The US Department of Agriculture announced a new initiative last week that will provide relief to farmers affected by severe weather hazards, including droughts, as part of the broader US Farm Bill. The move, which takes effect in spring 2015, has sparked questions among some trade watchers on what this might mean for overall US subsidy levels.
The new Actual Production History (APH) Yield Exclusion will be available for farmers of select crops such as corn, soybean, wheat, cotton, grain sorghum, and rice, among others.
Those producers who have suffered the effects of severe weather “in exceptionally bad years” will essentially be able to exclude those years from their calculations of their yields. This would, in turn, ensure that their risk coverage under the US federal crop insurance programmes will not go down as the result of a natural disaster.
US officials claimed that the initiative has been made possible given the speed at which staff in the Department of Agriculture has been able to implement new or extended programmes under the 2014 Farm Bill, which became law early this year after prolonged congressional negotiations. (See Bridges Weekly, 30 January 2014)
“Key programmes launched or extended as part of the 2014 Farm Bill are essential to USDA’s commitment to help rural communities grow,” said US Agriculture Secretary Tom Vilsack in announcing the move.
“By getting other 2014 Farm Bill programmes implemented efficiently, we are now able to offer yield exclusion for spring 2015 crops, providing relief to farmers impacted by severe weather,” he added.
Implications?
This type of device, agriculture trade expert Vincent Smith of Montana State University told Bridges, has been a goal of farm groups “for over fifteen years.”
“The implication is larger subsidies through the federal crop insurance programme that are tied to current production decisions and increased incentives for the production of crops that are typically insured such as corn, wheat, soybeans, cotton, etc.,” Smith said.
Another agriculture trade analyst commented to Bridges that the new initiative appears to allow farmers to choose which were the good years, which payouts would then be based on – suggesting that the move, depending on its implementation, may have the potential to bring the US closer to breaching its WTO subsidy limits.
Crop insurance in focus
Compared with the previous legislation, the new Farm Bill - which was enacted for a five-year period – has eliminated or phased out direct payments to farmers and has expanded crop insurance subsidy programmes.
US farmers are now allowed to choose from a suite of subsidised farm safety-net programmes that help protect them financially from the vagaries of the weather and market volatility, thus reducing some of the financial risk related to farming.
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