Author: Bart Fischer

I’m writing this somewhere over the Atlantic Ocean as I travel home from England.  I was there for the last several days at the invitation of the British Embassy in Washington, D.C., along with several U.S. agricultural officials, including Congressional staff and a handful of state secretaries, directors, and commissioners. The purpose was to learn about the agricultural industry in one of the most beautiful and storied countries on the planet, but it also provided a good opportunity to compare with current events unfolding at home. Not surprisingly, farmers and ranchers in both countries face a lot of the same challenges: enduring erratic weather; striking the right balance between conserving resources and growing food; and navigating unpredictable politics, just to name a few.

With respect to the latter, both countries have recently gone through elections. This past summer in the general election in the U.K., the opposition Labour Party led by Keir Starmer – now Prime Minister – defeated the governing Conservative Party. The new government recently introduced a new inheritance tax proposal. While there are far more details (and nuance) than I have space to discuss today, the proposed changes will impose an inheritance tax of 20% on business and agricultural assets beyond £1 million (roughly $1.26 million at today’s exchange rates) beginning in April 2026. Much like in the United States, growth in land values and equipment costs have resulted in a situation where farms have significant net worth – at least on paper – but little liquidity.  In other words, producers have little ability to pay huge tax burdens when an operation is passed along to an heir. Proponents of the proposal will argue that any transfers to individuals more than seven years before death will continue to fall outside the scope of the new inheritance tax. However, producers will counter that death doesn’t respect the timeframes set by the government, and they will argue that the proposal stands to destroy the heritage their families have built – to say nothing of the eventual impact on food security. On Tuesday of this week, British farmers and ranchers descended on London to protest the new government’s proposal.

While England is a long way from the United States, it’s not all that different from here. Throughout our own election season this Fall – and as part of the debate about how to pay for the now-defunct Build Back Better Act – a number of proposals were discussed to significantly change the taxation of unrealized capital gains and estate taxes in the United States. In June 2021, at the request of Rep. GT Thompson (R-PA) and Sen. John Boozman (R-AR), our team at the Agricultural and Food Policy Center (AFPC) authored a report that estimated the impact of two of these proposals, the Sensible Taxation and Equity Promotion Act and the For the 99.5 Percent Act. At the time, our analysis showed that a generational transfer under the two bills would impact 92 of AFPC’s 94 representative farms (increasing the average tax liability by $726,000 per farm) and 41 of 94 representative farms (increasing the average tax liability of $2.2 million per farm), respectively.

While our election results this Fall very likely mean that agricultural producers in the United States won’t face a near-term change in the treatment of unrealized capital gains and estate taxes, the events unfolding “across the pond” are a very clear reminder that elections have consequences…and that policies (well-intentioned or not) often have unintended consequences.

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Fischer, Bart L. “What a Difference an Election Can Make.” Southern Ag Today 4(47.4). November 21, 2024. Permalink

As we have noted over the past few months (see here and here), there is growing pressure to complete a farm bill in advance of the 2025 crop year and to provide economic assistance for 2024 losses given the low levels of support being provided by the current farm bill extension.  Hurricanes Helene and Milton have also resulted in renewed calls for natural disaster assistance for the 2023 and 2024 crop years.

While work continues behind the scenes on the farm bill – with no clear indication of the path forward – economic assistance for 2024 losses is starting to take shape. Most of the chatter concerns the significant collapse in commodity prices over the past two years coupled with costs of production that have continued to remain high. That cost-price squeeze has resulted in the largest 2-year decline in crop cash receipts in history (here).

Rep. Trent Kelly (R-MS) has introduced the Farmer Assistance and Revenue Mitigation Act of 2024 (The FARM Act) which would provide emergency assistance to producers of eligible commodities for which the expected revenue in crop year 2024 is below the projected per-acre cost of production.  Acres planted or prevented from being planted in 2024 to the following crops would be eligible for assistance: barley, corn, cotton, dry peas, grain sorghum, lentils, large chickpeas, oats, peanuts, rice, small chickpeas, soybeans, other oilseeds, and wheat. FARM Act payments are calculated as follows:

FARM Act Payment = (Projected Cost – Projected Returns) x Eligible Acres x 60% where:

• Projected Cost is the per-acre cost published by USDA’s Economic Research Service for corn, soybeans, wheat, cotton, rice, sorghum, oats, and barley and otherwise as determined by the Secretary in a similar manner.

