The Food, Conservation, and Energy Act of 2008 (2008 Farm Act)
provides soybean, other oilseed (sunflowerseed, canola, rapeseed,
safflower, mustard seed, flaxseed, crambe, and sesame), and peanut
producers access to marketing loan benefits, direct payments (DPs),
counter-cyclical payments (CCPs), and average crop revenue election
(ACRE) payments. In addition, many producers may benefit from
subsidized crop and revenue insurance available under previous
legislation, as well as from new permanent disaster assistance.
Moreover, oilseed producers are affected by conservation and trade
Under the 2008 Farm Act, program participants are given almost
complete flexibility in deciding which crops to plant. Farmers are
permitted to plant all cropland acreage on the farm to any crop,
with some limitations on planting fruits and vegetables on acreage
eligible for DPs and CCPs. Eligibility for DPs and CCPs is based on
historical production parameters, and no commodity production is
required to receive payments, but the land must be kept in
agricultural use (which includes fallow). Participants in all
programs must comply with certain conservation and wetland
General information follows on government programs affecting
soybean and other oilseed producers' management decisions and
Marketing Assistance Loans and Loan
The 2008 Farm Act extends nonrecourse commodity loans with
marketing loan provisions for crop years 2008-12. All current
soybean, other oilseed, and peanut production is eligible for the
program. National loan rates are set in the legislation.
|National loan rates
|| $9.30/hundredweight (cwt)
The marketing assistance loan program is designed to provide
short-term financing in all price environments, as well as to
assist producers when market prices are low. Because the loans are
nonrecourse, producers may forfeit the crop rather than pay back
the loan if prices fall below the loan rate plus interest.
To avoid forfeitures, the marketing loan provisions allow
producers to repay commodity loans at a rate less than the original
loan rate plus interest when posted county prices (PCPs) are below
commodity loan rates plus interest. USDA operates the program in
this manner to minimize potential commodity loan forfeitures and
subsequent government accumulation of stocks. When producers repay
their nonrecourse commodity loans to USDA's Commodity Credit
Corporation (CCC) at a rate less than the loan rate, the difference
between the two rates is called a marketing loan gain (MLG) and
represents a program benefit to producers. In addition, any accrued
interest on the loan is waived.
Producers are also offered the opportunity to receive an
equivalent benefit in the form of a loan deficiency payment (LDP)
if they choose not to participate in the loan program. In this
case, the producer can opt to receive a one-time payment on
harvested production at any time PCPs are below commodity loan
rates during the term of the loan. The difference between the PCP
and the loan rate is the LDP rate.
Direct and counter-cyclical payments are available to eligible
landowners and producers with soybean, other oilseed, and peanut
base acres who enter into an annual agreement with USDA's Farm
Services Agency (FSA). Base acres and payment yield for direct and
counter-cyclical payments are unchanged from the 2002 Farm Act.
Payment acres for direct payments are reduced to 83.3 percent of
base acres for crop years 2009-11. Payment acres for CCPs are
unchanged at 85 percent of base acres.
Direct payments for crop years 2008-12 are made based on fixed
rates set in the 2008 Farm Act. For producers with eligible
historical soybean, other oilseed, and peanut base acreage, the
amount of the direct payment equals the product of the payment rate
for the specific crop, a producer's historical payment acres (85
percent of base acres in crop years 2008 and 2012 and 83.3 percent
in crop years 2009-11), and a producer's historical payment yield
for the farm.
For producers with eligible historical soybean, other oilseed,
and peanut base acreage, counter-cyclical payments are paid
whenever a commodity's target price is greater than the calculated
effective price for that commodity. Target prices are specified in
the 2008 Farm Act for crop years 2008-12. The effective price is
equal to the sum of 1) the direct payment rate for the commodity,
and 2) the higher of the national average farm price for the
marketing year or the national loan rate for the commodity. The
maximum CCP rates (target price minus direct payment rate minus
loan rate) are shown in the table.
The payment amount equals the product of the payment rate, a
producer's historical payment acres (85 percent of base acres), and
a producer's historical counter-cyclical payment yield, which may
differ from the DP payment yield. However, there were no
counter-cyclical payments for other oilseeds (sunflowerseed,
canola, rapeseed, safflower, mustard seed, flaxseed, crambe, and
sesame) during crop years 2008-09. The payment rate is zero because
the loan rate plus the direct payment rate for the period (equaling
the effective price) equals or exceeds the target price.
Average Crop Revenue
The ACRE program is a new program in the 2008 Farm Act and is
administered by FSA. Beginning with the 2009 crop year, producers
of oilseeds and other crops can elect this optional, revenue-based
income support program, which is an alternative to receiving
The 2008 Farm Act sets the payment limit for direct payments at
$40,000 per person or legal entity and for counter-cyclical
payments at $65,000. There are no longer payment limits for
marketing loan benefits (MLGs and LDPs). Payments are attributed
directly to individuals, with spouses potentially eligible for a
full share. The
three-entity rule is eliminated. Authority for commodity
certificates, formerly available as an alternative to marketing
loan gains when payment limits were in force, ended after the 2009
Producers with an adjusted gross farm income of more than
$750,000 (averaged over 3 years) are not eligible for direct
payments, but remain eligible for other program payments. Persons
or entities with average adjusted gross nonfarm income in excess of
$500,000 (averaged over 3 years) are not eligible for direct and
counter-cyclical payments, ACRE payments, marketing loan benefits,
or disaster payments.
