While the Food, Conservation and Energy Act of 2008 eliminates the three-entity rule for farmers, it also makes it easier for a spouse to become eligible for payments. These changes could have a big impact on farmers, “especially when you talk about the sheer number of farmers who used the three-entity rule,” said Gary Adams, vice president, economics and policy analysis, National Cotton Council.
Adams, leading an information session on the 2008 farm bill at Agricenter International in Memphis, said another significant change is the “tightening down of means testing,” beginning with the 2009 crop. “Some of our larger farmers will feel it,” Adams said.
The adjusted gross income component of means testing has been separated into off-farm and on-farm income. Under the provision, a farmer is not eligible for any commodity program payments for a year if in the three previous years he earned an average of more than $500,000 a year in adjusted non-farm income. In addition, a farmer is not eligible for direct payments for a year if in the three previous years, he earned an average of more than $750,000 in adjusted farm, ranch and forestry income.
The farm bill will also include a means test for conservation programs. If an individual or entity earned an average of more than $1 million in adjusted non-farm income or more than $1 million in adjusted gross income (if less than 66.66 percent is from farming, ranching or forestry) that individual or entity is ineligible for conservation program payments for the year. This does not apply to easement programs.
Mike Farrish, a cotton merchant with Weil Brothers Cotton Co. in Memphis, said, “Under this new program, there is a whole lot more for the producer to be worried about. He has to understand the program to manage his farm operations.”
“A lot of people have portrayed this farm bill as just a continuation of the status quo,” Adams said. But there are some very significant changes in payment limits and eligibility that will impact producers. There are changes in the crop insurance program, a new permanent disaster program, additional funding for conservation and changes in the tax provision.
Adams said the means testing could impact way rental agreements on farms. “If farmers are in a share-rent situation with their landlord, they might need to be concerned if the landlord has a lot of non-farm income. The farmer may need to bring this to the attention of his landlord, to make sure that at the end of the day the landlord doesn’t realize that he’s not eligible.”
More highlights of the bill:
• Covers the 2008-2012 crop, although some provisions will not start until 2009.
• Maintains the same basic structure of the 2002 farm bill with the “three legged stool” combination of the marketing loan, countercyclical payments and direct payments.
• Establishes economic assistance for the U.S. textile industry of 4 cents per pound for all upland cotton consumed from Aug. 1, 2008, through July 31, 2012. Beginning Aug. 1, 2012, the rate is adjusted to 3 cents per pound. Proceeds must be invested in the textile plant.
• Establishes the revenue-based ACRE program.
• Most of the loan rates will be constant throughout the life of the farm bill: Cotton loan rate remains at 52 cents for base grade (41-4-34) for each year covered by the farm bill. ELS cotton remains at 79.77 cents. The corn loan rate is $1.95 and soybeans, $5. In the last three years of the bill, the wheat loan rate will rise from $2.75 to $2.94.
• Repayment for grains and oilseeds will continue to be based on posted-county prices, but moves to a 30-day moving average of the county price.
• For 2009-11, the payment acres for direct payments will be reduced to 83.3 percent of base and restored to 85 percent of base for 2012.