! Soybean exports: China

9.  Price and profitability.
 Every farm is different, but
USDA has survey data and
estimates to summarize costs
and returns.
2018 2017 2016
Gross value of production
Primary product grain 678.00 646.00 646.16
Secondary product silage 1.00 0.92 0.89
Total, gross value of production 679.00 646.92 647.05
Operating costs
Seed 102.20 103.26 104.52
Fertilizer ᵃ 113.32 118.19 131.49
Chemicals 34.74 35.58 36.56
Custom services ᵇ 23.02 22.59 23.24
Fuel, lube, and electricity 26.35 23.21 20.40
Repairs 31.97 30.89 30.33
Purchased irrigation water 0.00 0.00 0.00
Interest on operating capital 3.47 1.75 0.80
Total, operating costs 335.07 335.47 347.34
Allocated overhead
Hired labor 3.46 3.26 3.18
Opportunity cost of unpaid labor 26.05 24.53 23.87
Capital recovery of machinery and equipment 121.31 118.97 116.55
Opportunity cost of land 192.87 190.98 193.15
Taxes and insurance 11.44 11.34 11.21
General farm overhead 17.68 17.07 16.80
Total, allocated overhead 372.81 366.15 364.76
Costs listed
Total, costs listed 707.88 701.62 712.10
Net
Value of production less total costs listed -28.88 -54.70 -65.05
Value of production less operating costs 343.93 311.45 299.71
Supporting information
Yield (bushels per planted acre) 200 200 197
Price (dollars per bushel at harvest) 3.39 3.23 3.28

10.  But farm prices don’t have a profound effect on food prices

11.  Environmental impact from – and on – agriculture receives broad attention.
 Industry and consumers are engaging the issue.
Lake Erie algae issues
may strike Cleveland
New Jersey-Size 'Dead Zone' Is Largest
Ever in Gulf of Mexico

12.  Long history of legislative
engagement with agriculture.
 In general terms there have been
18 Farm Bills, beginning with the
Agricultural Adjustment Act of 1933.

13.  Farm Bill reauthorized every 5 years--or will revert to 1949 “Permanent Law.”
TITLE I—COMMODITIES
TITLE II—CONSERVATION
TITLE III—TRADE
TITLE IV—NUTRITION
TITLE V—CREDIT
TITLE VI—RURAL DEVELOPMENT
TITLE VII—RESEARCH, EXTENSION,
AND RELATED MATTERS
TITLE VIII—FORESTRY
TITLE IX—ENERGY
TITLE X—HORTICULTURE
TITLE XI—CROP INSURANCE
TITLE XII—MISCELLANEOUS

14.  There are 3 primary means $ delivered to agriculture via Farm Bill.
 Commodity Payments, Conservation Programs, Crop Insurance.

15. ►Nutrition programs
major aspect of USDA
operations.
►Farm Bill:
SNAP (food stamps).
►Non-Farm Bill:
National School Lunch Program;
Women, Infants and Children;
Child&Adult Care Food Program;
School Breakfast Program.

16. 1. Federal Farm Policy in Context
2. Production Policy
3. Conservation Policy
4. Risk Management Policy
Context and
Policies

17. Price Loss
Coverage
(PLC)
• 85% base
• SCO
Wheat
$5.50 per
bushel
Corn
$3.70 per
bushel
Grain sorghum
$3.95 per
bushel
Barley
$4.95 per
bushel
Oats
$2.40 per
bushel
Long-grain rice
$14.00 per
hundredweight
Medium-grain
rice
$14.00 per
hundredweight
Soybeans
$8.40 per
bushel
Other oilseeds
$20.15 per
hundredweight
Marketing Asst.
Loan (MAL)
2018 Farm Bill
change
Wheat $2.94 + $3.38/bu
Corn $1.95 + $2.20/bu
Grain sorghum $1.95 + $2.20/bu
Barley $1.95 + $2.50/bu
Oats $1.39 + $2.00/bu
Long-grain rice $6.50 + $7.00/cwt
Medium-grain
rice
$6.50 + $7.00/cwt
Soybeans $5.00 + $6.20/bu
Other oilseeds
$10.09 =
$10.09/cwt
Upland cotton
$0.42/lb + $.045 to
$0.52/lb
ELS cotton $0.7977 + $0.95/lb
Peanuts $355 = $355/ton
MAL / Loan Deficiency Payment: difference below Loan Rate of crop price selected
Agricultural
Risk Coverage
(ARC)
Pymts no greater
than 10 percent of
benchmark revenue
ARC-county
(85% base)
avg county yield
times national farm
price drops below
86% of county
benchmark revenue
(5-year Olympic avg
county yield times >
5-year Olympic avg
national or reference
price each year)
ARC-individual
(65% base)
difference between 86%
individual farm
guarantee (the 5-year
Olympic avg individual
yield times > 5-year
Olympic avg of national
or reference price each
year) and actual
individual farm revenue
summed across all
commodities (sum all
covered commodities
avg revenue weighted
by plantings)

