Commodity Chat

A Tale of Two Bills

The US has passed a new farm bill that looks like its 2014 predecessor, while the UK is debating a bill that would result in a major change in agricultural policy and may put the nation in rarefied company internationally.

On December 20th, 2018 President Trump signed the new Farm Bill, the Agricultural Improvement Act 2018, into law. The USA Farm Bill, a giant omnibus bill passed generally every four to five years, traces its lineage back to the New Deal and the Agricultural Adjustment Act of 1933 which was initially a temporary relief program. The new Farm Bill is projected to cost $428 billion over the next five years (2019 to 2023). It consists of four programs (nutrition, crop insurance, conservation, and farm commodity support), which accounts for 99% of the $428 billion spend. Nutrition, the SNAP program previously known as food stamps, alone accounts for 80% of the total cost.

The new Farm Bill is projected to cost $428 billion over the next five years (2019 to 2023).

For the sake of international trade agreements, and due to decades of criticism the 2014 Farm Bill broke with tradition and eliminated direct payments for grains, cotton and peanuts, modifying the counter cyclical programs. In order to bolster the safety net programs, the crop insurance provisions were expanded. These provisions include commodity-based revenue support programs, disaster assistance programs, and federal crop insurance (authorized under the Federal Crop Insurance Act of 1980). However, the saftey net is skewed towards only a handful of crops. In 2016 corn, soybeans, wheat, and cotton made up 77% of the insurance premium subsidies while accounting for only a third of total farm receipts (FAS).

farmer leans on a gate

The 2018 US Farm Bill makes some minor adjustments to the crop insurance programs’ policy with regard to cover crops (allowing farmers to adopt cover crops without concerns insurance would be jeorpadised) and shifted funding for conservation programs (with more cash for reserve programs and less for working lands). With only minor changes, and bipartisan support, it seems the USA has found a Farm Bill balance that producers, business groups and other interests are mostly satisfied with. 

The US Farm Bill: Its like a Swiss Army Knife

However, general satisfaction does not seem to be the case on this side of the pond as the UK’s new Agriculture Bill, now in the report stage at Parliament, is under a lot of scrutiny for a wide range of reasons (ecologicaleconomic). The bill is the first of its kind in nearly 50 years, focusing on UK agriculture policy without the Common Agricultural Policy (CAP) of the EU and direct payments based on acreage. The bill calls for a phasing out of direct payments and increasing payments based on environmental stewardship. The law has yet to be signed, and when its final form becomes clear, we will revisit it with more in-depth analysis. Until then we note simply that with the plans to phase out the £4 billion in annual CAP subsidies (that make up half the income on many farms), we wonder what the replacement programs will look like with regard to funding and where that will put the UK in relation to other developing nations and agricultural support


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