Farm Bill Positive for Western Nebraska Sugar Beet, Bean Growers - UNL Economist

Farm Bill Positive for Western Nebraska Sugar Beet, Bean Growers - UNL Economist

May 23, 2008

The 2008 Farm Bill contains some positive news for sugar beet and dry edible bean producers in western Nebraska, according to a University of Nebraska-Lincoln economist. Congress voted Thursday to override President Bush's veto of the Food, Conservation and Energy Act.

Overall, the new legislation continues the basic commodities title programs in the 2002 Farm Bill, with some tweaks, such as income limits and a new, state-level revenue protection system.

Sugar beet producers should continue to receive strong prices over the next five years, the life of the farm bill, says Paul Burgener, economist at the Panhandle Research and Extension Center. The 2008 legislation modifies and extends the current sugar program. But it also contains a new provision protecting domestic sugar producers from imported sugar by using the excess imported sugar for ethanol.

Burgener said the new farm bill raises the loan rate for sugar by a quarter cent per year for three years, to 24 cents for beet sugar. The loan rate is a guaranteed minimum price. But the new bill also sets the allotment quota to a minimum of 85% of domestic sugar consumption, meaning that no more than 15% of U.S. consumption can come from imported sugar. If imported sugar exceeds that level through NAFTA (the North American Free Trade Agreement) or CAFTA (the Central America Free Trade Agreement), the government will buy the surplus and sell it to ethanol producers, according to Burgener. "That's a big step because one of our concerns was that free-trade sugar would create an over-supply problem in the U.S.," Burgener said.

Under NAFTA, the North American Free Trade Agreement, the tariff on imported sugar ended in January, and there was concern that imports would increase, he said.

Dry edible bean growers also get some protection, and a new title, under the 2008 Farm Bill. The new farm bill continues existing planting restriction offsets that reduce program payments to farmers who plant some of their program acreage to fruits and vegetables (including dry edible beans). This has the effect of restricting dry bean acreage in other parts of the country, where a higher percentage of a farmer's acreage is typically planted to program commodities. This tends to prevent surpluses that would drive prices down.

The '08 farm bill also establishes a whole new title, Horticulture and Organic Agriculture, that includes dry beans and other crops classified as fruits and vegetables.

Agricultural research in western Nebraska also got a boost in the new legislation, according to Burgener. The Farm Bill Research Title expands specialty crop research to $466 million over 10 years to extend a program that provides block grants to states for research into specialty crops (including many of the crops grown in the Panhandle, such as sugar beets and dry edible beans). A provision also was added for fruit and vegetable promotion..

Burgener said the 2008 Farm Bill has several other provisions that will affect western Nebraska:

  • The Energy Title provides $1 billion for research and loan guarantees for renewable energy, such as biofuels. This includes $320 million in loan guarantees for biorefineries producing advanced biofuels, $35 million for a new program to help existing ethanol facilities reduce their fossil fuel use, and $120 million for biomass research and development.
  • Conservation spending is increased by $7.9 billion overall. The Conservation Reserve Program (CRP) was reauthorized, the Wetlands Reserve Program was expanded, the Environmental Quality Incentives Program (EQIP) was increased by $3.4 billion, and the Conservation Security Programm was extended.
  • Crop Insurance will take a cut. Administrative and operating reimbursement to crop insurance companies was decreased by 2.3%. Data mining for crop insurance records to reduce waste, fraud and abuse was expanded.
  • The Commodity Title imposes a cap on average adjusted gross income for eligibility to receive farm-program payments. Non-farm income has a cap of $500,000, and farm income has a cap of $750,000, after which a producer will no longer be eligible for direct payments.
  • The Commodity Title also offers producers the option of enrolling in a new, revenue-based counter-cyclical program. Known as the Average Crop Revenue Election (ACRE) program, it starts in crop year 2009. It is a state-based revenue guarantee for participants based on the five-year state average yield and two-year national average price. ACRE provides producers with payments for a commodity when the actual state revenue for the commodity is less than the revenue guarantee. For those who enroll, ACRE would replace the counter-cyclical part of the commodity price support program.

Bush, in vetoing the Farm Bill, said that, among other things, the bill increases spending on subsidies and fails to include farm program reforms he sought. Burgener said it's important to remember that most of the money in the farm bill isn't spent on farm programs, but nutrition, and that proportion is increasing.

In the 2002 Farm Bill, nutrition accounted for 62% of the spending, commodities 23%, and other programs 15%. In the 2008 Farm Bill, nutrition's share is 74%, commodities 10% and other programs 16%. Burgener said projected spending on commodities, conservation and trade in the 2008 bill is $72 to $74 billion, $20 billion less than the $95 billion actually spent under the 2002 bill.

David Ostdiek
Communications Specialist
Panhandle Research and Extension Center