New legislation to drastically impact Iowa's economy
Iowans around the state have their eyes on the nearly $500 billion legislation signed into law earlier this month and how it will affect their bottom lines.
The Agriculture Act of 2014, commonly called the farm bill, is particularly important to Iowans because agriculture contributes billions of dollars to the state’s economy. According to the Iowa Farm Bureau, in 2007 — the most recent year for which official data have been released — Iowa agriculture products were valued at more than $20 billion.
The legislation sets farming and nutrition policy for the next five years throughout the United States. Experts in agriculture and nutrition policy alike say the passage of the bill will provide a greater sense of certainty in the industry.
“The first factor is relief,” said Craig Hill, the president of the Iowa Farm Bureau. “We have normally amended our farm policy every five years, and this was due in 2012, so we have been in limbo.”
The 2014 farm bill appeared an almost unattainable goal when the 2008 farm bill expired in September 2012. Congress has been staunchly divided on how much money and which programs to cut from the bill for nearly a year and a half.
The bill was passed on Feb. 4 and signed by President Obama three days later. Ryan Drollette, a farm-management specialist at the Iowa State University Extension Office of Johnson County, said the U.S. Department of Agriculture is interpreting the bill and writing regulations that will be implemented later this year.
The two major sticking points in congressional debate came down to direct payments to farmers and the amount of money spent on nutrition programs such as the Supplemental Nutrition Assistance Program, more commonly known as food stamps. This legislation eliminates direct payments altogether and cuts spending on food stamps by $8 billion, according to the U.S. Senate Committee on Agriculture, Nutrition, and Forestry website.
Overall, the legislation could save the United States more than $16 billion over 10 years, according to the Congressional Budget Office. However, the legislation will only be in effect for the next five years.
Nutrition programs, such as food stamps, make up 80 percent of the legislation. In 2010, Iowa was among the top-10 states for the number of eligible participants receiving benefits, at 88 percent.
The majority of the $8 billion being cut from the food-stamp program won’t negatively affect Iowans because the savings comes from tightening a regulation in an area in which Iowa has stricter standards.
In Iowa, food-stamp recipients who also receive payments from the Low-Income Home Energy Assistance Program to help pay home heating and cooling costs are eligible for a deduction from their income that is taken into consideration when their amount of food-stamp benefits is determined. As a result, households with this deduction would qualify for around $90 more a month in food-stamp benefits.
Prior to the 2014 farm-bill legislation, households receiving heating assistance payments could qualify for the food-stamps deduction regardless of the amount of the payment. Now, assistance payments must be at least $20 annually to qualify for the deduction.
Iowa heating-assistance payments are based on a point system that takes such factors as income and household size into account. The lowest number of points a household could receive would equal $40 annually.
Food-stamp recipients in 17 other states were receiving payments as low as $1 annually from the utilities assistance program in order to qualify for the deduction in the food stamp program.
“Families that are going to be hurt most are the ones who live in the 17 states that had that provision on the heating allowance,” said Helen Jensen, a professor of economics at ISU. “For them, it will be quite significant.”
Jensen said the new bill contains pilot programs that soon will help Iowans receiving food stamps shop for healthier foods such as vegetables at local farmers’ markets.
Direct Payments Cut
In the agriculture side of the bill, Iowa farm group representatives are pleased with the legislation, saying it strengthens programs that farmers rely on. For several years, farmers have received direct-subsidy payments based on the historical acreage of their farms regardless of market conditions on any given year. These payments were designed to help farmers maintain operations against poor weather or low prices.
According to the Environmental Working Group, a national environmental health research and advocacy organization, Iowa farmers received more than $4 billion in direct payments from1995 through 2012. Yet, Iowa farm group leaders said they are OK with these benefits being eliminated in the new legislation.
“We want the budget to be balanced,” Hill said. “We want to do our share, and we’re not going to fight to retain these dollars because more important to us is a good crop-insurance program and also the conservation tools that we have.”