• Projected Returns for corn, soybeans, wheat, cotton, rice, sorghum, oats, and barley are determined by multiplying the projected 2024 marketing year average price published in the WASDE by the 10-year national average yield for the eligible commodity and otherwise as determined by the Secretary.

• Eligible Acres consist of 100% of the acres planted to an eligible commodity plus 50% of the acres prevented from being planted to an eligible commodity in crop year 2024, as reported to FSA by the producer.

Existing provisions relative to attribution of payments, actively engaged in farming, and other regulations apply. With respect to payment limitations, persons or entities that derive less than 75% of their income from farming, ranching, or forestry are subject to an overall limitation of $175,000. Persons or entities that derive 75% or more of their income from farming, ranching, or forestry are subject to an overall limitation of $350,000 in assistance.

Table 1 provides an estimate of the per-acre payments under the FARM Act. In this analysis, we use estimates from the October 2024 WASDE for the marketing year average price along with harvested acre yields from NASS. Most importantly, these are merely estimates and are subject to change.  For example, Congress may choose to reduce the payment factor, or they may choose to go a different direction altogether. Regardless, proposals are starting to take shape, and the levels of support being discussed would provide a meaningful amount of assistance to help offset losses in 2024.

Table 1. Estimated Per-Acre Payments for Select Commodities under the FARM Act.

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Fischer, Bart L., and Joe Outlaw. “Economic Assistance for the 2024 Crop Year Starting to Take Shape.” Southern Ag Today 4(43.4). October 24, 2024. Permalink

Over the last two weeks, row crop producers descended on the nation’s capital, lobbying for passage of a new farm bill and highlighting the need for ad hoc disaster assistance. If you do not personally live with the constant barrage of challenges facing our nation’s farmers and ranchers – ranging from droughts, wildfires, and hurricanes to inflation and market collapses – it’s easy to grow numb to their plight. Besides, aren’t farmers and ranchers always on Capitol Hill asking for assistance?

We understand the cynicism, but most people do not realize that this is a direct consequence of the way farm bills are negotiated.  While many federal programs are on autopilot (e.g., Social Security, Medicare, Medicaid, etc) – where we don’t think about them until someone tries to change something – farm bills are negotiated roughly every 5 years on the premise that they need to be responsive to the needs of producers. Unfortunately, rather than responding to the needs of our nation’s farmers and ranchers, farm bills now get caught up in annual spending fights with growers constantly having to defend the farm safety net from attacks. On top of that, the short-term nature of the farm bill leaves producers in a regular state of limbo about what the safety net will cover. For example, producers are planning for the 2025 crop year, but they still have no clue what the safety net will look like for the upcoming crop year (nor do they know if any assistance will be provided to help with 2023 and 2024 losses). If that were not enough, these dynamics have culminated in a situation where “direct government payments” to producers in 2024 are forecasted to hit a 42-year low. The last time we saw so little investment in direct producer support was in 1982 in the midst of the farm crisis of the 1980s.  So, while it’s easy to joke that farmers and ranchers are always asking policymakers for something, the system is designed to work that way.  Whether or not that approach makes sense is open for debate, but we will save that conversation for another day. 

In the meantime, between a stagnating farm bill process, a farm bill extension that is slated to provide virtually no help in 2024, and no ad hoc support from Congress over the last two years, an outside observer might quickly conclude that things must be going extraordinarily well in the farm economy.  To the contrary, USDA’s latest net farm income estimate showed a $35 billion decrease in crop cash receipts in 2024 alone, the largest single-year drop in the last 50 years (and the largest 2-year drop in history).  2025 is on track to be considerably worse. 

As we noted above, farm bills are on a 5-year cycle because they are supposed to be responsive to the needs of farmers and ranchers.  But, support levels are at 42-year lows and growers are facing the prospect of enormous losses.  Congress passed a continuing resolution yesterday to extend current government funding levels through December 20^th and promptly left town for the final stretch of the campaign season.  When they return on November 12^th, they will face a very short runway to wrap up farm bill negotiations and provide ad hoc disaster assistance.  If Congress decides not to act – and absent a major rebound in the agricultural markets – many of our nation’s producers will enter the New Year in arguably some of the most challenging financial circumstances they’ve faced in decades.

