October 01, 2013

The 2013 Farm Bill: An Opportunity for Change

William S. Eubanks II

After much deliberation, creative differences left Congress mired in a political struggle at the end of 2012 without reauthorizing the farm bill—legislation that governs all things farming, from price supports for commodity crops, incentives for conservation programs and biofuel production, to funding for food-related research and innovation. See Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, 122 Stat. 923 (2008). Despite the partisan conflicts, as a new Congress resumes discussion about the farm bill, there are promising opportunities for targeted reforms that, if adopted and strengthened, can ensure a more ecologically sustainable, nutritious, and transparent domestic farming and food system. This article explores five key areas of reform worthy of congressional consideration..

Commodity and Crop Insurance Payment Reforms

First, Congress must limit commodity and crop insurance payments, especially given the government’s tenuous financial situation. The 2008 farm bill limited direct payments to a maximum of $40,000 annually per farm. Id. § 1603. In 2011, as part of his budget reduction plan, President Obama proposed eliminating all direct payments based on historical crop acreage (a metric that often includes acreage no longer in agricultural production). Particularly concerning is that direct payments, and the capital consolidation they promote, have had the effect of discouraging new farmers from obtaining capital necessary to join the farming workforce.

Congressional members have also taken aim at direct payments. In 2012, a bipartisan group of representatives encouraged elimination of direct payments, and a bipartisan Senate coalition urged a hard per-farm cap on direct payments of $20,000, a 50 percent reduction from the 2008 farm bill. Myriad environmental benefits would result from a system with less direct payments (or, ideally, none) because such incentives severely restrict planting flexibility (as described below) and thus encourage ecologically devastating monocultures. But any attempt to eliminate or further cap direct payments will inevitably be met with fierce resistance from those who benefit from the status quo.

In addition to restraining direct payments, hard caps are also necessary to limit other forms of subsidies that deplete public funds and foster environmental degradation, such as (1) counter-cyclical payments to eligible farmers in years where the actual price paid for a commodity is less than a target set by the U.S. Department of Agriculture (USDA) and (2) nonrecourse commodity marketing loans and loan deficiency payments that provide capital to farmers when market prices are at their nadir (harvest time). The latter allow the producer to delay bringing a crop to market until farmers can garner higher prices later in the season. As with direct payments, the farm bill authorizes sizeable disbursements for both counter-cyclical payments (capped at $65,000 annually) and marketing loans/loan deficiency payments (no caps). Congress can address this in two ways—on the front end by capping them on a per-farm basis or on the back end by lowering eligibility requirements below the current limit of an adjusted gross income (AGI) of $1.25 million. Congressional blocs advocated for both approaches as recently as 2012; for example, one bill called for a hard per-farm cap of $30,000 for counter-cyclical payments (down 54 percent from the 2008 farm bill) and $75,000 for loan deficiency payments and marketing loans (down from no limit at all), while another proposal proposed limiting commodity payments to farms with an AGI of $250,000 or less (down 80 percent from the 2008 farm bill).

Lower caps and stricter eligibility requirements are vital so that subsidy payments and crop insurance payments to farmers, if any at all, return to their original purpose of buttressing small family farmers in need of supplemental income or disaster relief.

Planting Flexibility Reforms

Second, Congress must address what, if any, conditions should be placed on planting flexibility—or the ability to diversify one’s crops for environmental or other purposes—as part of the farm bill’s commodity and crop insurance programs. In the 2008 farm bill, Congress restricted all payments under the commodity title of the farm bill to farms that comply with planting flexibility rules. See Food, Conservation, & Energy Act of 2008 § 1106(a)(1). In practice, that means that farmers enrolled in any commodity program may not plant fruits, vegetables, or wild rice on any portion of their base acres for which they are eligible for commodity or crop insurance payments. Therefore, farmers have all of their base acres available for commodity cultivation that in turn translates to a payment to the farmer each year. If a farmer opts to grow fruits or vegetables on his base acres, the farmer is ineligible for commodity payments that year.

Congress first adopted the idea of planting flexibility in the 1990 farm bill as a boon to farmers seeking to diversify production, including small-scale producers who had previously lost government payments when they added forage and other soil-building crops to their rotation. Thus, the creation of planting flexibility regulations eliminated a substantial obstacle to the adoption of more sustainable, diversified farm systems.

