Minding Ag's Business

Don't Trip on Farm Bill Technicalities

By Marcia Zarley Taylor , DTN Executive Editor

The current farm program safety net--downsized as it is compared to past legislation--still could mean the difference between profit and loss for many farmers in 2016. So lenders and farm program specialists are urging growers not to overlook technicalities that affect eligibility for everything from Farm Service Agency checks, FSA loans, crop insurance subsidies and conservation payments under current Farm Bill rules.

"Farmers may not understand that unlike past farm programs, one misstep can mean they're out of compliance for all these USDA benefits. That's a huge change from prior law," says Jason Alexander, Farm Credit Mid-America's vice president for crop insurance. Specifically, growers should be very aware of new conservation and wetlands cross compliance features for crop insurance subsidies, he warns.

Alexander expects Ohio's 2015 Agriculture Risk Coverage (ARC-CO) corn and soybean payments to run the maximum when payable next October, based on customers' disappointing 2015 yield reports and national price forecasts. That could total $60-$80/acre ARC-CO for corn and $40-$55 for soybeans, Alexander estimates. Payment limits per person run $125,000, but many farms operate with spouses and multiple partners. That means the total at risk per farm for noncompliance could run much more.

Here's a list of top issues and deadlines that could trip growers in 2016:

1. Conservation compliance. Significantly, failure to meet new conservation compliance and wetlands protection standards will deny federal subsidies on crop insurance premiums under the 2014 Farm Bill. Prior law already denied most other USDA benefits, such as FSA farm program payments or FSA loans.

Violators will still be eligible to buy crop insurance, but noncompliance can send premiums up four times as much as what you pay now, Alexander warns.

To comply with the Highly Erodible Land Conservation (HELC) and Wetlands Conservation (WC) provisions of the new Farm Bill, producers must fill out and sign form AD-1026 certifying they will not:

--Plant or produce an agricultural commodity on highly erodible land without following an NRCS approved conservation plan or system;

--Plant or produce an agricultural commodity on a converted wetland; or

--Convert a wetland which makes the production of an agricultural commodity possible.

According to USDA, producers planning to conduct activities that may affect their HEL or WC compliance (for example by removing fence rows, conducting drainage activities, or combining fields) must notify FSA by filing form AD-1026. FSA will notify the Natural Resources Conservation Service and NCRS will then provide highly erodible land or wetland technical evaluations and issue determinations if needed.

(See detailed conservation compliance rules at http://www.nrcs.usda.gov/…)

"The salvation is once you have filed the AD-1026 form with FSA, you don't have to refile or update the form unless there are changes to the operation or new activities that change your status," says Wayne Myers, a farm program specialist with the consulting firm KCOE-Isom. The form is not farm or crop specific, RMA notes, "but covers all land in all states and counties in which the person has an interest. Therefore, a person only completes one form for all their acreage."

2. Retroactive filings. The problem is you must have filed Form AD-1026 certifying conservation compliance at the Farm Service Agency by June 1 of the previous year to collect government payments in the current year.

"If you're a new farmer, rarely would you set up the paperwork by the prior year. To obtain eligibility, you must file an exemption with your crop insurance agent by the earliest applicable crop insurance closing date," Alexander points out. For the bulk of the Grain Belt, that's March 15.

3. New entities. If you've created a new legal entity, such as a limited liability company or a corporation, it must have an AD-1026 on file. Again, you can file for an exemption retroactively but no later than the first applicable crop insurance closing date for the current crop year. Then file an AD-1026 for the first time for the new entity.

4. Landowner oversights. Share-rent landowners must also be in compliance with an AD-1026, otherwise payments for the entire operation could be in jeopardy or prorated, Alexander says.

5. Deceased operators. A survivor needs to have an updated AD-1026 file at FSA. There's no automatic carryover of eligibility to a surviving spouse, for example.

6. Re-enrollment for ARC or PLC. The choice between ARC and Price Loss Coverage programs was completed last year and remains in effect through 2018. However producers must renew their contracts annually to receive coverage. Deadline for the 2016 year is Aug. 1, 2016.

7. Match pay to farm location. On another front, big pay gaps between neighboring counties sprouted in 2015, with some paying as much as $109/acre for ARC-CO corn payments and others zero. Initially, that became a problem for growers whose farms straddled multiple counties since USDA paid farm program checks based on a grower's administrative county, not necessarily where the land was physically located.

After a public outcry, the agency reversed itself and gave operators until Feb. 1, 2016 to request calculations of their ARC-CO 2014 payments based on the county offices where land was located (see DTN coverage http://goo.gl/…). The same option will be available later for 2015 crops. For 2016 and beyond, growers who want to match payments with the physical location of their land will need to reconstitute their farms (into multiple county offices).

However, Myers points out that FSA has yet to issue field regulations or guidance for counties on how to administer 2014 recalculations. Without that, he says, it's almost certain FSA will need to extend that Feb. 1 date.

On the other hand, don't let a technicality stand between you the sizable benefits that flow through USDA. You still have a few days to request recalculation at your county FSA office. Meanwhile, crop insurance closing dates draw near.

Follow Marcia Taylor on Twitter@MarciaZTaylor

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