Category: Policy

Over the past 15 years, several states have passed laws regarding the amount of space that specific types of farm animals must be given. One such law – California’s Proposition 12 –imposes certain animal welfare requirements such as pen size and space on pork sold in California. These requirements apply not only to California producers but also to anyone selling products into the California market.^[1] Proposition 12 was challenged in both state and federal court, and on May 11, 2023, the Supreme Court issued its opinion in National Pork Producers Council v. Ross, ultimately upholding California’s Proposition 12.^[2] This raises the inevitable question of what impact, if any, the ruling will have on farm bill deliberations. To help address this question, we provide an overview of the historic federal legislative response to Proposition 12 and initiatives like it over the past decade.

Several of the early federal legislative attempts to push back on these state initiatives came from former Rep. Steve King (R-IA-4).  

• On July 11, 2012, at the House Agriculture Committee markup of the 2012 Farm Bill (H.R. 6083), King offered an amendment (Amendment No. 45) that was ultimately adopted as Sec. 12308 in H.R. 6083. The amendment prohibited a state or local government from imposing a standard or condition on the production or manufacture of any agricultural product sold or offered for sale in interstate commerce if the production or manufacture occurs in another State and the standard or condition is in addition to Federal standards and the laws of the State and locality in which production or manufacture occurs. Ultimately, that bill expired at the end of the Congress.

• On May 15, 2013, at the House Agriculture Committee markup of the 2013 Farm Bill (H.R. 1947), King again offered his amendment (Amendment No. 71) that was ultimately adopted as Sec. 12314 in H.R. 1947 and as Sec. 11312 in H.R. 2642, the version of the 2013 Farm Bill that passed the House and was sent to conference with the Senate. Ultimately, the provision was dropped by the conference committee and was not included in the final version of the 2014 Farm Bill.

• Rep. King introduced his amendment as the Protect Interstate Commerce Act in 2015 (H.R. 687) and 2017 (H.R. 3599). In 2018, he reintroduced the act as the Protect Interstate Commerce Act of 2018 (H.R. 4879), this time also including a private right of action to challenge state or local regulations relating to agricultural goods sold in interstate commerce.

• On April 18, 2018, at the House Agriculture Committee markup of the 2018 Farm Bill (H.R. 2), King again offered his amendment, including the private right of action from H.R. 4879.  The amendment passed on voice vote and was adopted in H.R. 2 as Sec. 11701 (prohibition against interference by State and local governments with production or manufacture of items in other States) and Sec. 11702 (federal cause of action to challenge State regulation of interstate commerce).  The provision was ultimately included in the House-passed version of the 2018 Farm Bill but again was dropped by the conference committee and was not included in the final version of the 2018 Farm Bill.

• On January 8, 2019, King again introduced the Protecting Interstate Commerce Act (H.R. 272), yet again including the private right of action provision.  

Rep. King was ultimately defeated in the June 2020 Republican primary.  Following his defeat, others have picked up the mantle.  

• On August 5, 2021, Sen. Roger Marshall (R-KS) and several other Senate co-sponsors introduced the Exposing Agricultural Trade Suppression (EATS) Act (S. 2619). On August 10, 2021, Rep. Ashley Hinson (R-IA-1) and several other House co-sponsors introduced the House companion (H.R. 4999).  Both closely track the Protecting Interstate Commerce Act.

• Following the Supreme Court’s ruling, Senator Marshall and others again introduced the EATS Act, this time as the Ending Agricultural Trade Suppression (EATS) Act (S. 2019).  Substantively, the bill would again (1) prohibit interference by state and local governments with production of items in other states and (2) provide a private right of action to challenge state regulation of interstate commerce.

While these legislative efforts over the past 10 years attempted to challenge the patchwork of state laws, they were largely dismissed while numerous legal challenges were making their way through the courts.  While Dr. Tiffany Dowell Lashmet recently noted that others may lodge additional challenges seeking to prove that Proposition 12 does impose a substantial burden, the Supreme Court’s recent ruling makes it hard to imagine a scenario where this issue is not front and center in the upcoming farm bill debates.  In fact, key leaders in the House have identified finding a solution as a priority.  This time around, “let’s wait and see how the Supreme Court rules” will no longer be a reason for kicking the can down the road.

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^[1] Rumley, Elizabeth. “U.S. Supreme Court to Hear Proposition 12 Case“. Southern Ag Today 2(29.5). July 15, 2022.

^[2] Lashmet, Tiffany. “United States Supreme Court Upholds Proposition 12.” Southern Ag Today 3(20.5). May 19, 2023.

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^[1] Rumley, Elizabeth. “U.S. Supreme Court to Hear Proposition 12 Case“. Southern Ag Today 2(29.5). July 15, 2022.

^[2] Lashmet, Tiffany. “United States Supreme Court Upholds Proposition 12.” Southern Ag Today 3(20.5). May 19, 2023.

