New payment limit rules could put growers in a bind if prices fall

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The Agriculture Act of 2014 contains a new payment limit of $125,000 per person. That is not far off the mark from the old limit under the 2008 farm bill. What is new is that the new limit will include marketing loan gains and loan deficiency payments in the total.

“The payment limits are different in this new bill from the standpoint that any marketing loan gains or loan deficiency payments are now included in a single $125,000 limit along with any payments that are received under the PLC or ARC,” says Dr. Gary Adams, vice president for economic and policy with the National Cotton Council.

“That applies to all commodities with peanuts having a separate limit,” said Adams, who was interviewed following a presentation at an NCC farm bill meeting at the Memphis, Tenn., Agricenter. (PLC or Price Loss Coverage and ARC or Agricultural Risk Coverage are one of several new features in the 2014 farm bill which were covered at such meetings.)

Adams said NCC presenters have been receiving questions about how the new limit will work, particularly on the marketing loan and loan deficiency payment gain side.

“Growers often have multiple commodities being marketed and, if we move back back into a period of low prices, I think there are some concerns about how those payments are attributed to a limit and what disruption that may have on the marketing of their crops,” he noted.

On the new law’s actively engaged language, USDA now has the authority to examine and define what constitutes a significant contribution to management. “That’s a new qualifier being added to management contribution that could make someone eligible for farm program benefits,” Adams said.

“At this point, we don’t know how USDA may define the term significant, but that’s something we’ll learn as we go further into the year. Also, USDA would have the authority to then put a limit on the number of individuals within an operation that could make themselves eligible by using this significant contribution to management. In terms of how USDA implement this, there is a provision in the law that says this shall not apply to family members that are in operations composed solely of family members.”

He said one provision that should be beneficial to farmers is that if they look at price loss coverage as an option on a commodity that there is an opportunity for growers to update the payment yield based off their recent yield history.

“That would certainly be something that could be beneficial to them because if they don’t update then we understand they would stay with the same yield that was available under the counter-cyclical program,” he noted. 

“So that will be one of the choices producers face when they make it to the FSA office and all that data is compiled and before them,” said Adams.

Adams spoke at one of the last of the 49 NCC farm bill meetings, which were attended by more than 4,000 persons. The Council conducted a number of meetings in conjunction with the USA Rice Federation and with other organizations.

“We’ve found, well, first a lot of interest in the meetings,” he said. “Farmers have been excited to get details and get the new information. They want to learn about the new programs. They’ve heard some of the buzz words and the acronyms, and now they want to get into the details.

One question asked at the meetings is will there be tools to help them make some of these decisions? “They understand the gravity of the choices in front of them, particularly when it’s a one-time choice that sticks with them for the life of the farm bill,” he said. “They want to get as much information as they can as the try to put that decision together.”

A number of the land-grant universities are working on such tools. Farm Press will report on those as they become available. 

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