The 2018 Farm Bill: Overview & Outlook Jonathan Coppess & Nick Paulson www.farmdocdaily.illinois.edu www.farmdoc.illinois.edu
2018 FARM BILL. CBO BASELINE $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Outlays, CBO April 2018 Baseline 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Commodities Conservation Crop Insurance Nutrition CBO projected spending, mandatory programs: 1. Farm Programs (Title I); 2. Conservation (Title II) 3. Nutrition and SNAP (Title IV) 4. Crop Insurance (Title XI). Source: Congressional Budget Office
REVIEW: AGRICULTURAL ACT OF 2014 $8,000 Difference In Spending (2014 Baseline Estimate-Revised 2018) $6,000 $4,000 Millions in Outlays $2,000 $0 -$2,000 -$4,000 -$6,000 -$8,000 -$10,000 -$12,000 Year 1 Year 2 Year 3 Year 4 Year 5 Commodity Conservation Nutrition Crop Insurance Source: Congressional Budget Office
BACKGROUND: SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM $80,000.00 Historic & Estimated SNAP Spending & Participation (USDA and CBO) 60,000 Largest program by spending and people. Millions of Dollars $70,000.00 $60,000.00 $50,000.00 $40,000.00 $30,000.00 $20,000.00 $10,000.00 50,000 40,000 30,000 20,000 10,000 Thousands of People Low-income assistance; countercyclical. House partisan dispute; dropped in conference; no changes. $0.00 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019p 2021p 2023p 2025p 2027p 0 Participation Spending
Conservation Program: Spending & 2018 Baseline $7,000 Conservation Program Outlays, Revised (CBO) $6,000 Millions in Outlays $5,000 $4,000 $3,000 $2,000 $1,000 $0 2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 CRP CSP EQIP ACEP RCPP
REVIEW: CONSERVATION PROGRAMS Millions $3,000 $2,500 $2,000 $1,500 $1,000 Total Conservation Spending by Program, 2009-2017; top 20 states (USDA) CRP is dominant source of conservation funds; IL benefits more from CSP ($212m) than EQIP ($151m). $500 $0 EQIP CSP Easement CRP RCPP IL receives on average 9.8% of EQIP funds and 13.7% of CSP funds nationally.
2018 FARM BILL: CONSERVATION Expanded CRP: 27m acres; 30-year contracts; limits on rental payments. Blended CSP and EQIP with fixed funding levels; increased EQIP. Acreage-based CSP eliminated, existing contracts continue; potential for 1-year extension for 2019.
2018 FARM BILL: CROP INSURANCE Millions in Outlays $9,000 $8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 Crop Insurance Baseline (CBO) 2019p 2020p 2021p 2022p 2023p 2024p 2025p 2026p 2027p 2028p Prem. Sub. Delivery Exp. Underwriting Crop Insurance is largely unchanged; New provisions for cover crops: defines termination (NRCS or local expert); Cover crops considered a good farming practice; termination should not impact insurability.
