Major Changes and Features of the 2012 Farm Bill

Source: World Agriculture 2013.2

the United States is one of the world's largest producers, consumers and traders of agricultural products, and its agricultural policy changes will have an important impact on the international agricultural market and trade. This article compares the Agricultural Reform, Food and Jobs Act of 2012 passed by the U.S. Senate with the Food, Conservation and Energy Act of 2008. The reform direction and main contents of the new farm bill are analyzed, and the characteristics of the new farm bill in the United States are summarized on this basis.

Every five years or so, Congress will revise the farm bill so that it can adapt to the new economic and social environment. Most of the agricultural programs in the Food, Conservation and Energy Act of 2008 will expire in 2012, and Congress is preparing a new farm bill. On April 26, 2012, the U.S. Senate Agriculture Committee passed the Agriculture Reform,Food and Jobs Act of 2012 (AgricultureReform, andJobsAct0f2012). The bill will be submitted to the House of Representatives, where it will be amended and formally signed by the President after it is passed by Congress. The 2012 farm bill will form the basic framework for U.S. agricultural policy for 2013-2017. The United States is one of the largest producers, consumers and traders of agricultural products in the world. Tracking the process of agricultural legislation in the United States will help China to grasp the changing trend of American agricultural policy and its important impact on the international agricultural market and trade in a timely and accurate manner.

Key Changes to 1.'s New Farm Bill

the 2012 Agriculture Bill passed by the Senate has 12 chapters, namely, commodity plan, crop insurance, environmental protection, nutrition assistance, trade, credit, horticulture, energy, scientific research, rural development, forestry and others. Compared with the 2008 Agriculture Bill, it has reduced by 3 chapters, namely, Chapter 1l Animal Husbandry, Chapter 13 Agricultural Products Futures and Chapter 15 Trade and Taxation in the 2008 Agriculture Bill, the contents of these three chapters are either canceled or integrated into other chapters. The changes in the specific contents are mainly reflected in the following aspects.

First, the establishment of an agricultural income risk guarantee (ARC) scheme to replace support policies such as direct payments (DP) and counter-cyclical payments (CCPS).

Direct payments and counter-cyclical payments are the main policy instruments in the 2008 Farm Bill commodity program to ensure that farmers achieve certain income targets. Direct payment is a kind of "unlinked" subsidy, similar to China's direct subsidy for growing grain. As long as farmers grow the specified agricultural products, they can receive subsidies according to the planting area registered in 1998-2001. Products that can receive direct payment include wheat, corn, Sorghum, barley, oats, cotton, rice, peanuts, soybeans and other oilseeds. Counter-cyclical payment means that when the effective price (the sum of the average market price and the direct payment rate) received by the farmer is lower than the target price (a reasonable price determined by the act to guarantee the farmer's income level), the farmer can receive a subsidy in the amount of the difference between the target price and the effective price. Both direct payments and countercyclical payments were eliminated in the 2012 farm bill, along with the elimination of the average crop choice program and the Supplemental Income Assistance payment program. These canceled projects will be replaced by a new commodity program, the Agricultural Income Risk Protection Program. When the income from crops grown by farmers is less than 89% of the average level in the last five years, the agricultural income risk guarantee scheme will start to provide subsidies to farmers, but the total amount of subsidies should not exceed 10% of the average level in the last five years. The plan also stipulates that farms earning more than $750000 a year after adjustment will not be allowed to apply for the Agricultural Risk Guarantee Program and reduces the maximum amount of subsidies that farms can receive to $50000. The range of products covered by the plan is basically the same as the original direct payment plan. Cotton was not included in the case of Brazil's lawsuit against the United States cotton subsidy.

Second, the range of products covered by crop insurance has been expanded, with the addition of the income insurance scheme for cotton (STAX) and the supplementary insurance option for other crops (SC0).

The new farm bill expands the range of products covered by crop insurance programs, mainly by adding horticultural crops such as fruits and vegetables. Budget funding has also increased, mainly through the addition of the cumulative income insurance scheme for cotton and the Supplementary Insurance Option (SCO) for other crops, which provide greater income security for cotton and other crop producers who purchase insurance, respectively. The cumulative income insurance plan is that when the cotton planting income within a county is less than 10% of the expected income, the plan will be triggered, and the loss of more than 10% of the expected income will be compensated by the plan, but the compensation is capped at 30% of the expected income. The supplementary insurance option provides protection for the income from planting crops other than cotton. Farmers can choose 85% of their personal output or 90% of the county average output as the upper limit for insurance. When the loss of output or income exceeds 10% of the normal level (21% for producers participating in the agricultural income risk protection plan), the plan will compensate according to the insured amount. The government will provide 80%(STAX) and 70%(SC0) premium subsidies to purchasers of the two insurance schemes, respectively.

