About 99% of farm bill outlays go to nutrition, crop insurance, commodities and conservation titles. The “Other” category makes up the remaining 1% of all projected outlays. Figure 1 provides the breakdown of all projected outlays as a percentage of total outlays under the Agriculture Improvement Act of 2018 (2018 farm bill, PL 115-334), including titles within the “other” category. This Market Intel will analyze the titles of the farm bill outside of the top four titles that account for nearly all farm bill outlays. These programs, while only making up 1%, have huge impacts on one of the most productive groups of people in the country, rural Americans.
Who are rural Americans and what do they provide? In 2020, approximately 46 million U.S. citizens lived in communities classified as rural. Facing challenges like limited internet access, fewer jobs, infrastructure issues and declining population, people living in rural America see things in a way that no one else does because small changes can have huge impacts.
“Rural” is defined by a broad range of factors depending on the definition used. This can cause some confusion but reflects the fact that the terms “rural” and “urban” are moving targets; some definitions use population density while others use geographic isolation. Regardless of the exact definition, rural America is an important piece of the U.S. economy, responsible for generating about 10% of the country’s gross domestic product.
Most U.S. farmers operate in rural areas and are among the most productive in the world. In fact, agriculture and food-related industries contributed $1.055 trillion, or 5%, to the U.S. GDP in 2020. The output of American farmers in 2020 directly contributed $134.7 billion, or over 0.6%, to the overall GDP.
Title V, Credit
The relationship between a farmer and their lender is a crucial piece of production agriculture. Factors that affect the banking industry have a direct impact on farmers and other businesses in rural America related to agriculture. Recently one of the greatest changes affecting all consumers but especially farmers and ranchers has been inflation, specifically the response of the Federal Reserve Bank (the Fed). The Fed has addressed inflation with a series of interest rate hikes that affect borrowers and creditors alike. Borrowers now face interest rates double or even triple what they were in 2020. This can affect things like land values, the cost of borrowing money and even the impact of government programs when a dollar doesn’t go as far. These effects can linger for many years.
The federal government has a history of assisting farmers and rural stakeholders with obtaining loans. The Farm Service Agency (FSA) and Farm Credit System (FCS) are agricultural lenders permanently established through federal mandates. While these two are both lenders, they operate differently.
FSA is a USDA-operated lender that is important for family farms that do not qualify for credit elsewhere. FSA lending peaked in the 1980s from a government attempt at addressing the farm debt crisis. During this time tight money policy that was intended to bring down interest rates caused farmland values to drop. At the end of 2021, out of the total $441 billion in farm debt, FSA serviced 3%, or $14.8 billion, of loans and 4%, or $17.6 billion, in loan guarantees that covered another 4% of the overall market. The standard guarantee ratio is 80-90% and is based on the borrower’s credit risk. Loan guarantees are higher for socially disadvantaged or beginning farmer borrowers.
FCS is a private, retail lender with a federal charter and mandated by law to serve creditworthy farmers and ranchers, cooperatives, certain agribusinesses, and rural homeowners in towns with a population of less than 2,500. In 2021, FCS had a loan portfolio of $344 billion. This includes 44%, or $210 billion, in farm loans.
Title VI, Rural Development
Title VI, Rural Development, included in the farm bill since 1973, establishes, reauthorizes and amends programs administered by USDA’s Rural Development agency. Title VI is important because it helps rural communities improve rural health outcomes, broadband investment, community and economic development programs, water and wastewater treatment, general business assistance, rural energy, electrification and cybersecurity.
Barriers to jobs is one issue that has led to a decline in rural populations. In fact, labor force participation rates among adults ages 25-64 decreased three times more in rural areas than urban areas from 2007-2019. This means many working age individuals are seeking jobs in metro areas. Over the last 10 years, rural America saw a population loss of 289,000 out of 46 million. Although it’s a small decrease (0.6%), this is the first time in history rural America has seen a decade-long population loss.