REVIEW: AGRICULTURAL ACT OF 2014; TITLE I SPENDING $9,000 Title I Total Payments (CBO, through April 2018) $8,000 $7,000 Millions in Outlays $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2014A 2015A 2016A 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Corn Soybeans Wheat Upland Cotton* Rice Peanuts Other Commodities Dairy
ARC-CO CORN EXAMPLE Input State Illinois County Champaign Crop Corn Type All PLC Payment Yield 130 ARC-CO PLC Payment Estimator Use Defaults Help Print What-If Change the county yields and Market Year Average (MYA) prices for 2018 to see payments under ARC-County and PLC. Payments are stated per base acre, as such they are multiplied by.85. If there are 100 base acres per farm, multiple the result below by 100. Input Agricultural Risk Coverage (ARC) - County Price Loss Coverage (PLC) County MYA Benchmark ARC ARC Year Yield Price 1 Yield 2 Price 3 Guarantee 4 Payment 5 Payment 6 2009 190 3.55 2010 169 5.18 2011 164 6.22 2012 123 6.89 2013 168 4.46 $/acre $/acre 2014 216 3.70 167 5.29 760 0.00 0 2015 189 3.61 167 5.29 760 61.36 9 2016 210 3.36 174 4.79 717 8.86 35 2017 207 3.36 189 3.95 642 0.00 35 2018 187 3.60 202 3.70 643 0.00 10 National loan rate equals: 1.95 Five-Year Average 14.04 18 Reference price equals: 3.70
ARC-CO SOYBEAN EXAMPLE Input State Illinois County Champaign Crop Soybeans Type All PLC Payment Yield 42 ARC-CO PLC Payment Estimator Use Defaults Help Print What-If Change the county yields and Market Year Average (MYA) prices for 2018 to see payments under ARC-County and PLC. Payments are stated per base acre, as such they are multiplied by.85. If there are 100 base acres per farm, multiple the result below by 100. Input County MYA Benchmark ARC ARC Year Yield Price 1 Yield 2 Price 3 Guarantee 4 Payment 5 Payment 6 2009 56 9.59 2010 56 11.30 2011 51 12.50 2012 47 14.40 2013 53 13.00 $/acre $/acre 2014 64 10.10 53 12.27 559 0.00 0 2015 64 8.95 53 12.27 559 0.00 0 2016 67 9.47 56 11.87 572 0.00 0 2017 64 9.33 60 10.86 560 0.00 0 2018 65 8.60 64 9.63 530 0.00 0 National loan rate equals: 5.00 Agricultural Risk Coverage (ARC) - County Five-Year Average 0.00 0 Reference price equals: 8.40 Price Loss Coverage (PLC)
ADDITIONAL CHALLENGES FOR COMMODITIES Trump Administration & tariff conflict; Especially with China and for soybeans; Market Facilitation Program (MFP) payments.
UPDATED SITUATION FOR TITLE I Continued lower prices = increased spending in ARC/PLC Addition of Seed Cotton + MFP + Cotton Ginning MFP: 2 Rounds ($0.01-corn; $1.65-soybeans); 2 nd just announced ($4.8b)
AGRICULTURAL IMPROVEMENT ACT OF 2018 Election for 2019 & 2020 crops between ARC and PLC; Revisit election for 2021 through 2023 crops; 2014 90% 2008-2012 (175 avg.) 157.5 update ARC-CO: administrative county; to use 80% t-yield plug and crop insurance trend adjusted yields; 2018 0.81 2013-2017 (192.5 avg.) 155.9; no update PLC: Optional yield update.
AGRICULTURAL IMPROVEMENT ACT OF 2018 PLC: reference price escalator; Effective reference = 85% of 5-year Olympic moving average; up to 115% of statutory reference. MAL/LDP: increased loan rates.
2018 FARM BILL: FARM PROGRAMS CORN $/bu $4.95 $4.45 $3.95 $3.45 $2.95 $2.45 $1.95 Corn Price Example Ref. Price MYA 85% 5YOMA USDA Chief Economist forecast; MYA expected above Reference Price ($3.70) thru 2026; Effective reference price escalator (85% of 5 year Olympic moving average) not effective. Sources: USDA NASS (actual) and OCE (projections)
2018 FARM BILL: FARM PROGRAMS SOYBEANS $/bu $11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 Soybeans Price Example Ref. Price MYA 85% 5YOMA USDA Chief Economist forecast; MYA expected above Reference Price ($8.40) all years; Effective reference price escalator (85% of 5 year Olympic moving average) not effective. Sources: USDA NASS (actual) and OCE (projections)
2018 FARM BILL: FARM PROGRAMS WHEAT $/bu $6.44 $5.94 $5.44 $4.94 $4.44 Wheat Price Example USDA Chief Economist forecast; MYA expected to remain below Reference Price ($5.50); $3.94 $3.44 $2.94 Ref. Price MYA 85% 5YOMA Effective reference price escalator+ (85% of 5 year Olympic moving average) not effective. Sources: USDA NASS (actual) and OCE (projections)
Gardner Agriculture Policy Program and National Center for Supercomputing Applications. 2018 FARM BILL: ARC/PLC SIMULATION FARMDOC TOOL
THANK YOU Jonathan Coppess (jwcoppes@illinois.edu) Nick Paulson (npaulson@illinois.edu) www.farmdocdaily.illinois.edu www.farmdoc.illinois.edu