The Agriculture Act of 2014 (2014 Farm Bill) is divided into 12 titles covering commodities, conservation, trade, nutrition, credit, rural development, research, forestry, energy, horticulture, crop insurance, and miscellaneous. In this column, we take a look at some of the elements of Title I – Commodities.
Beginning with the 1996 Farm Bill, crop farmers have been provided with—in one form or other—direct payments based on historical yields and acreage. The total amount of the Direct Payments has been in the vicinity of $5 billion a year (for background on these payments see http://agpolicy.org/weekcol/703.html).
These payments were decoupled from production and paid whether prices were high or low. The rationale was that decoupled payments would not distort production decisions and would be more in line with the rules of the World Trade Organization. In the early years, when prices were low, they provided farmers with some additional operating capital, though prices were below the cost of production.
With the growth of the corn-for-ethanol industry providing a source of expanding demand for corn, prices more than tripled. With prices well above any measure of the cost of production and farmers making record profits, the $5 billion in direct payments became a public embarrassment and politically unsustainable. The first portion of the 2014 Farm bill repeals direct payments effective with the 2014 crop year, but allows the continuation of the payments for the 2013 crop year.
For upland cotton, the bill provides transition payments to producers of upland cotton in light of the repeal of direct payments, the ineligibility of cotton producers for PLC or ARC, and the delayed implementation of STAX (a program designed for cotton). The transition payments will be made with respect to the 2014 crop year to upland cotton producers with cotton base in the 2013 crop year, and with respect to the 2015 crop year to upland cotton producers with base in the 2013 crop year and who are located in counties where STAX is not available for that crop year.
With the potential for commodity prices to fall well below the highs of recent years, the 2014 Farm Bill requires farmers to make an irrevocable choice between two programs for counter-cyclical price protection: Agricultural Risk Coverage (ARC), and Price Loss Coverage (PLC). The choice is in effect for the 2014 through 2018 crop years. If a farmer makes no choice, the farmer is automatically enrolled in PLC. The election can be made crop by crop, except when a farmer chooses individual ARC coverage over county ARC coverage. In that case all covered crops are enrolled in ARC.