18.  Commodity program payments made on “base acres.”
 historical planted acreage registered for each farm.
 may plant any crop*; payments based on “base” and historical yield.
Soybeans
35 acres
Corn
50 acres
Wheat
15 acres
 2018 Farm Bill uses base acres in effect for the 2018 crop year.
 2018 Farm Bill permits one-time PLC yield update (90% 2013-2017 avg. yield).
 base stays with land.
XYZ Farm
100 acres

19.  PLC explained
…maybe.
Base Acres & Yield
Calculate difference between ERP and EP;
Payment made when ERP > EP
85% of base acres
$2,295 PLC payment
*
*

20.  ARC explained
…maybe.
$4.10 x 180 =
$738 x 0.86 =
$634.68/acre $3.20 x 180 =
$576/acre
$634.68 - $576 =
$58.68 x 50 acres =
$2,934 x 0.85 =
$2,493.90 or $49.88/acre
($738 x 0.10 = $73.80/acre)
$49.88 x 50 =
$2,494 ARC payment

21. e.g. $6 coverage, 60% production:
milk - feed = $4.50
$6 - $4.50 = $1.50
$1.50 x (production history x .60) =
DMC payment
 Coverage is selected margin between U.S. all-milk price and national avg. feed cost (as calculated by a
statutory formula); choose each year or lock-in for 5 yrs for 25% discount.
Milk production base (production history) is equal to the
highest annual quantity of milk marketed by the operation
during the period from 2011-13.
 Dairy Margin Coverage program

22. PLC and ARC enrollment permits fruit, vegetables, and
wild rice on up to 15% of registered farm base acres.
Above 15% receives acre-to-acre payment reduction.
 Miscellaneous…
 No limits on MAL / LDP.
 $900,000 adjusted gross
income eligibility limit.

23. Market Facilitation Payments (2.0)
Minnesota: Aitkin: $38 Anoka: $38 Becker: $51 Beltrami: $35 Benton: $51 Big Stone: $64
Blue Earth: $74 Brown: $66 Carlton: $15 Carver: $63 Cass: $28 Chippewa: $61 Chisago: $54
Clay: $51 Clearwater: $35 Cottonwood: $72 Crow Wing: $29 Dakota: $58 Dodge: $68
Douglas: $57 East Otter Tail: $48 East Polk: $53 Faribault: $76 Fillmore: $54 Freeborn: $69
Goodhue: $60 Grant: $62 Hennepin: $66 Houston: $44 Hubbard: $79 Isanti: $49 Itasca: $53
Jackson: $72 Kanabec: $49 Kandiyohi: $58 Kittson: $42 Koochiching: $43 Lac qui Parle: $68
Lake of the Woods: $46 MFP 2019 County Per Acre Payment Rate July 25, 2019 Page 11 of
24 Le Sueur: $73 Lincoln: $63 Lyon: $68 Mahnomen: $54 Marshall: $43 Martin: $71 McLeod:
$62 Meeker: $60 Mille Lacs: $48 Morrison: $42 Mower: $69 Murray: $70 Nicollet: $69
Nobles: $69 Norman: $52 North St. Louis: $15 Olmsted: $60 Pennington: $46 Pine: $44
Pipestone: $66 Pope: $61 Ramsey: $34 Red Lake: $51 Redwood: $69 Renville: $66 Rice:
$65 Rock: $70 Roseau: $43 Scott: $69 Sherburne: $48 Sibley: $67 South St. Louis: $15
Stearns: $44 Steele: $67 Stevens: $62 Swift: $60 Todd: $43 Traverse: $63 Wabasha: $47
Wadena: $43 Waseca: $70 Washington: $60 Watonwan: $70 West Otter Tail: $55 West Polk:
$48 Wilkin: $54 Winona: $43 Wright: $62 Yellow Medicine: $68
TRADE WAR
Market Facilitation
Payments (1.0)
All planted acres:
•non-specialty crops, including alfalfa hay, barley, canola, corn, crambe, dried beans, dry peas, extra-long staple cotton,
flaxseed, lentils, long grain and medium grain rice, millet, mustard seed, oats, peanuts, rapeseed, rye, safflower, sesame
seed, small and large chickpeas, sorghum, soybeans, sunflower seed, temperate japonica rice, triticale, upland cotton, and
wheat.
•specialty crops, including almonds, cranberries, cultivated ginseng, fresh grapes, fresh sweet cherries, hazelnuts,
macadamia nuts, pecans, pistachios, and walnuts.
•dairy and hogs.