Third, the Dairy Price Support Program, the Milk Revenue Loss Payment and the Dairy Export Stimulus Program were abolished, and the Dairy Profit Protection Program and the Market Stabilization Program were added.

Dairy is one of the key agricultural products supported by the United States, and the Dairy Profit Protection Program (DPMPP) and the Market Stabilization Program (DMSP) have been added to the new Farm Bill to replace the original dairy price support program (equivalent to the minimum purchase price policy for dairy products, the product range includes cheese, skimmed milk powder or milk, butter), milk revenue loss payments (equivalent to counter-cyclical payments for dairy products) and dairy export stimulus programs (export subsidies for dairy exporters). The dairy profit protection plan ensures that the production profit of milk (the difference between the average national milk price and the national feed cost) is not less than US $4/cwt (1 cwt is about 50.8kg). When the profit of dairy production is less than US $4/load for two consecutive months, the producer is subsidized according to the profit difference. The purpose of the dairy market stabilization plan is to maintain a balance between supply and demand by encouraging milk producers to scale back production when there is an oversupply of milk. The USDA has been given more authority and resources to develop measures to ensure that dairy prices and feed costs are accurately calculated.

Fourth, the new farm bill consolidates environmental protection projects from the original 23 to 10, and the funding budget for major projects has been cut.

Compared with the 2008 Agriculture Act, the 2012 Agriculture Act retains several larger environmental protection plans, such as the Fallow Plan (CRP) implemented to protect soil water resources, the Environmental Quality Stimulation Plan (EQIP) aimed at promoting the development of agricultural production while protecting and improving environmental quality, and the Environmental Protection Management Plan (CSP) that encourages the use of new technologies and new products to implement high-level environmental protection, some smaller and similar environmental protection projects were canceled or merged. Among them, the fallow area ceiling of the fallow plan will be gradually reduced from the current 1.296 million hm2 to 1.0125 million hm2 in 2017, and the environmental quality stimulus plan and environmental protection management plan will also reduce the scope of protection and funding budget. The new farm bill establishes two new environmental protection programs-the Agricultural Land Titled Protection Program (ACEP) and the Regional Cooperative Protection Program (RCPP). Agricultural land tenure protection plan is mainly the government through the purchase of agricultural land development rights to protect wetlands, grasslands and some arable land. The regional cooperative protection plan mainly encourages the government, Indian tribes, farmers' cooperatives and other organizations in a certain area to work with farmers to improve soil quality, water quality and wildlife habitat.

Fifth, bioenergy projects have been strengthened, and the budget for scientific research and horticulture projects has increased.

The U.S. Farm Bill is valid for five years, but the government generally makes a 10-year budget baseline. In the 2008 Farm Bill, the budget baseline for material energy is only retained until 2012, without further extension. This means that these bioenergy projects will be canceled after they expire in 2012, because no funds are set aside for bioenergy in the big plate of the government budget. But the new farm bill still continues the vast majority of bioenergy projects and provides them with a five-year budget of $0.8 billion, which must save money for bioenergy projects from other projects. In addition, the government has set aside $1.125 billion for the development of bioenergy projects over the next five years. In terms of scientific research, the 2012 Farm Bill not only retains the scientific research projects and funding budget in the original bill, but also increases the budget by $0.1 billion to establish a food and agricultural research fund to strengthen the basic and applied research of the USDA. The U.S. government continues to pay attention to the importance of horticultural crops and organic agriculture, and the new farm bill adds about $0.212 billion over five years to the development of horticultural crops and organic agriculture.

In addition, special mention needs to be made of nutrition programs, which are the largest item of expenditure in the United States farm bill. The 2012 Farm Bill basically maintains the basic policies and funding budget in the 2008 Farm Bill. The most important change is to modify the project rules to regulate the behavior of beneficiaries and food retailers in the implementation of the project, and encourage beneficiaries to purchase fruits and Healthy foods such as vegetables.

Key Features of the New 2. Farm Bill

through the analysis of the above-mentioned main changes, it is not difficult to find that the new farm bill passed by the U.S. Senate Agriculture Committee has the following characteristics in terms of content adjustment.

First, high agricultural prices make it possible for the new farm bill to shrink its budget. Since 2006, the rapid development of biomass energy and the rapid growth of agricultural exports have led to a rapid increase in the demand for agricultural products in the United States. The inventory of major grain and oil crops has dropped to a historical low, coupled with the depreciation of the US dollar, making the prices of agricultural products run at a high level most of the time, and the operation of farms has been greatly improved. The U.S. Congress expects that agricultural product prices will continue to be generally higher than the target price in the next five years. The original policy measures such as direct payment, counter-cyclical payment, average crop income selection plan and supplementary income assistance payment plan have weakened their role in protecting farmers' income. Therefore, they were canceled in the new agricultural bill and replaced by a new agricultural income risk protection project. This change saves about 1.5 billion US dollars in fiscal expenditure every year. Together with about $0.8 billion in fiscal spending saved by the combined restructuring of environmental and nutrition programs, the entire farm bill is expected to save about $2.36 billion a year in already large deficit spending.

