Briefing Report: A Summary of the Federal Agricultural Act of 2014

"Not Your Father's Farm Bill"
Wednesday, February 19, 2014

On February 7, 2014, President Obama signed the Agricultural Act of 2014 (The Farm Bill) into law after two years of legislative wrangling and negotiation.  It was heralded as a monument to bipartisanship and reform, even though it reduces expenditures by only $23 billion in a $956 billion program over the next decade.

Nevertheless, the bill includes significant changes in agricultural programs that led its lead author, Senator Deborah Stabenow (D- Michigan) to label it:  “Not your Father’s Farm Bill.”

The following is a summary of the major reforms contained in the 2014 Farm Bill, with some emphasis on impacts on the California agriculture community.

Direct Payments Reconfigured Into A Crop Insurance Program

The new Farm Bill repeals the old system of direct payments to producers regardless of how much land they actually plant or the price for which they sell their crops.  This policy change saves taxpayers over $19 billion over the next 10 years.  The bill also repeals the 70 year-old system of setting minimum prices for milk, cheese and butter. 

It replaces direct payments with subsidized crop insurance programs where farmers buy into an insurance policy that covers lost revenue due to drops in prices or increases in feed costs.  It also provides a new, permanent, disaster assistance program for producers affected by natural disasters such as drought, freezes, and pest infestations.  Overall, this $90 billion program is expected to cost $7 billion more than the current direct payment system, for a net savings of $12 billion for this part of the Farm Bill.

Because of the severe drought situation in California, this disaster assistance program is expected to provide some level of relief for dairy farmers forced to reduce their herds in the future because of lack of water.  Until federal agriculture officials define the parameters of the new program, it is unknown what level of assistance can be expected.

Eliminating The King Amendment – Protecting California Egg Producers

One of the most contentious issues during the final negotiations on this Farm Bill was the elimination of the King Amendment, which threatened the livelihood of California egg producers, and threatened the ability for any state to enact health, safety, or disease protections for agricultural products within their jurisdiction.

The King Amendment was authored by Rep. Steven King (R-Iowa) and was directly targeted at California egg producers subject to the new law passed as Proposition 2 in 2010, which required egg-laying hens to be given enough space to turn around and spread their wings while producing eggs.  Subsequently, the Legislature passed a law requiring all eggs imported into the state to be subject to the same standard, thus excluding eggs produced in Midwestern states from sale in California.

The King amendment prohibited states from setting their own standards for food and agricultural products, thus threatening other state-specific standards that protect California crops from disease and pests, and food safety laws that protect public health.

The final Farm Bill excluded the King Amendment, and subsequent to its passage, the Attorney General of Missouri filed a lawsuit against the State of California in Federal Court in Fresno, challenging Proposition 2 and the subsequent California law as an unconstitutional infringement on interstate commerce.

Nutrition Programs (Food Stamps)

By far, the largest amount of expenditures contained in the Farm Bill is for the Supplemental Nutrition Assistance Program (SNAP), commonly known as Food Stamps.  $756 billion of the $956 billion total over the 10 year period is expected to be spent on this program.

House Republicans called for $40 billion in savings in this program, but the final bill cuts a total of only about $8 billion.  The only significant reform contained in the final bill is an adjustment to the “LIHEAP loophole.”  The Farm Bill contains a requirement that state officials must spend at least $20 per recipient on home heating assistance in order to qualify for food stamps.  The previous requirement for only one dollar ($1) per recipient was being widely used by states to qualify more people for food stamp assistance.  The theory for this reform is by making the “loophole” more expensive, fewer states will utilize it.

California state officials are pleased with the provisions in the bill that increase funding for anti-fraud programs.  The bill expands anti-trafficking efforts, with an emphasis on the use of data mining and other information technologies to identify possible trafficking.  It would provide one-time funding of $15 million in fiscal year 2014 and authorize an additional $5 million to be appropriated for fiscal years 2014 through 2018.  The bill authorizes pilot projects to expand collaborative state and federal efforts to prevent and detect retailer fraud.  States are given the authority to monitor and prosecute trafficking and fraud by SNAP recipients.  The bill also allows data exchanges among programs.  This ensures that SNAP can share data with other key federal and state programs to identify patterns of fraudulent food stamp usage.

Organic Agriculture And Farmers Markets

The Farm Bill more than doubles annual funding for the National Organic Certification Cost-Share Program to offset the costs of annual certification for organic farmers and handlers.   It also allows Farmers Markets to participate more fully in the SNAP program by providing exemptions from requirements to obtain equipment that facilitate the use of the SNAP EBT cards, and triples funding to $30 million per year for the Farmers Market and Local Food Promotion Program. It expands the program to allow grants to both direct-to-consumer projects and projects supporting local and regional food enterprises through processing, aggregation, distribution, storage, and marketing.

Community Supported Agriculture (CSA’s), where consumers receive food directly from local growers are, for the first time, permitted to participate in the SNAP program.  Also for the first time, organic farmers, distributors and marketers will have access to the same agriculture research and promotion programs that always have been available to conventional farmers.

Miscelaneous Provisions

Under this new Farm Bill, industrial Hemp— marijuana’s non-intoxicating cousin that is used to make everything from clothing and soap to cooking oil — can now be cultivated by colleges and universities for academic or agricultural research purposes in the 10 states where industrial hemp farming is already legal under state law.  California’s hemp statute, Senator Mark Leno’s SB 566, was signed into law last year.

The bill includes $600 million in mandatory research dollars to support specialty crops, organic agriculture, and beginning farmers.  These programs have all been stranded without funding since 2012.  The specialty crop research program is especially vital to California’s agricultural research programs at state universities, including the leading agricultural research institution at UC Davis.  The bill also includes $125 million in mandatory funding for research on Huanglongbing (citrus greening disease) that is the Number 1 threat to California citrus crops.  It also contains another $125 million in discretionary funding for the disease.

The bill creates a safety net for California dairy farmers called the Margin Protection Program, which will provide targeted support when feed prices are high or milk prices are low, as well as the ability to petition USDA to create a federal milk marketing order.  This petition authority is especially important if dairy farmers cannot receive payments from the state milk pooling program that adequately cover their costs.

And finally, the bill includes approximately $400 million in Payments In Lieu of Taxes (PILT), a program that reimburses rural counties for the loss of property tax-dollars from land owned by the federal government.  Without the PILT extension, rural counties would have lost funding for schools, roads, search and rescue crews and other important programs.

For more information on this report or other Agriculture issues, contact Doug Yoakam, Senate Republican Office of Policy at 916/651-1501.