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Fischer, Bart L., and Joe Outlaw. “The Losses are Mounting…and are Projected to get Worse.” Southern Ag Today 4(39.4). September 26, 2024. Permalink

The U.S. House of Representatives departed Washington, DC, for the August recess last week, and the Senate is currently wrapping up its business. When Congress returns in September, most of the legislative agenda prior to the Presidential election will be focused on funding the government past September 30, 2024. This naturally raises the question: will we see a new farm bill this year?

We can look to the past 10 farm bills (over the course of the last 50 years) for guidance. As noted in Table 1, only 2 of the last 10 farm bills were enacted during presidential election years (1996 and 2008 Farm Bills), and both of those were signed into law before Congress left town for the August recess. The remaining 8 farm bills were enacted in the Congress following the Presidential election, with 2 of those (1990 and 2018 Farm Bills) coming in the lame duck session following the midterm elections.

Table 1. Enactment of the Past 10 Farm Bills

Enacted during a…	Farm Bill (Month Enacted)
Year Following Presidential Election:	1996 Farm Bill (April) 2008 Farm Bill (June)
Year Following Presidential Election:	1973 Farm Bill (August) 1977 Farm Bill (September) 1981 Farm Bill (December) 1985 Farm Bill (December)
Midterm Election Year:	1990 Farm Bill (November*) 2002 Farm Bill (May) 2014 Farm Bill (February) 2018 Farm Bill (December*)
Year Following Midterm Election:	None

While history does not bode well for wrapping up a farm bill this year (i.e., none of the last 10 farm bills were completed immediately prior to or following a presidential election), it’s not out of the realm of possibility. So, what would it take to get it wrapped up? Following are the key issues holding up completion: 

• Improving the farm safety net. As we’ve said for the last two years – and there seems to be growing agreement on this point – there is no point in doing a farm bill absent improvements to the farm safety net, namely improving the Reference Prices in the Price Loss Coverage (PLC) program and the loss thresholds in the Agriculture Risk Coverage (ARC) program. With that said, there is still disagreement on the extent of the improvements and how to pay for them.

• Commodity Credit Corporation (CCC). Discretionary use of the CCC has long been a sticking point for lawmakers, but that concern has grown dramatically over the course of the last two Administrations, where the CCC has been used to deliver tens of billions in aid to agricultural producers and, more recently, climate-smart programming. Many in Congress would like to restrict the Secretary’s use of the CCC, returning decisions about funding to Congress. Doing so would save money that could be used to offset improvements to the farm safety net. While we discussed CCC funding in detail last Fall, the Congressional Budget Office (CBO) will officially weigh in on this topic tomorrow when they release the cost estimate for the House Agriculture Committee-passed farm bill. 

• Inflation Reduction Act (IRA). While there seems to be growing consensus over bringing the IRA conservation funding inside of the farm bill, there are ongoing disagreements about whether that funding should continue to be restricted to climate-smart practices. Some lawmakers would like to put those decisions – like most other conservation decisions – in the hands of local decisionmakers.

• Thrifty Food Plan (TFP). There is still considerable frustration among most Republican lawmakers over the Biden Administration’s roughly $250 billion unilateral increase to the Supplemental Nutrition Assistance Program (SNAP) via adjustments to the TFP in 2021. Similar to the discussion on the CCC, many lawmakers would like to return decisions about future increases in SNAP spending to Congress.

While there are certainly disagreements, in our view, the list above is by no means insurmountable. While there is very little legislative runway prior to the election, we do think it’s possible to wrap up the farm bill during the lame duck session, perhaps as part of a supplemental. Why?

A recent hearing before the House Agriculture Committee highlighted the mounting concerns about financial conditions in the countryside. With sustained high input costs and prices that continue to collapse, growers are facing a precarious situation as they plan for the 2025 crop year. That dynamic – coupled with natural disasters like the wildfires in the Texas panhandle – are triggering alarm bells and resulting in calls for additional disaster assistance.

Congress has a lot on its plate going into a new Congress. For example, the debt limit – which dominated much of the conversation in the first half of the current Congress – is currently suspended through January 1, 2025. In addition, several major provisions from the Tax Cuts and Jobs Act of 2017 – including several that are important to the agricultural community – are set to expire at the end of next year. Rather than punting the farm bill into the new Congress and relying on another year of disaster assistance, Congress could choose to reauthorize the farm bill in the lame duck session – improving the farm safety net and side-stepping the need for disaster assistance – all the while keeping the farm bill out of what will already be a very crowded legislative calendar in 2025.

