Agricultural Act of 2014

Conservation Compliance and Crop Insurance

March 12, 2014

Bruce KnightSCS

Bill WenzelIWLA

Sam WillettNCGA

Agricultural Act of 2014Conservation Compliance Background Broad agreement among agriculture,

crop insurance and conservation groups Support for relinking conservation

compliance with crop insurance premium subsidies

Oppose Adjusted Gross Income test for crop insurance

Agreement included in final law

Agricultural Act of 2014Conservation Compliance Background Removal of direct payments Crop insurance increasing role as

primary farm safety net Need for strong farm and natural

resource safety net More defensible for taxpayer

Agricultural Act of 2014Conservation Compliance + Crop Ins. Addresses conservation of two

fragile lands Highly Erodible Land (HEL) Wetlands

Involves 3 USDA agencies Farm Service Agency, Natural

Resources Conservation Service, Risk Management Agency

Conservation Compliance and the 2014 Farm Bill

March 12, 2014 Strategic Conservation Solutions

Agricultural Act of 2014

Conservation Compliance

Enacted in 1985 Farm Bill Linked Farm Program Benefits to

management of certain fragile lands

Estimated that compliance accounts for 25% of the soil loss reduction between 1982 and 1997

Highly Erodible Land (HEL) requires a conservation plan.

Wetlands can be farmed, but cannot be drained.

Conservation Compliance 1985 – linked conservation compliance

to crop insurance and farm program benefits

1990 – expanded wetlands coverage, expanded linkage to conservation programs, penalties modified to fit the violation

1996 – crop insurance was decoupled, provisions to allow a producer one year to come into compliance

2014 – conservation compliance again linked with crop insurance subsidies, as well as all programs within the commodity title (Title I)

Benefits Linked to Compliance in the 2014 Farm Bill

Disaster Payments Conservation Programs Farm Storage Facility Loans Production Loans from USDA Marketing loans Crop insurance premium subsidies Both the Agricultural Risk Coverage and

Price Loss Coverage options (which replaced direct payments)

STAX: Stacked Income Protection for producers of upland cotton

Swampbuster Enforcement (Farm Programs)

Filling, draining, dredging or leveling of wetlands prohibited after 1990.

Farming of wetlands under natural conditions is allowed.

Drainage of uplands and prior converted wetlands is allowed.

Minimal effects and mitigation is allowed.

No graduated penalties for intentional violations

Farmer Impact

Fear of increased regulation Fear of regulatory creep Compliance cost is actually low

and relatively easy for most farmers

Uncertainty about crop insurance eligibility

Uncertainty about changes in linkage to compliance

Implementation

Conservation compliance is forward looking from February 7, 2014 (date of enactment)

While farmers will be able to sign up for programs under the new Farm Bill for the current crop year, rules tying conservation compliance to eligibility for crop-insurance subsidies go into effect with 2016 crop year.

Rules and Regulations

Crop insurance compliance will be developed by FSA, RMA and NRCS

No significant changes are necessary for “traditional compliance”

Released in 2014 Implemented in 2015? Impact the 2016 crop year in the

case of crop insurance.

How Big is the Issue?

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110

100

200

300

400

500

600

700

Total Number of Violations (Wetlands + HEL)

Total

Producer Impacts of Enforcement

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Requested Benefits

2899333.8

3

4714544.5

5

3656949.7

3

8680982.66999999

13631132.

29

14002863.

95

17136231.

26

14105044.

21

8735237.9

1

24208093.

58

16819391.

7

15949596.

78

9636901.5

5637745.2

8

6388643.0

5

7527664.3

9

6936664.1

Reinstated Benefits

1817978.1

3

3420131.9

2810599.1

6

7332965.1

3

13219814.

24

13221090.

16

15212725.

25

12858989.

46

8026627.2

5

23048420.

22

14809946.

81

14955027.

21

8685864.0

5

4596745.8

5527939.8

2

6442161.4

3

5825217.9

$2,500,000.00

$7,500,000.00

$12,500,000.00

$17,500,000.00

$22,500,000.00

$27,500,000.00

Producer Benefits Influenced by Compliance Vio-lations

Producer B

enefi

ts ($)

Conclusion

Compliance is still not a “gotcha program”

If you were in compliance in the past - no change.

If you were out of compliance in the past – decisions to be made.

Coalition efforts and cohesiveness will be important to help guide the regulatory process.

Bruce KnightStrategic Conservation

Solutions50 F Street, NW Suite 900Washington, D.C. 20001202-879-0801 (office)202-213-3887 (mobile)bknight@stratconserve.com

CONSERVATION COMPLIANCE AND CROP INSURANCE

Premium Subsidy Eligibility

Highly Erodible Lands (HEL)

Agricultural Act of 2014

Conservation Compliance

Number one priority for most conservation groups

Compliance is main source of protection for farmed wetlands and highly erodible land (HEL)

Credited with protecting an estimated 3.3 million wetland acres and 140 million HEL acres

93% of producers in compliance

Compliance - Highly Erodible Land

Requirements of 1985 Farm Bill largely unchanged

Producers receiving farm program benefits who are farming land prone to erosion must develop and implement a conservation plan

Producers must file an annual certification of compliance (AD – 1026)

Changes to HEL RequirementsAgricultural Act of 2014

Producers subject to compliance for first time have 5 years to develop conservation plan

NRCS will give priority to new producers who need assistance in developing and implementing conservation plans

There are no clawback provisions for premium assistance repayment for violations

Ineligibility for premium assistance only after Final Determination of violation

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Conservation Compliance and Producer Perspective

Agricultural Act of 2014

Agricultural Act of 2014Conservation Compliance – Producer Perspective Forward looking application of

regulations and penalties Premium assistance cannot be

withdrawn in year of violation No clawback on previous year’s

assistance regardless of appeals process Compliance required to restore premium

assistance for future crops

Agricultural Act of 2014Conservation Compliance – Producer Perspective Tenant Protections

No liability for land owner refusal to meet requirements

Grace Period for newly covered farmers Five years for HEL and wetland

compliance Two years for producers who drain

wetlands to begin mitigation

Agricultural Act of 2014Conservation Compliance – Producer Perspective Whole Farm subject to ineligibility

in the event of violations Current allows wetland conversion

with mitigation Question remains regarding impact

on a producer’s other farms

Questions?

www.farmland.orgwww.nacdnet.orgwww.iwla.orgwww.ncga.com

Agricultural Act of 2014