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Fischer, Bart L., and Joe Outlaw. “How will Proposition 12 Ruling Impact the Farm Bill?” Southern Ag Today 3(27.4). July 6, 2023. Permalink

The U.S. federal crop insurance program has experienced substantial growth over the past three decades. This expansion has led to an increase in the number of insured acres, greater overall liability, and higher subsidies for insurance coverage. Crop insurance aims to help farmers and ranchers effectively manage the risks associated with potential decreases in crop yields and revenue. The program is jointly managed by the USDA Risk Management Agency (USDA-RMA) and the Federal Crop Insurance Corporation. The Agency’s role is to determine the premium rate for crop insurance, considering various factors, such as the risk associated with the insured crop in a specific county, the chosen coverage level for the farm, the type of insurance product, and farm-specific practices like irrigation. The agency strives to establish actuarially fair premium rates, ensuring that the rates accurately reflect the expected indemnities per dollar of liability.

The subsidy for crop insurance premiums has witnessed a remarkable expansion, reaching about $11.6 billion in 2022, compared to $205 million in 1989 (USDA-RMA, 2023). This noteworthy surge is concurrent with the broadening array of crop insurance alternatives made available to farmers. Nevertheless, the allocation of the subsidy among farmers exhibits significant disparities across distinct levels of crop insurance coverage (Bullock & Steinbach, 2023). In our study, we evaluate the distribution of the farmer premiums to liability ratio across diverse levels of crop insurance coverage, drawing comparisons between the number of insured enterprise units and the amount of insured liabilities. Furthermore, we investigate the potential economic ramifications of capping the premium-to-liability ratio of 4.0% for different categories of crop insurance offered within the federal crop insurance program.

Figure 1 illustrates the distribution of the farmer premium-to-liability ratio for crop insurance coverage levels below 65%, between 65% and 75%, and above 75%. We compare the distribution based on the insured enterprise units (blue) and insured liability (red) for the Southern United States in 2022. For approximately 96.9% of the insured liability, the ratio is less than 4.0% at the <65% coverage levels. Moving to the 65% to 75% coverage levels, the ratio drops to 73.5% and falls further to 68.1% at the >75% coverage levels. Notably, there is a disparity in the number of insured units. While 90.8% of the enterprise units at the <65% coverage level have a farmer premium to liability ratio below 4%, this number falls to 75.5% at the 65% to 75% and 42.1% at the >75% coverage levels. This imbalance implies that fewer and larger enterprise units have a farmer premium-to-liability ratio below 4.0% at higher crop insurance coverage levels. This share is significantly higher and favors smaller enterprise units at lower coverage levels.

We now investigate the potential economic implications of capping the premium-to-liability ratio at 4.0% for different categories of crop insurance offered within the federal crop insurance program. Limiting the farmer premium to liability ratio to 4.0% would require 6.1% or $89.5 million in additional subsidies. Of these supplementary payments, 81.1%  would be allocated to enterprise units with crop insurance coverage levels ranging from 65% to 75%. The distribution of the extra subsidies would primarily favor cotton, receiving approximately 73.2% of the additional payments, followed by wheat (9.9%), corn (6.0%), and soybeans (5.9%). The crop-specific subsidies would experience an increase ranging from 1.9% for soybeans to 9.8% for cotton. 

Our findings indicate that the current allocation of farmer premiums per liability in the federal crop insurance program exhibits inequities across various levels of coverage. The suggested modifications to the program would particularly benefit farmers with a coverage level exceeding 70%, which holds significance considering the elevated vulnerability of these farmers to crop or revenue losses. Additionally, our findings emphasize the need to consider the consequences of program adjustments on different commodities and states. Furthermore, the analysis implies that the proposed change could incentivize farmers to allocate more acreage to higher coverage levels, enhancing their risk management options. All in all, this study offers insights into the distributional implications of the federal crop insurance program. Furthermore, it underscores the potential advantages of program modifications to foster equity for farmers and ranchers.

Figure 1: Distribution of the Farmer Premium to Liability Ratio for Different Crop Insurance Coverage Levels.

Learn More

Bullock, D. & Steinbach, S. (2023). “Capping the Farmer Premium-to-Liability Ratio for the Major Federal Crop Insurance Coverages: An Evaluation of the Potential Economic Implications,” AAE Staff Paper 2023-01, North Dakota State University. https://ageconsearch.umn.edu/record/333994

U.S. Department of Agriculture, Risk Management Agency. (2023). Summary of Business (SOB) online database. Available at: http://www.rma.usda.gov/data/sob.html.

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Bullock, David W., Sunghun Lim, and Sandro Steinbach. “Southern Economic Impacts of Premium-to-Liability Ratio Limits in U.S. Crop Insurance.” Southern Ag Today 3(25.4). June 22, 2023. Permalink

A recent Agri-Pulse article explored “raising reference prices based on a commodity’s relative input costs” suggesting that the approach “could benefit some southern crops over commodities such as soybeans and corn.”  In the article, I was quoted as saying that an “across-the-board increase in PLC reference prices could penalize farmers who don’t grow corn, soybeans and wheat, which together account for 85% of the acreage eligible for the program.”

