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Looking Ahead

Producers Cautiously Optimistic About New Farm Law

By Tommy Horton


After more than three years of debate – both inside and outside the halls of Congress – the cotton industry must now begin educating producers and help implement a new farm law.

The bill delivered to President Bush in early June was eventually vetoed but successfully overridden by both the House and Senate after a clerical error forced a re-vote.

Last month the National Cotton Council’s staff conducted Farm Bill information meetings across the Belt in an effort to explain provisions of the law. Early reaction from producers who attended the sessions was cautiously optimistic.

Reports indicate that all information meetings were well attended despite farmers being in the middle of planting and early season management.

Gary Adams, National Cotton Council vice president of economics and policy analysis, says there are two reasons why producers are reacting positively to the new law. Some important program eligibility provisions were retained, and the new law doesn’t take effect until the 2009 crop.

“If we were coming to farmers now and suggesting to them that they had to make changes for the 2008 crop, I can see how that would throw them for a loop,” Adams says.

“For that reason, I think it’s good that we had these meetings. Farmers obviously want to hear about the changes on payment eligibility and how they’ll affect their own operation.”

Obtain Good Advice

Adams has suggested that farmers consult with their attorneys and accountants to learn how provisions of the law will affect them. That may seem like a burdensome chore, but the complexity of the new law requires meticulous reading of the fine print. That’s where an attorney or accountant could help, Adams says.

As mentioned, the sheer volume of the new law’s regulations can be overwhelming, even for the most astute and informed producer. For that reason, Adams says it’s impossible to make a blanket recommendation to farmers on how to implement all of the provisions.

“Some of the changes that we see and have talked about in the 2008 Farm Bill won’t even matter to some farmers,” he says. “And that’s because these provisions won’t be relevant to their operations. To others, it will be a huge issue.”

Important Program Changes

The most discussed provisions in the new law, according to Adams, relate to payment eligibility and limitations, as well as the income means test (beginning with the 2009 season).

As expected, the three-entity rule was eliminated. For producers who take advantage of marketing loan gains and loan deficiency payments, there are no limits on benefits.

The key changes, however, occur for producers who have all of their acreage enrolled in direct payment and counter-cyclical payment programs. The direct payment limit will be $40,000, while the counter-cyclical payment limit is $65,000 per person.

For those producers with all farms enrolled in the optional revenue program (ACRE), there are two important policy rules. The limit on direct payments is reduced from $40,000 by an amount equal to the 20 percent reduction in direct payments. The limit is increased from $65,000 by the amount of the reduction in the direct payment limit.

The other significant provisions of the new law causing some questions relate to income means testing for commodity programs.

If a farmer earns more than $500,000 in adjusted non-farm income during the three years prior to the year preceding the applicable year, he is ineligible for program payments.

Additionally, if a farmer earns an average of more than $750,000 in adjusted farm income during the three years prior to the year preceding the applicable year, he is ineligible for direct payments for the year.

The $750,000 adjusted gross farm income level is less than the $2.5 million level in the 2002 farm law.

Industry Anticipated New Policy

Because the industry anticipated that the three-entity rule might be eliminated and the adjusted gross income level lowered, most producers weren’t surprised by those developments, Adams says.

For the record, however, the NCC’s policy is against changes that affect or adversely impact producer income.

Adams will be the first to admit that not having a new farm law until June created some uncertainty for producers who had to make planting decisions without knowing about various farm policy guidelines.

“That was certainly a problem,” he says. “But I think we would’ve heard even more of an uproar in the country had it not been for the high commodity prices. Prices were generally high for all commodities, and program spending has been low.”

Contact Tommy Horton at (901) 767-4020 or thorton@onegrower.com.

Need Help Understanding The Farm Bill? Lean On The Experts

Louisiana producer Jay Hardwick, the National Cotton Council’s current vice chairman, was a part of the industry’s leadership that worked with Congress for the past two years in the writing of the new law.

Recently, Hardwick helped coordinate a Farm Bill information meeting in Rayville, La., which attracted a crowd of 70 persons.

Even an experienced farmer like Hardwick says it is overwhelming to absorb so much information in the new law. But he has some advice for farmers across the Belt on how to get through the process.

“My suggestion is to lean on the professionals,” he says. “By that, I mean stay plugged into your trade associations – whether it’s the National Cotton Council, Farm Bureau, Delta Council or whoever. They can guide you through the process and help you understand it.”

Hardwick says he’s encouraged that so many provisions in the new law are nearly identical to the 2002 law except for the aforementioned payment eligibility and income means testing.

Considering how severe the changes could have been in the law, the NCC vice chairman can live with those changes.

“I can live with the income means testing being lowered from $2.5 million to $750,000,” he says. “If it had gone any lower, it would’ve been pretty unfair to agriculture.”

Hardwick also thought it was significant that Congress supported the Farm Bill with an overwhelming override vote of President Bush’s veto. Even though the bill wasn’t reported out of a House-Senate committee until this past spring, Hardwick was pleased at how Democrats and Republicans eventually supported the legislation in a bipartisan manner.

“That showed me right there that there were folks in both the Senate and House who didn’t want to see agriculture dismantled in this country,” he says.

“That was an excellent signal, and I was glad to see it. People had invested so much time in the bill. There was a real sense of ownership about it.”

Even with the support for the bill, Hardwick doesn’t think the industry can afford to become complacent. He anticipates future battles, but remains confident that the industry can withstand those challenges.


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