Recognizing, however, that a sudden increase in fruit and vegetable production on commodity-supported farmlands would harm their interests, the lobby for fruit and vegetable growers sought to ensure that the new planting flexibility would not jeopardize their market share. Thus, before the new planting flexibility rules could be enacted, several restrictive limits were incorporated in the 1990 farm bill to prohibit commodity-eligible farms from growing fruits or vegetables on base acres. See Jim Monke, Cong. Research Serv., RS21615, Farm Commodity Programs: Base Acreage and Planting Flexibility, at CRS-3 (2005). Those restrictions essentially remain in place today, and fruit and vegetable farmers—who are typically excluded from subsidy programs altogether—continue to oppose measures that would allow planting flexibility because it could result in unfair competition from government-subsidized commodity growers cultivating fruits and vegetables on commodity base acres.

Despite those concerns, sustainable agriculture advocates have long urged Congress to lift these growing restrictions because of the significant conservation and health benefits that would result from allowing farmers to diversify crops, including land stewardship efforts and bolstering farm-to-consumer sales. Indeed, some farmers who have leased land formerly enrolled in the commodity program in order to grow organic fruits and vegetables have been subjected to stifling financial penalties.

To close this loophole, there have been renewed calls during the current farm bill cycle to reexamine and greatly expand planting flexibility for farmers enrolled in commodity or crop insurance programs. Research has indicated that this is not just a hollow goal; rather, there is a dire need for more flexible planting requirements. A 2010 study indicated that in order to meet USDA’s daily recommended nutritional guidelines for each American, the United States needs an additional 13 million acres of farmland growing fruits and vegetables. See Am. Farmland Trust, “The United States Needs 13 Million More Acres of Fruits and Vegetables to Meet RDA” (July 7, 2010). Therefore, action is needed to loosen the restrictions on planting flexibility so that all farmers can contribute to more nutritious food systems, both locally and domestically.

Conservation Stewardship Program Reforms

Third, Congress must retain and fortify the Conservation Stewardship Program (CSP), an environmental protection program to pay farmers for on-farm conservation benefits proportionate to their environmental benefits. See U.S. Dept. of Agric., NRCS, Conservation Stewardship Program. Each year, 12.8 million acres are enrolled in and added to existing CSP program acres. Enrolled farmers participate under five-year contracts, and CSP payments are capped at $200,000 over the lifetime of the contract. Program payments are made based on a priority ranking system of the most critical conservation needs, with allotments for such activities as converting cropland to grass-based forage, employing continuous cover cropping, and extending riparian buffers. Despite its aspirations, the program turns away many applicants each year due to funding constraints. It is crucial that Congress continue to support this ecologically protective approach by funding CSP at significantly enhanced levels.

Moreover, critical fixes are needed to achieve CSP’s full potential. A glaring omission at present is that CSP does not have a minimum annual per-contract payment. Therefore, while smaller farms are eligible to apply for CSP enrollment, the CSP payment that very small farms can obtain is limited even when achieving high conservation benefits on a per-acre basis. Thus, for many small farms, the current CSP framework is not worth the time required to prepare and submit the grant application. Congress has already eliminated this barrier for socially disadvantaged, beginning, and limited-resource farmers by ensuring a minimum annual payment of $1,000 for CSP-enrolled farms meeting any of those criteria. See 7 U.S.C. § 2003(e) (2006). Congress should extend the predetermined minimum annual payment to all farmers to ensure that CSP does not inadvertently discriminate against small farms engaged in sustainable practices—farmers who are perfect candidates to maximize the environmental benefits of crop production consistent with the goals of CSP.

Organic Agriculture Reforms

Fourth, there are various organic-centered programs in need of congressional funding and support. For example, the National Organic Certification Cost-Share Program (NOCCSP) partially reimburses farms and ranches for the cost of USDA organic certification, making it more likely that those farms can afford certification. See Nat’l Sustainable Agric. Coalition, Organic Certification Cost Share. The 2008 farm bill funded NOCCSP at $22 million, a substantial increase from the $5 million authorized during the 2002 farm bill. Sustainable farming advocates have called for minimum funding of $30 million in the next farm bill, which would make significant gains in achieving organic production goals.

Another key to providing stability for organic producers is an equitable organic insurance program. In the 2008 farm bill the insurance plans and premiums offered to organic farmers differed little from those available to conventional farmers. These plans fail to account for the unique risks facing organic producers. It is critical to remedy this inequity so that organic producers can compete on the open market with conventional farmers, who are backed by government insurance, and that they have organic insurance that sufficiently protects their crop investments in the event of disaster or crop loss. A policy change on this front would pay organic producers fair market organic prices for their crops when insurance claims are paid out, as opposed to lower prices that reflect the conventional values (i.e., price of nonorganic counterparts) as is the status quo.