Crop and Revenue
Adverse weather, as well as insect and weed infestations, can
reduce a farmer's yields and result in below-normal revenue in any
year. Low prices can also reduce revenue. Oilseed producers can
purchase crop insurance to guard against yield risk and can buy
revenue insurance for protection against revenue losses regardless
of the source of loss. USDA's Risk Management Agency pays a portion of
producers' premium costs for insurance policies and also pays some
of the delivery and administrative costs of private insurance
companies that handle policy sales.
Supplemental Agricultural Disaster Assistance, created in the
2008 Farm Act, provides disaster assistance payments to producers
of eligible commodities (crops, farm-raised fish, honey, and
livestock) in counties declared by the Secretary of Agriculture to
be "disaster counties," including counties contiguous to disaster
counties, as well as any farms with losses in normal production of
more than 50 percent.
Environment and Conservation
The 2008 Farm Act expands support for conservation practices on
all cultivated land (including fallow). To remain eligible for
specified program benefits, farmers cropping highly erodible land
are required to implement an approved conservation plan (highly
erodible land conservation provisions or sodbuster) and to be in
compliance with wetland conservation provisions (swampbuster).
Programs, such as the Environmental Quality Incentives Program
and the new Conservation Stewardship Program, provide assistance on
lands in production. Land retirement programs-including the
Conservation Reserve Program, the Conservation Reserve Enhancement
Program, and the Wetlands Reserve Program-remove environmentally
sensitive land from production and establish long-term,
resource-conserving cover. The acreage cap for the Conservation
Reserve Program is scheduled to decline from 39.2 million acres to
32 million acres beginning in fiscal year 2010 under the 2008 Farm
Export and Food Aid
Export programs administered by USDA's Foreign
Agricultural Service (FAS) and the U.S. Agency for
International Development (USAID) help promote and facilitate
purchase of U.S. oilseeds in foreign markets, primarily soybeans
and soybean products. These programs include the Export Credit Guarantee Program (GSM-102), the Market Access Program (MAP), and the Foreign Market Development Program (FMD).
Export credit guarantees are designed to help foreign importers
facing foreign exchange constraints and needing credit to purchase
commodities. The Export Credit Guarantee Program (GSM-102)
underwrites commercial financing of U.S. agricultural exports by
guaranteeing repayment of private, short-term credit for up to 3
years. The CCC does not provide financing but guarantees payments
due from foreign banks, which allows U.S. financial institutions to
offer competitive credit terms to foreign banks.
The Market Access Program (MAP) aids in the
creation, expansion, and maintenance of foreign markets for U.S.
agricultural products. MAP forms partnerships between USDA's CCC
and nonprofit trade associations, cooperatives, trade groups, or
small businesses to share the cost of overseas marketing and
promotional activities. MAP partially reimburses program
participants for these activities, which include consumer
promotions, market research, trade shows, and trade servicing.
The Foreign Market Development Program, also known
as the Cooperator Program, aids in the creation, expansion, and
maintenance of long-term export markets for U.S. agricultural
products. The program enlists private sector involvement and
resources in coordinated efforts to promote U.S. products to
foreign importers and consumers around the world. CCC funds are
used to partially reimburse cooperators conducting approved
overseas promotion activities.
The U.S. Government provides food aid overseas through the Food for Peace Act (FPA) (formerly referred to
P.L. 480), Section 416, and the Food for Progress Act (FFP). Under P.L. 480
Title I, USDA makes concessional sales that provide low-interest
loans to qualified developing countries purchasing U.S.
commodities. Generally, commodities shipped under Title I are
purchased on the open market by the recipient country. The Title II
program, administered by USAID, donates commodities to least
developed countries. The Section 416(b) program provides for
donations of CCC-owned surplus commodities to developing countries.
It also allows surplus CCC commodities to be used for the purpose
of P.L. 480 Title II programs and the FFP program.
Incentive Payments for Covered Oilseed Producers
Funds are authorized for fiscal years 2009-12, subject to
appropriations, to provide quality incentive payments for
production of oilseeds with specialized traits that enhance human
Aside from funding a Biodiesel Fuel Education Program, the 2008
Farm Act has few policy measures regarding biodiesel. Major policy
goals for biodiesel are guided by a combination of Federal and
State tax credits, mandated use, and procurement preferences.
Beginning January 2005, tax legislation encouraged a significant
expansion in the U.S. production capacity and output of biodiesel.
The law made available to blenders of biodiesel a tax credit equal
to $1 per gallon. Soybean oil is the primary raw material used in
U.S. biodiesel production, although inedible tallow is of growing
Updating the U.S. Energy Policy Act of 2005, the Energy
Independence and Security Act of 2007 revised the Renewable Fuel
Standard to include a separate requirement for biodiesel. Pending
rule-making by the Environmental Protection Agency, this national
mandate for biodiesel starts at 500 million gallons for 2009 and
increases to 1 billion gallons by 2012.
In 2008, a new law extended the blending credit through the end
of 2009. The legislation also provided that biodiesel produced from
all feedstocks, including recycled cooking oils, qualified for the
$1-per-gallon blending credit. And, it prohibited biodiesel
produced and used outside of the United States from qualifying for
the blending credit. In 2010, the biodiesel blending credit lapsed
but was retroactively renewed for 2011. The blending credit expired
as of December 31, 2011 and has not been reinstated.