After more than two decades of farmers relying on government direct payments, the change to crop insurance-based programs in the new farm bill will present “a real challenge” for Mississippi farmers and agricultural lenders, says Randy Knight, president of the Mississippi Farm Bureau Federation.

“Following three years of work, the farm bill was passed by the Senate today and is now on its way to President Obama for his signature,” he said at the annual meeting of the Mississippi Agricultural Consultants Association at Mississippi State University.

“Both of Mississippi’s senators voted in favor of the bill and, speaking for the farmers of our state, I want to thank Senators Thad Cochran and Roger Wicker for helping get this important legislation passed.

See: Senate passes new farm bill

“The safety net that this bill provides will help our farmers to invest confidently in their farming operations in the future. That in turn will help to stimulate the economies of the communities in which they live.”

The bill provides additional risk management tools for grain, livestock, and fruit and vegetable farmers, Knight says, while still saving taxpayers about $23 billion over 10 years.

“Farmers need to have some stability in the high-risk business of agriculture. This legislation helps our farmers put together a five-year plan to manage their risk.”

Although Farm Bureau is “very happy to finally have a new law,” he says, “we are a little overwhelmed with the many changes in this bill compared to the old law — the most significant being the repeal of the direct payment program that southern producers have relied upon due to higher production costs of their commodities, such as cotton and rice.”

Crop insurance

For southern producers, he says, crop insurance “may have not been as effective as in other parts of the country. This change will also take millions of dollars out of Mississippi’s agricultural economy.”

Terming the new legislation “probably the biggest national issue that we’ve worked on over the last two years, Knight says producers “will have many options and important decisions to make, many of which have to be made very, very quickly.

“They will have the option of a whole farm revenue-type program or a target price support program, similar to the current countercyclical program, both of which will be administered by the government’s Farm Service Agency. These programs will be paid on base acres, and farmers will have a one-time option to update their farm base and program yield, which is based on a 5-year history of actual planted acres on their farm.”

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Because of the challenges the World Trade Organization cotton case brought to the U.S. cotton industry, Knight says, “Cotton will have the STAX program, which is administered by the Risk Management Agency. A farmer will have to pay a premium to participate in the program, and it will work like an area risk insurance product, such as a GRIP [Group Risk Insurance Program] policy.

“Because RMA can’t get STAX implemented for the 2014 crop, cotton will have a 2014 partial direct payment, called a transition payment, amounting to about 5.85 cents per pound on 2013 base and payment yield.”

The new farm bill will bring “many positive enhancements to crop insurance,” Knight says. “One is the new SCO [Supplemental Coverage Option] product, which farmers can purchase on top of their existing individual coverage. This will also work like an area group policy, and we’re told it will be very cost-effective. However, most of the county will have to incur a loss for an indemnity to be issued.”

The bill also changes the payment limits provisions, he says, and leaves changes to the definition of “actively engaged” to the discretion of the Secretary of Agriculture in the rule-making process. “This concerns us greatly.

“We have a tremendous job before us in learning more about the changes in this new legislation,” Knight says, “and then educating our membership about the many decisions they are going to face very soon. We will begin working with the MSU Extension Service to help develop a decision tool that will aid the farmer in making these decisions. This will be a major priority for Farm Bureau for 2014.”