Another centerpiece of reform would be setting aside certain mandatory funding in existing competitive programs for organic producers. CSP, discussed above, exemplifies this need. Because CSP rewards farmers undertaking substantial conservation efforts—generally a key tenet of organic production—organic producers are ideal candidates for CSP enrollment. However, despite the clear match between CSP objectives and organic production methods, there is no funding pool solely for organic farmers, meaning that many eligible organic producers are excluded from the program because there are more applications than CSP funds available. This could be cured, to some extent, by authorizing a set-aside for organic farmers, as Congress has done for beginning farmers and socially disadvantaged or resource-limited farmers. This would ensure that organic producers are compensated in some way for the conscious choices they make in production methods to better the planet.

One last crucial piece of the organic puzzle is increasing funding for research. An initiative that has produced invaluable information is the Organic Agriculture Research and Extension Initiative (OREI), which funds research and extension related to organic production and marketing. See Organic Farming Research Foundation, Organic Agriculture for Health and Prosperity: Opportunities to Invest in the Growing Organic Sector through the 2012 Farm Bill (Sept. 2011). OREI is a competitive grant program, and only funds a fraction of eligible proposals each year. The 2008 farm bill authorized approximately $20 million annually. However, with many innovative grant applications turned away during the previous farm bill cycle, more funding is sorely needed for this key research program.

Local and Regional Food System Assistance Reforms

Fifth, there are many laudable programs in their relative infancy that if sustained and funded adequately have the potential to support a drastically different food system that is based, in part, on local and regional production and distribution rather than the industrial model traditionally promoted by the farm bill. For example, Congress allocated funding for the Farmers Market Promotion Program (FMPP) in the 2008 farm bill, authorizing an average of $6 million per year. See Food, Conservation, and Energy Act § 10106. FMPP is a competitive grant program that improves and expands not only farmers markets, but also other farm-to-consumer sales. Because FMPP is essential to ensuring that local and regional food systems can persist against the competition of cheap processed foods, this is a program that critically needs congressional funding. In particular, there is a push in Congress to retool FMPP to also provide grant funding to scale up local and regional food enterprises—an ambitious, yet vital, objective.

Another competitive grant program that bolsters local food systems is the Value-Added Producer Grant program (VAPG), which provides grants to farmers to produce “value-added” products (for example wine, flour, cheese, and jam) or businesses selling directly from farm to institution (for example, to schools, prisons, and hospitals). Nat’l Sustainable Agric. Coal., Value-Added Producer Grants. Congress authorized $40 million annually under the 2008 farm bill, with grants of up to $50,000 per grantee. Id. This program has been instrumental in helping sustainable producers add value to their products and maintain thriving operations without compromising their environmental ethics. Many of these products are sold in local and regional food markets. Accordingly, securing additional funding from Congress for this program is key.

Finally, Congress must support an amendment to the National School Lunch Program (NSLP) to allow participating schools to utilize a certain amount of their allocated entitlement dollars—which are normally used to purchase highly processed commodity-based foods—to purchase locally procured fruits and vegetables and value-added products. While this type of local set-aside does not currently exist in the NSLP, see Healthy, Hunger-Free Kids Act of 2010, Pub. L. No. 111-296, § 208, there is growing pressure on Congress from consumer groups for this type of local food credit program. If adopted, it would enable schools to spend some defined percentage of their entitlement dollars on locally produced foods. If such a program were created, our nation’s school foods would take a significant step toward better nutritional quality.

In conclusion, there are myriad existing programs and innovative ideas for new initiatives that have extraordinary potential to reward farmers for implementing sound ecological practices and cultivating nutritious products for consumers; to fund research on important scientific and economic objectives; to ensure a stable and fair farm economy; and to establish the critical connection between consumers, their farmers, and the lands upon which our daily meals are grown. However, it is up to Congress, and ultimately constituents, to ensure that these policy reforms are adopted for the benefit of food producers and consumers alike.

William S. Eubanks II

Mr. Eubanks is a partner at the public interest environmental law firm Meyer Glitzenstein & Crystal and on the adjunct faculty at Vermont Law School and American University’s Washington College of Law.