The U.S. Department of Agriculture has moved to close a nearly 30-year-old provision that it says some farming operations have used to increase their federal safety-net payments.
Under a new rule, finalized Tuesday, farms operated as joint ventures and general partnerships must demonstrate that any extra managers are actively running the business in order for those individuals to qualify for federal payments. The rule exempts family farms, the USDA said.
"The federal farm safety-net programs are designed to protect against unanticipated changes in the marketplace for those who actively share in the risk of that farming operation," U.S. Agriculture Secretary Tom Vilsack said in a news release. "To ensure that help goes to those who genuinely need it, such as America's farm families, the Farm Bill authorized USDA to close a loophole and limit payments [to] those not directly involved on a daily basis in non-family farm management."
Andrew Grobmyer, executive vice president of the Arkansas Agricultural Council, said Wednesday that his group is opposed to means testing for farm programs, "including those that place a bias against farming operations of a certain scale or business model."
The Agricultural Council is a trade group representing row crop farmers.
"We are going to closely review the new USDA policy to determine its ultimate impact on Arkansas farms, but it will likely directly impact several farm businesses in Arkansas at a time when these businesses are struggling mightily due to low commodity prices," Grobmyer said. "The farm safety-net programs should not discriminate based on size or structure. Such actions could cause significant disruptions in the agriculture economy and food production."
Steve Eddington, a spokesman for the Arkansas Farm Bureau, said the bureau had opposed the rule but added that the exemption for family farms would protect about 97 percent of Arkansas farms.
"The vast majority of Arkansas farms won't be affected," Eddington said. "But it's a very big deal for those whose farms are going to be impacted."
Since 1987, the USDA said, the rules defining "actively engaged" farm managers had been so broadly interpreted that some general partnerships and joint ventures added individuals who "did not substantially contribute to management" in order to qualify for more payments.
The new rule applies to joint ventures and general partnerships seeking more than one farm manager. It requires any additional managers to work "measurable, documented" hours and engage in "key management activities" each year, the USDA said. Large, complex operations may be allowed up to three qualifying managers, according to the agency.
The new approach was mandated by the 2014 farm bill, which overturned long-standing agricultural policies. Under the legislation, farmers get safety-net assistance only when markets or yields are down. Previous farm bills issued payments regardless of market conditions or crop yield to provide producers with a minimum guaranteed income.
Written at a time of high commodity prices, the 2014 bill was presented by supporters as a way to save the federal government billions of dollars over 10 years. Since then, commodity prices have plunged, and the USDA now predicts net farm income will decline 38.2 percent in 2015.
Operators of 16,339 Arkansas farms qualified for safety-net payments for the 2014 market year, according to USDA. As of Dec. 1, payments to those farmers totaled $217,760,098, a spokesman for the USDA's Arkansas Farm Service Agency said Wednesday. He said only a small number of payments for 2014 were still outstanding.
Separately, a USDA spokesman in Washington said Wednesday that the agency didn't have an estimate of how much money the new active management rule would save taxpayers.
As required by Congress, the USDA said, the new rule does not apply to family farms nor change regulations governing contributions of land, capital, equipment or labor.
The rule goes into effect for the 2016 crop year for most farms, the agency said. Farms that have already planted fall crops for 2016 have until the 2017 crop year to comply, the USDA said.
Business on 12/17/2015