STILLWATER, Okla. - After more than three years of deliberations on the next farm bill, the House and Senate Agriculture Committees seem to be close to reaching an agreement on a new farm bill. While many were hoping that this would happen in 2013, it looks like we will make it through another year without a new farm bill. However, discussions from both sides have indicated that it is likely that the farm bill will be completed in January 2014.
While the road to the next farm bill has been rather long and quite rough at times, the House and Senate Agriculture Committees have continued to focus on providing a strong safety net to producers with an emphasis on risk management and crop insurance. Overall, total spending under the new bill will be reduced with cuts to commodity programs, conservation programs and nutrition programs.
Now that a new farm bill seems to be on the horizon, producers will likely be somewhat relieved about the possibility of a bit less uncertainty for the 2013/2014 crop year. However, producers need to keep in mind that changes will be coming with the new farm bill. New commodity programs will be added and other programs, such as the Direct and Counter-Cyclical Payment (DCP) program, will likely be eliminated.
Once the new farm bill is passed and new programs are enacted, producers will need to understand the impact on their operations. Producers will probably have a choice between new commodity and crop insurance programs but the decision will be more difficult than it was for the 2008 farm bill. In the previous bill, producers had a choice between DCP and the Average Crop Revenue Election (ACRE) program but most chose to stay in the DCP program. While the new commodity programs will be similar to those in the 2008 farm bill, several key changes are included and producers will need to carefully evaluate the new options.
The new farm bill will likely include a new revenue protection program, a price protection program and two new supplemental crop insurance programs: Supplemental Coverage Option (SCO) for all eligible commodity crops and Stacked Income Protection Plan (STAX) for upland cotton. Similar to the 2008 farm bill, commodity producers will likely be given a choice to enroll in the revenue protection program or the price protection program for each covered commodity on their operation. In addition, producers may have the option to purchase SCO or STAX along with their individual insurance policy.
SCO and STAX are supplemental crop insurance products and would be purchased from a crop insurance agent. Producers would pay a premium and receive an indemnity payment for eligible losses. The products are designed to complement a producers' individual insurance policy which is a new concept as producers have not previously been allowed to stack insurance policies for the same crop. The idea is that STAX or SCO would cover shallow losses while the producers' individual insurance policy would cover deeper losses. SCO and STAX will likely be subsidized at a higher rate than individual buy-up coverage so producers may want to lower the coverage level on their individual policy and purchase a higher level of supplemental coverage.
Another potential twist in the new farm bill is the interaction between Title I commodity programs and crop insurance. Enrollment in a particular commodity program may determine available coverage levels in the supplemental crop insurance program. In addition, supplemental crop insurance coverage will be limited by the coverage level of the individual insurance policy. This could mean that commodity program choice and insurance coverage levels will be even more integrated and producers will need to understand the types of risk covered by each program to make informed decisions.
Educational programs and decision tools will be available to assist producers with these decisions. Producers will need to thoroughly evaluate their options before enrolling in a commodity program with the Farm Service Agency (FSA) and before purchasing crop insurance from an agent.
Jody Campiche is a public policy specialist at Oklahoma State University.