PDF _ RL34594 - Farm Commodity Programs in the 2008 Farm Bill
30-Sep-2008; Jim Monke; 32 p.

Update: Previous Editions:
September 20, 2008

Abstract: Farm commodity price and income support provisions in the Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill) include three primary types of payments:

  • Direct payments unrelated to production or prices
  • Counter-cyclical payments for a commodity that are triggered when
  • prices are below statutorily-determined target prices, or
  • revenue falls below a historical guaranteed level
  • Marketing assistance loans that offer interim financing and, if prices fall below loan prices set in statute, additional income support.
The farm commodity programs are the most visible part of the farm bill. In recent years, five crops (corn, wheat, cotton, rice, and soybeans) account for over 90% of government commodity payments to farmers.

The 2008 farm bill generally continues the farm commodity price and income support framework of the 2002 farm bill, with modifications. It continues the direct payment, counter-cyclical payment, and marketing loan programs for the 2008-2012 crop years, but adjusts target prices and loan rates for some commodities. The law also creates a pilot revenue-based counter-cyclical program (“ACRE”) beginning with the 2009 crop year. The new law also has a pilot program for planting flexibility, new restrictions on base acres developed for residential use, and elimination of benefits to farms with fewer than 10 acres of program crops. For the 2008 crop year, the programs are essentially unchanged from the 2002 farm bill.

Payment limits both determine eligibility and set a maximum amount of commodity payments per person. The 2008 farm bill revises payment limitations for the commodity programs by tightening some limits and relaxing others. Limits are tightened by (1) reducing the adjusted gross income (AGI) limit to $500,000 of nonfarm AGI and $750,000 of farm AGI, (2) eliminating the “three-entity rule,” which allowed individuals to double their payments by having multiple ownership interests (doubling by having a spouse continues), and (3) requiring “direct attribution” of payments to a living person. Limits are relaxed by eliminating any limit on the marketing loan program. The new rules do not take effect until the 2009 crop year.

Implementation has been problematic in two ways. First, the Administration did not allow farmers to combine land before enforcing the 10-acre restriction, an allowance Congress mentioned only in report language. Consequently, Congress passed H.R. 6849 to suspend enforcement of the 10-acre provision for one year and offset the cost with reductions in computer technology outlays and changes to the new permanent disaster program. The bill awaits the President’s signature.

The second implementation issue is that USDA is considering using prices from crop years 2006 and 2007 for setting the 2009 ACRE revenue guarantee, rather than the immediate past two years of 2007 and 2008, as Congress intended. The regulations, however, have not yet been released.

 [read report]

Topics: Agriculture, Economics & Trade

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