Market Intel
October 17, 2022
Market Intel / October 17, 2022
Every five years Congress passes legislation that sets national policy on agriculture, nutrition, conservation and forestry. The first real farm bill was the Agricultural Adjustment Act of 1933, part of the government’s New Deal response to the Great Depression, following a decade of failed efforts to address low crop prices after World War I. The original goal was to raise prices for farmers to a level at ‘parity’ with 1910-1914. Over the 18 farm bills that have been passed since 1933, various provisions and programs have been added including those related to crop insurance, conservation and nutrition. Livestock, though, has had a limited place in all of these farm bills, including the most recent version, the Agriculture Improvement Act of 2018 (PL 115-334), set to expire in 2023.
This Market Intel will help readers better understand the livestock-related provisions scattered through the farm bill, what they do for U.S. livestock producers, and other risk management tools that are also available outside of the farm bill.
What’s in the Farm Bill for Livestock Producers
Provisions related to livestock inspection restrictions first appeared in the farm bill in 1996 under the Miscellaneous Title. In 2008 livestock was given its own title, Title XI, but was moved back under Miscellaneous in 2018. The 2018 farm bill did very little to expand livestock provisions under the Miscellaneous Title.
In 2014, three livestock-related programs were permanently incorporated as supplemental disaster programs under Title I, which covers commodity programs. This title provides certainty and predictability to eligible producers by reauthorizing and improving commodity, marketing loan, sugar, dairy and disaster programs. The three livestock programs introduced in the 2014 farm bill are:
For more details on these programs, please see our Market Intel, Revisiting Disaster Programs in the Farm Bill.
Title XII Subtitle A: Livestock
Livestock does exist in the Agricultural Improvement Act of 2018 as subtitle A under Title XII, also known as the Miscellaneous Title. Historically, the Miscellaneous Title has included a variety of provisions and has served as an incubator for programs to grow into their own titles.
Other Livestock Risk Management Tools
There are several livestock insurance products that have been developed outside of the legislative process, though they are supported by farm bill resources.
Livestock Risk Protection (LRP) is an insurance risk management tool that provides protection against price declines. It is available for feeder cattle, fed cattle and swine. Producers may choose from a variety of coverage levels and insurance periods that correspond to when covered livestock are sold.
The Pasture Rangeland Forage Pilot Insurance Program (PRF) was designed to provide insurance coverage on pasture, rangeland or forage acres. The PRF program uses a rainfall index to determine precipitation for coverage purposes. The rainfall index is based on weather data collected by the National Oceanic and Atmospheric Administration Climate Prediction Center (NOAA CPC). This risk management tool is best suited for producers and insures against a decline in the rainfall index.
Livestock Gross Margin (LGM) provides protection against loss of gross margin. This insurance product is available for cattle, swine and dairy. Gross margin is calculated slightly differently for dairy than cattle and swine because it uses the value of milk rather than the value of the actual livestock. LGM uses futures prices to determine expected gross margin and actual gross margin. These prices are calculated using simple averages of Chicago Mercantile Exchange Group (CMEG) futures contract daily settlement prices and are not based on the prices farmers receive at market.
Summary and Conclusions
From having its own title in the 2008 farm bill, to a subtitle in 2018, livestock has historically made scattered appearances in the farm bill. Livestock was included in three new permanent supplemental disaster programs under Title I of the 2014 farm bill. The 2018 farm bill included livestock as Title XII, also known as the Miscellaneous Title, Subtitle A. This subtitle revised the existing National Animal Health Laboratory Network authority to also establish the National Animal Disease Preparedness and Response Program and the National Animal Vaccine and Veterinary Countermeasures Bank. Farmers should evaluate all tools – those included in and outside of the farm bill – to determine which best suits their needs.
Contact:
Bernt Nelson
Economist
(202) 406 – 3623
berntn@fb.org
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