University of Minnesota, Colloquium in Sustainable Agriculture: presentation on federal Farm Bill policy. Commodity, conservation, and risk management programs--including CFAP and MFP--in context of current conditions affecting agriculture.

1. Brad Jordahl Redlin
October 1, 2020
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 2019 is estimated at 2.02 million -- down 31,940
farms from 2016 -- with size of farms steadily increasing.

5.  Crop prices are mired in a long, low cycle...

6.  …and in other sectors….
 …while in Brazil….

7.  But farm prices don’t have a pronounced effect on food prices.

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

9.  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

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

11. ►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.

12.  Shadow Casters.

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

14. 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)

15. 1. Commodity program payments made
on “base acres.”
 historical acreage & yields registered for
each farm (may plant different crop).
Soybeans
35 acres
45 bu.
Corn
50 acres
175 bu.
Wheat
15 acres
50 bu.
XYZ Farm
100 acres
2. Program payments limits.
 no limits on MAL / LDP.
 $900,000 adjusted gross
income eligibility limit.
3. Eligibility: Actively Engaged
 family including grandparents,
cousins, nieces, nephews…
 provide labor or management

16.  Shadow Casters.

17.  Direct payments not in the Farm Bill.
Market Facilitation
Payments (MFP)
2018/19 = $23 billion
Coronavirus Food
Assistance Program
(CFAP1&2) = $23 billion
Entire 5-year Title 1
Farm Bill = $31 billion
Coppess, J., J. Janzen, G. Schnitkey, N. Paulson, K. Swanson and C. Zulauf. "Coronavirus Food Assistance Program, Part 2." farmdoc
daily (10):169, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, September 21, 2020.

18.  Direct payments not in the Farm Bill.
1933 AAA established the CCC
- Commodity Credit Corporation
CCC $ received through Farm
Bill, annual approps, other; $30B
borrowing authority.
The CCC funds farm
payments and supports incl.
commodity, conservation
programs.
Payments outside of and in
addition to 2018 Farm Bill
budget (e.g. CFAP1&2) risked
exceeding funding authority of
CCC in recent weeks.

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

20.  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)

21.  ‘Working lands’
programs are dominant.
 Increased investment in
‘production’ conservation
can build resiliency.

22. 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

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

24.  Federal Crop Insurance is subsidized for producers and insurance
companies.
 National average is 63% of premium is paid by subsidy, often even
higher ($6.3 billion dollars ea. of last three years).
 Crop Insurance exempted from compliance in 1996 Farm Bill.
Reinstated in 2014.
 Revenue policies dominate.

25.  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%) * $3.88) * 500 = $287,120 insured revenue
(185 * $3.35) * 500 = $309,875 actual revenue
$0 indemnity

26. Approved Projected Price: $5.65
Approved Harvest Price: $4.39
 A crop insurance
assertion had been, with
accessible markets to sell
into, supply and demand
would react rationally to
abundant or restricted
production.

27.  Crop Insurance became the central Farm Bill policy for farmers during the ‘08 and ‘14 Farm Bills.
 Stagnant low-price cycle undermines revenue insurance benefit.
 Increasingly volatile weather events, while triggering indemnities, reduce APH & increase risk (PP).
 Farm profitability: One third of forecasted U.S farm income from federal payments in 2020.
 Conservation, in Farm Bill policy and on the ground, builds resiliency in policy and production.
Context and
Policies

28. Brad Jordahl Redlin
bjredlin@gmail.com
651.270.0564
Context and
Policies
Thank you…questions?

29. Context and
Policies
Appendix slides:
Sample payment mechanisms.

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

31.  ARC
$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

32. 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