March 10, 2014

What happens next, and what do farmers need from agribusinesses?

Last month, lawmakers passed the much-anticipated—though a couple of years past due—2014 Farm Bill. Now, farmers everywhere are scrambling to make sense of the bill’s provisions and move their operations forward with new and different programs.

What’s highest on your Farm Bill priority list? Are you pleased with the final legislation? How enthusiastically you respond to those questions probably depends on what segment you’re in.

Entira invited a few friends to weigh in on the provisions of the bill and most importantly, what farmers and livestock producers can expect next. We gathered perspectives from several food and ag sectors on the provisions that seem to be getting the most attention: changes in payments and insurance, mandatory country of origin labeling, and dairy programs. Here’s what they had to say:

Direct payments out, crop insurance in

Good agronomic management is more important than ever

Dr. Harold F. Reetz, Jr., CPAg, CCA, Reetz Agronomics, LLC
“Farmers always plan their crops around payments, and now they’ll plan without it. The challenge is to not let these programs encourage farmers to use insurance as a back-up instead of just following good practices. In other words, ‘should I put down enough nitrogen for a good crop, or just use enough for a marginal crop and get insurance?’

“My viewpoint is that it will be successful if farmers don’t back off on good management practices. They should use insurance as protection, not a crutch. Doing a good job agronomically is what will keep them in business for the long haul. Farmers need to continue to manage their crops well, and not manage them for insurance benefits. In reality, it’s best to plan for a good year—you’ll get much more out of it when you have a good year than if you planned for worse. Insurance takes some of the risk out of it.

“It seems to me we’re trying to make one program work for the whole country, and that could present problems. What works in the Midwest may not necessarily be what works in the South, and vice versa. The changes are spread out over 10 years, so that gives farmers time to ease in to it.

“By getting the Farm Bill passed, farmers can go forward with planning—and at least for the next five years, they know what the programs are and can plan crops, management, and so forth. It will take a few months to iron out, and there will probably be a lot of confusion in this first year while organizations work to implement the new programs and each of the agencies divide up their respective pieces. Anything businesses and associations can do to help farmers make smart decisions in light of these changes will be a huge benefit.”

Grower education is the priority now

Tim Lust, Chief Executive Officer, National Sorghum Producers

“From our standpoint there are a lot of positives in the bill. Direct payments were consistent, so the programs moving forward will definitely be a change, adding more complication to decisions. Our job as an association will be to help educate growers as they think about their options. Their biggest hurdle will be deciding in a relatively short amount of time what they plan to do—which options to go with and stay with for the next five years.

“With these new insurance programs, there is no guarantee of payment; it only gets allocated in the case of significant losses or price tumbles. From a cash flow perspective, this will be very different and will be felt right away. Also, there will be a lag time in payments, basically a year behind, so that’s something growers will need to prepare for as well.

“Growers are starting to ask a lot of questions, and there will be plenty of analysis to do, a lot of choices to pick from. The right answer will be different for different farms. We are very eager to start the education process before planting starts. For a long time, we’ve been hearing that direct payments are going away. It makes financing a big challenge for growers when you don’t know what programs will be.”

Commodity price protection puts sorghum on a more level playing field

“The new reference price for sorghum at $3.95 compares favorably to other commodities, so we’re pleased with that. We hope we don’t get to prices lower than that, but it’s good that there’s a fix if it does happen. The reference point was $2.63 before, so it’s a significant increase and the adjustment makes sorghum more on a level playing field with other commodities. And we’re happy it was set at a better level than what they initially talked about.”

Mandatory origin labeling will continue; makes sourcing meat across the border difficult

Jeremy Russell, Director of Communications and Government Relations, North American Meat Association

“The current version of the mandatory Country-of-Origin Labeling (mCOOL) program requires extremely specific labeling and eliminates comingling. We were hopeful for a legislative fix in the Farm Bill, but one was not forthcoming.

“Retailers say the complex rules force them to reject meat sourced from Canada or Mexico and stock only meat with the designation ‘Born, Raised, and Slaughtered in the United States.’ This is causing great harm to those companies which depend upon livestock that may have been born in another country. Some of our beef-packer members in Texas, for example, rely on Mexican-born cattle, and they are incurring dramatic segregation costs that place their businesses at serious risk. Companies along the U.S.-Canadian border are facing the same issue on both cattle and hogs.

“The government has declared that mCOOL ‘is neither a food safety or traceability program but rather a consumer information program.’ This is why in our legal complaint we argue that mCOOL violates the Constitution by compelling speech that does not directly advance a government interest.

“We're hopeful that when the court rules it will be in our favor.”

Margin insurance program is good news for dairy farmers

Chris Galen, Senior VP of Communications at NMPF

“The new margin protection program is a vast improvement for dairy farmers compared to the safety net that existed previously. The new program will allow farmers to use a new form of economic insurance to protect a much larger portion of the nation’s milk production against either low milk prices, high feed costs, or the combination. That said, we believed that the program would be more cost-effective if it also had contained a stronger mechanism to disincentivize milk production during times when margins are poor, and when more milk production would exacerbate those low margin conditions. Unfortunately, Congress did not include such a provision. This means the resulting program will cost taxpayers more than the program NMPF initially had supported.

“It will be a big job in the remainder of 2014 to educate farmers about this new program. There will be a learning curve, because those enrolling in the margin insurance program will have to not just sign up for it; they also will have to decide how much of their production to insure, and at what level of margin protection.  We will use an existing website, www.futurefordairy.com, to post information about the new program as it becomes available.

“A significant part of this effort is in working with the USDA to ensure that the program’s rules and provisions are implemented in ways that farmers can understand. That process of collaborating with the USDA is already underway.

“The new margin protection program is a better one for farmers. It replaces three programs that were not effective in the 21st century. It is not the best possible outcome – we sought a somewhat different goal.  But the proper way to view it is not looking at what might have been, but rather in looking at how far we’ve come. And by that measurement, the new margin protection program will be a big help to farmers.”

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Everyone agrees grower education is on the front burner in the immediate future to help farmers navigate the new programs. If you’d like to visit with us about ways to support your growers, please contact us.