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Fischer, Bart L., and Joe Outlaw. “Will We See a New Farm Bill This Year?” Southern Ag Today 4(31.4). August 1, 2024. Permalink

On May 30, 2024, we compared the farm safety net features of the House Ag Committee-passed version of the 2024 Farm Bill (Farm, Food, and National Security Act of 2024) with the Senate majority proposal (Rural Prosperity and Food Security Act of 2024). In today’s article, we focus on one of those provisions: the addition of base acres. While the Senate majority proposal would provide a “limited opportunity” to update base for “underserved producers”– and it remains to be seen exactly what that would entail – the House Ag Committee-passed bill would add up to an additional 30 million acres of base for farms where planted acres exceed base acres on the farm. While base is a wonky, often overlooked provision, is has the potential to be one of the more consequential in the farm bill, particularly as proposed by the House. 

Previous Southern Ag Today articles (for example, see here) have explored the issue of base. While a seemingly straightforward issue, it’s actually quite complicated. First, base acres were established decades ago and there have been very few opportunities to update/add base. Second, because base acres are decoupled from planting history, what a producer was planting in the mid-1980s when base was established is not necessarily reflective of what is being planted on the farm today. Third, while the 2014 Farm Bill allowed for a “reallocation” of base acres – which did provide an opportunity for the base acres to be more aligned with what was planted on the farm, on average, from 2009-2013 – that “reallocation” did not allow new base acres to be added to the farm. In fact, the last real opportunity to add base acres occurred in the 2002 Farm Bill as soybeans were being added as a covered commodity. Consequently, land with no base (or with plantings that exceed base) have had virtually no opportunity to add base in the last several decades. Fourth, there are severe data limitations preventing thorough analysis, which means it’s difficult for policymakers to know the scope of the problem. Fifth, because of those data limitations, it’s difficult to advise policymakers on the implications of various proposals to change base acres. For example, one popular option adopted by the National Corn Growers Association would be for Congress to simply mandate a base acre update to recent plantings, but ascertaining who would add/lose base is almost impossible to determine, which puts Congress in a precarious position. Despite all of these challenges, based on our collective decades of experience in working on farm policy, just about every farmer we know has land without base (or that is “under-based”) and would be very interested in being able to add new base acres. 

It is this last point that makes the House Ag Committee proposal particularly intriguing. It is entirely optional and, apart from the 2002 Farm Bill making soybeans a covered commodity, it would represent the single largest opportunity to add base acres since their initial creation in the mid-1980s. Under the House Ag Committee proposal, a farm would be eligible for additional base acres equal to the amount by which (1) the average number of acres from 2019 through 2023 that were planted or prevented from being planted to covered commodities (including “eligible non-covered commodities”) exceeds (2) the existing base acres on the farm. In other words, if you have a farm with plantings that exceed base (including farms where you have no base at all), you can add the missing base. There are a few key limitations/provisions of which to be mindful:

• To avoid penalizing producers who may be in a crop rotation that contains certain non-covered commodities, the number of eligible acres may include the number of acres planted or prevented from being planted to non-covered commodities (i.e., the “eligible non-covered commodities” referenced above) other than trees, bushes, vines, and pasture. The acres of non-covered commodities that can count toward the eligible acres on the farm would be limited and may not exceed 15% of the total acres on the farm.

• New base acres added under this provision would be assigned to covered commodities using a formula like that utilized for the base reallocation opportunity in the 2014 Farm Bill. The assignment would reflect the ratio of covered commodities planted on the farm from 2019 through 2023.

• Following sign-up, if the total number of eligible acres across the country exceeds 30 million acres, the Secretary would be required to apply a pro-rata reduction to all farms to reduce the number of eligible acres to equal 30 million. For example, if USDA receives applications to add 60 million acres of base, everyone will see a 50% factor applied to their application (i.e., 30 million divided by 60 million). Regardless, assuming there are sufficient applications, this would result in a minimum of 30 million new base acres being added to the program.

Bottom line: this is a significant change from previous law that we expect to be extraordinarily popular among agricultural producers.

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Fischer, Bart L., and Joe Outlaw. “Examining Farm Bill Base Acre Proposals.” Southern Ag Today 4(23.4). June 6, 2024. Permalink