Common Midwest crops such as corn have been profitable in the past few years, and farmers have relied less on direct payments. According to the USDA, corn prices have not fallen below $3.50 a bushel in the past five years. In the 2012-13 season corn prices were as high as $6.89 a bushel.
But Drollette said farmers who harvest other crops could have concerns.
“The cotton industry is an example of where the loss of the direct payments is a concern,” he wrote in an email. “… There has been a lot of consolidation in the industry, which has resulted in acres that have been lost to other commodities.”
Crop insurance strengthened
The continuation of crop insurance remains a vital component of the 2014 legislation for Iowa farmers.
Drollette said crop insurance wouldn’t have disappeared if the 2014 bill had not passed, but private insurance companies would not have received government funding that helps keep premiums down. The legislation includes four new programs for Iowa crop farmers designed to help reduce the money they have at risk in the event of a crop failure or low prices.
The old direct payments were based on what farmers long ago registered as their “base acres.” This is a submission to the government in which farmers record how many acres they plant and what crops are planted. Over time, farmers have changed what they plant and by how much but have not been able to update their submissions. Drollette said this is why one of the complaints of direct payment critics is farmers get paid for crops they don’t plant.
The new legislation allows farmers to update their base acres. A crop farmer can choose to sign up for one of the new programs to help protect him or her if prices or revenue fall below specified thresholds, depending on the program chosen.
Twenty-three environmental conservation programs incentivizing farmers to take conservation efforts have been consolidated into 13.
Some conservation practices Iowa farmers implement include retiring fragile acres for several years, planting grass buffer zones around waterways to catch runoff, and minimizing tillage.
Ben Bader, a farmer from Black Hawk County, said farmers often get a bad rap for not doing enough to protect the environment, but conservation is important to him and other Iowa farmers.
“We can all see the benefit of saving our soil and water,” he said. “And no one has more interest in that than a farmer. I think it’s also important to our state as a whole so if we’re going to put money somewhere it should be in conservation.”
Hill said the only policy issue he wishes the bill had changed concerns meat package labeling. Under current U.S. law, the country the animal is born and raised in must be printed on the packaging when meat is processed and packaged.
Hill said this “country-of-origin labeling” is controversial for two reasons. First, buyers may not want to buy meat from other countries. Second, packaging plants lose money by having to segregate and then separately package meat from animals born in different countries such as Canada and Mexico. In fact, after the country-of-origin law took effect in 2009, both of the U.S. border countries sought legal action with the non-binding World Trade Organization.
WTO members establish and enforce rulings. The organization ruled that the U.S. law treats pork and beef from Canada and Mexico less favorably than U.S. livestock. But they also found the law meets a legitimate goal of providing consumers with relevant information.
A Canadian Pork Council news release from mid-2013 said the effect of the country-of-origin law has been “horrendous,” leading to a 41 percent decrease in U.S. imports of Canadian hogs since the law was introduced. Cattle imports have gone down by 46 percent in the same time period. Canadian officials have suggested Canada may retaliate with legislation creating barriers to U.S. trade.
Exports to Canada and Mexico each bring in more than $200 billion to the U.S. economy.
Despite Hill’s concerns, Steve Swenka, the vice president of the Johnson County Farm Bureau, said there could be legitimate reasons consumers may not want meat products from other countries, specifically beef from Mexico. He said cattle in Mexico are bred differently so that the cattle can withstand the heat and, therefore, the quality of beef may not be as high.
“Probably for me and for the American farmers who raise their own product, I think it’s [country-of-origin labeling] is a good thing,” he said. “I think for the American cattlemen it will be a very good thing that they will have a brand identity and be proud of that.”
The question remains whether there will be as much difficulty getting a new bill passed once this legislation expires.
Hill said he is hopeful that Congress won’t face as much gridlock next time around but that he expects tension.
“We [in agriculture] are shrinking in our political presence in Washington,” he said. “It will get harder and harder, and there will be things that will be essential to every citizen in the U.S. to make sure we have a reliable and safe food supply.”
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