24. 1. Federal Farm Policy in Context
2. Production Policy
3. Conservation Policy
4. Risk Management Policy
Context and
Policies

25.  Conservation Programs expanded
with ‘85 Farm Bill and generally
grew consistently in subsequent Farm
Bills (‘90, ‘96, ’02, ’08).
 Conservation Title contains a suite
of programs.
 Programs meet different goals and
utilize different methods.
 Some contraction in programs
with 2014 Farm Act.
Wetlands Reserve Program, Farmland Protection Program,
and Grassland Reserve Program (easement) consolidated into:
Agricultural Conservation Easement
Program (ACEP)
Agricultural Water Enhancement Program, Chesapeake Bay
Watershed Program, Cooperative Conservation Partnership
Initiative, Great Lakes Basin Program are consolidated into:
Regional Conservation Partnership
Program (RCPP)
Wildlife Habitat Incentive Program merged into:
Environmental Quality Incentives
Program (5% dedicated wildlife)
Grassland Reserve Program (rental) moved to:
Conservation Reserve Program
(grassland up to 2 million acres)

26.  ‘Working lands’
programs are dominant.

27.  Farm Bills set mandatory
spending levels; appropriators
nonetheless do otherwise.
 Conservation CHIMPS cut
$1.6 billion since 2014 Farm Bill.

28. Conservation Compliance
Highly Erodible Land (HEL) Compliance, Sodbuster, Wetland Conservation (Swampbuster)
 Public provides financial support via USDA payments.
 Recipients protect soil and wetlands for the public.
 Penalties are reduction or loss of farm program
payments for draining existing wetlands or not
maintaining soil protections.
Ducks Unlimited photo
NRCS photoNRCS photo

29. 1. Federal Farm Policy in Context
2. Production Policy
3. Conservation Policy
4. Risk Management Policy
Context and
Policies

30.  Federal Crop Insurance is subsidized for producers and insurance
companies.
 National average is 63% of premium is paid by subsidy, often even
higher.
 Crop Insurance exempted from compliance in 1996 Farm Bill.
Reinstated in 2014.

31.  Participation in Crop Insurance is
high across major commodities.
Revenue policies have been growing
rapidly.

32.  Fundamental crop insurance formula:
((Yield * Coverage) * price) * acres = Insured Revenue
Yield – Actual Production History (APH)
minimum 4 yrs, maximum 10 yrs
Coverage – percentage of yield/APH insured
like a deductible, select from sequence 50% - 85%
Price – generally, higher of spring/harvest price
average futures prices Feb or Oct
Acres – acres planted to insured crop
optional “units,” e.g. all acres of one crop in county
((185 * 80%) * $4.00) * 500 = $314,500 insured revenue
(185 * $3.90) * 500 = $360,750 actual revenue
$0 indemnity

34.  Extended low-price cycle is
challenge to revenue insurance.
 Climate change is challenge to
APH (provisions enacted to
minimize ‘bad’ years).

35.  Crop Insurance is the central Farm Bill policy for farmers.
 Conservation in Farm Bill policy is an established, on-going component…and investment.
 Farm profitability: via trade, support-payments, insurance, ecosystem services….
 What does U.S. agriculture need? 1) Resilient Systems, 2) Consumers/Buyers.
Context and
Policies

36. bjredlin@gmail.com
Brad Jordahl Redlin
bjredlin@gmail.com
651.270.0564
www.sustainableagriculture.netwww.ers.usda.gov/ www.fsa.usda.gov/FSA/
Context and
Policies