Second, ensuring that farmers achieve their income targets remains a central element. In the context of the government's tight budget, although the new farm bill has streamlined and optimized agricultural income support programs and eliminated the original complex price and income support measures such as direct payments and counter-cyclical payments, the establishment of an agricultural income risk protection plan and a huge insurance plan can more effectively ensure that farmers achieve their income goals and ensure a stronger agricultural safety net in the United States. First, when farmers lose more than 11% of their income due to natural or market factors, the Agricultural Income Risk Guarantee Program can provide a 10% income subsidy in a timely manner. Second, if the loss of income exceeds 21% or more, the new cotton income insurance plan and supplementary insurance options for other crops can provide farmers with more compensation for loss of income. It should be pointed out that although the new farm bill names new projects as risk management or crop insurance, its essential attributes need to be seen. The agricultural income risk protection plan is actually an income subsidy for farmers when they lose their income. The cotton income insurance plan and supplementary insurance options for other crops not only subsidize farmers by 70% to 80%, more importantly, the standard of its guarantee is still the loss of farmers' income, and the compensation is very large, not simply commercial insurance for general natural disasters.

Third, biomass energy has been strengthened as an important means to support the high prices of agricultural products. In recent years, the rapid development of global biomass energy has formed a huge demand for agricultural products, and has become an important factor to promote the price of agricultural products. Especially in the United States, with the rapid growth of fuel ethanol production, the demand for corn is growing rapidly. In 2011, the amount of corn used to produce fuel ethanol reached 1.3 billion t, an increase of 0.11 billion t over 2000, accounting for 40% of the corn production in the United States. Affected by this, corn prices also showed an obvious upward trend. The rapid rise in corn prices through the mutual transmission between agricultural products, led to the continuous rise in the prices of wheat, soybeans, meat, eggs and other products, from this point of view, vigorously developing biomass energy has become an effective means to support the high prices of agricultural products in the United States, and may even become an important strategic means to effectively regulate the prices of energy and agricultural products. As a result, the new farm bill increased support for biomass energy projects despite overall budget cuts.

Fourth, the new farm bill adjusts the means of support to better adapt to WTO rules. The export of agricultural products is one of the important driving forces for the development of the US agricultural economy, and it also makes an important contribution to balancing the trade deficit of other industries. The United States has implemented a plan to double its agricultural exports and will continue to vigorously explore overseas markets and expand agricultural exports in the future. However, the original U.S. policy system based on price support and high subsidies for some agricultural products have caused dissatisfaction in many countries, and even encountered countervailing lawsuits. The most typical case is Brazil's lawsuit against the U.S. cotton subsidy case. In order to avoid more subsidy litigation disputes while strengthening support for domestic agriculture, the new farm bill has made major adjustments to subsidy instruments and programs such as price support. Reduced direct support for prices and income, but more indirect support for farm income through agricultural income risk protection programs and crop insurance, with greater concealment. For example, in response to the lawsuit filed by Brazil in wT0, the new farm bill no longer provides price and income support for cotton, but establishes an income insurance scheme specifically for cotton to provide income security for cotton producers; the dairy price support scheme and export stimulus scheme are canceled, but the dairy profit protection scheme and market stabilization scheme are added.

Fifth, the new farm bill pays more attention to the pertinence of policies. The original intention of many agricultural subsidy policies is to help small and medium-sized farms, but due to unreasonable policy design, large farms often receive higher subsidies, making small and medium-sized farms unable to compete fairly with large farms. The new farm bill restricts the farm's application conditions and the maximum subsidy that can be obtained. For example, in the commodity plan, farms with adjusted annual income of more than $750000 are not allowed to apply for the Agricultural Risk Guarantee Program and reduce the maximum amount of subsidies that farms can receive to $50000.

In general, the 2012 Agricultural Reform, Food and Employment Act passed by the Senate and the 2012 Federal Agricultural Reform and Risk Management Act passed by the House of Representatives in July are consistent in the direction of reform, that is, on the one hand, through streamlining and optimizing agricultural projects Reduce government fiscal expenditures, on the other hand, focus on risk prevention to build a more effective agricultural safety net. However, in terms of specific content, there are still some differences between the two. For example, in terms of building an agricultural safety net, the Senate bill pays more attention to the protection of producers' income rather than price support, while the House bill allows producers to choose between price subsidies and income subsidies.