What does the extension of the farm bill mean for Michigan?

1/3/2013

Passage of the farm bill extension was all but overshadowed by the "fiscal cliff" negotiations in the final days of 2012.  Despite a mention or two of milk prices, few media outlets had the opportunity to explore what the one-year extension means to Michigan farmers. 

Steve Weyhing, an attorney with Warner Norcross & Judd LLP, notes that farmers were hoping for a five-year bill that would provide a more permanent fix to subsidies and other pressing issues, but Congress chose to "kick the can down the road" with a patch that expires in September of this year.  He notes that the short-term fix ensured that milk prices – which were tilting toward $7 a gallon – would remain stable. However, the legislation failed to address concerns over long-term strategy for dealing with milk prices and concerns over subsidy payments in general.

Weyhing explains that the program provides subsidy payments to farming operations for a number of cash crops, such as corn, potatoes and soybeans.  The general rule is $40,000 per active owner/operator in the farming business.  In the 2009 farm bill, Congress restricted the subsidy payments by the passage of a direct attribution rule. 

Since 2009, Weyhing says, payments have been based on the number of active individuals in the farming operation.   Prior to 2009, farm business planning focused primarily on the subsidy program and resulted in the creation of limited partnerships to maximize the subsidy.  With the direct attribution rule, the subsidy program remained a factor in business organization and planning, but to a lesser degree.

“It is my understanding that the original 2012 farm bill would have further restricted the subsidy program and would have likely eliminated all subsidies for most of the larger productive operations,” Weyhing says.  “Indeed, there is a faction that suggests eliminating the entire subsidy program.  Congress will have to again consider the farm bill this year and, if it continues its intent to restrict subsidy payments, farming operations will need to focus their operations and their organization on the more standard concepts of liability protection and tax minimization.”

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