While the article has generated a significant amount of interest (judging by the call and email volume over the past week), I do think additional context is important.  My purpose in making the statement was this:

• Corn, soybeans, and wheat account for 85% of the base acres nationwide.  As a result, decisions made for those three crops will necessarily drive the vast majority of the spending in Title 1 of the farm bill.

• Because each crop is different – with different risk profiles and with producers who have varying views on the various components of the farm safety net – policymakers are in no way constrained to simply making across-the-board adjustments to the farm safety net.

I also argued – and continue to do so – that cost of production is an appropriate metric for making decisions about Reference Prices.  The entire point of the traditional farm safety in Title 1 is for it to be reflective of the cost of producing a crop.  I suspect that most producers reading this would agree with that point.  After all, the primary complaint we’ve heard from the hundreds of producers we work with around the country over the past several years is that the Title 1 safety net has not kept up with the cost of doing business.  

The article culminated with a comparison of corn and rice that has led some to ask if I’m suggesting that corn producers (and soybean and wheat producers for that matter) are not in need of a Reference Price increase.  To clear up any confusion, in the space that remains, I will quickly address this point for corn, soybeans, and wheat.

Using publicly available data from USDA’s Economic Research Service (USDA-ERS), I compared the total cost of production from 2012-2014 (the 3-year period during which the current Reference Prices were initially established) to the most recent 3-year period for which data is available (2020-2022).  As noted in Figure 1, the average cost of production across the United States for corn, soybeans, and wheat increased by 15%, 21%, and 19% respectively over that timeframe.  It is also important to note that the impact was not uniform across the nation.  For example, while the increase in the national average cost of producing corn may have been 15%, costs in the Northern Crescent (including Michigan, Wisconsin, and parts of Minnesota), the Prairie Gateway, and the Southern Seaboard were all in excess of 20%.  A similar dynamic exists for soybeans and wheat.  For example, the national average increase for wheat is 19%, but the cost of production for growers in the Northern Great Plains increased more than 25%. 

Bottom line:  corn, soybean, and wheat producers are absolutely justified in requesting Reference Price increases.  Depending on the region in which you produce, the sense of urgency may be even greater.

Figure 1.  Percent Change in Cost of Production by Region, 2020-2022 versus 2012-2014.

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Fischer, Bart. “Adjusting Reference Prices Based on Changes in Cost of Production.” Southern Ag Today 3(23.4). June 8, 2023. Permalink

When the Agriculture Committees and their staff begin working on a farm bill, like clockwork, experts from around the country, including us, put out information intended to help inform the process.  Every farm bill cycle, we run across a report or research geared toward the next farm bill that, while what the authors did and said isn’t technically wrong, boy does it leave out something kind of important…hence the term “Silly Season.”

The article that caught our eye this time is titled “State Shares of US Commodity Program Payments: 2002–2021” by Zulauf, et al., written for farmdoc.^[1]  The authors summarize their paper with the following:

“Payments are compared to the value of all field crop production. One would expect payments to be proportional to value of production. In general, commodity payments follow farm production, but exceptions exist. States whose share of commodity payments are higher (lower) than their share of field crop production tend to be in the South (Midwest).”

When looking at the share of commodity payments relative to the share of the value of crop production, the South does receive proportionally more payments than the Midwest.  The implication is that Southern farmers are provided significantly more benefits than the value of their crops would imply is needed.  The problem is the report leaves out one word that we think should have been included: ethanol.

The biofuels blending mandates contained in the Energy Policy Act of 2005 (EPA of 2005) and the Energy Independence and Security Act of 2007 (EISA of 2007) dramatically changed the value of corn production in the United States.  See the SAT article from April 14, 2022, for more information on these two acts.  Overnight, this effectively created a new demand for biofuels – and therefore corn – leading to a significant increase in price and the quantity of corn diverted to ethanol production (Figure 1).  The blue line indicates the share of total corn supply going to industrial uses…namely ethanol.  The red line indicates what happened to corn prices when the ethanol mandate took effect.

All corn producers have benefitted greatly from the ethanol mandate.  While there are definitely spillover effects on some other crops resulting from ethanol policy, leaving out the effect of ethanol when discussing proportional shares of farm program payments is misleading.  As Paul Harvey was fond of saying: “now you know…the rest of the story.”  

Figure 1.  Share of Total Corn Supply Utilized in Food, Alcohol and Industrial Use and Marketing Year Average Corn Prices, 1973 to 2022.

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^[1]

 Permalink: https://farmdocdaily.illinois.edu/2023/05/state-shares-of-us-commodity-program-payments-2002-2021.html

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Outlaw, Joe, and David Anderson. “The Silly Season Has Begun… Must Be Farm Bill Time.” Southern Ag Today 3(21.4). May 25, 2023. Permalink