Rural Broadband
Title VI authorizes the programs that help provide affordable broadband internet access to historically underserved areas. People who live in places with smaller populations or geographic isolation often struggle with access to services and other economic development hurdles that those living in more urban communities do not. Access to broadband internet can be limiting in a post-COVID-19-pandemic era, when working remotely has become a common practice and an important economic opportunity for rural residents.
The Rural Broadband Program provides loans, loan guarantees and grants to construct, improve and acquire facilities and equipment needed to provide broadband service to rural areas. Prior to the 2018 farm bill, the program was limited to direct loans and loan guarantees. The law also increased the threshold for sufficient broadband access to 25 megabits per second download/3 megabits per second upload (25/3 Mbps) from 4/1 Mbps.
The Community Connect Program is a grant program that provides awards to eligible applicants to provide broadband services to rural, underserved communities where services do not currently exist. The 2018 farm bill codified this program for the first time as it previously operated as a pilot program.
The ReConnect Program, while not authorized through the farm bill, is an important addition to supporting broadband in rural America. The program was established through appropriations legislation in 2018 and has continued to receive funding through multiple pieces of legislation including annual appropriations bills, the Coronavirus Aid, Relief, and Economic Security Act of 2020 and the Infrastructure Investment and Jobs Act of 2021. The program provides grants, loans and loan/grant combinations to build and enhance broadband infrastructure in eligible rural areas. While the program has similar goals to the Rural Broadband Program, it currently operates as a pilot program that has become popular with Congress.
Precision Agriculture
For thousands of years the world has relied on farmers to provide its growing population with sustainable and safe food, fiber and renewable energy. The world’s population has continued to grow, placing demands on farmers to produce more food with fewer resources. Technological advances have played a major role in agricultural production in the 21st century. One of the greatest modern innovations has been precision agriculture. Studies have shown connections between precision agriculture and increases in yields. Precision agriculture relies on tools connected to the internet. These tools allow farmers to produce more with less, reducing the use of fuel, water and chemical applications. The Precision Agriculture Connectivity Act of 2018 was included in the 2018 farm bill and created a precision ag task force to bring together public and private stakeholders to evaluate current programs and develop new policies surrounding coverage gaps.
Rural Education and Health
In recent years, most students have relied on technological devices and the internet to complete homework assignments. During pandemic shutdowns schools relied on technology more than ever to enable students to continue to participate in school classwork.
The Distance Learning and Telemedicine Program provides grants to help rural communities access the technology and training to connect teachers and medical professionals with students and patients in rural communities. The program is primarily used for acquiring equipment that facilitates distance learning and telemedicine access. The 2018 farm bill increased authorization for the program from $75 million to $82 million.
Special attention has been given to substance use disorders. People living in rural areas face additional risk factors for substance use. Individuals seeking help may be more hesitant because of privacy issues in a town where everyone knows everyone. Those seeking treatment services may have to travel long distances, introducing additional costs to an already costly service. The 2018 farm bill set aside 20% of Distance Learning and Telemedicine Program funds specifically for projects providing treatment for substance use disorders and gives priority to Community Facilities applications that provide facilities for services, including telehealth services aimed at recovery from substance misuse in rural communities for fiscal years 2019 through 2025.
Title VII, Research, Extension, and Related Matters
Between 1990 and 2013, the U.S. share of spending on agricultural research and development (R&D) among nations with major public R&D programs fell from 22.5% to 13.4%. This was a result of decreased spending by the U.S. and rapidly increased spending by developing countries.
Title VII establishes funding for research, Extension and education including funding for land-grant institutions, state agricultural experiment stations, USDA research agencies and other cooperating institutions. The 2018 farm bill also amends and reauthorizes several programs and establishes new programs and initiatives. Mandatory outlays for research are $1.2 billion and make up about 0.2% of all 2018 farm bill spending.
The new programs and initiatives established by the 2018 farm bill include the Agriculture Advanced Research and Development Authority Pilot, Research Centers of Excellence at 1890 Institutions (historically black land-grant colleges and universities) and competitive grants programs to benefit tribal students and those 1890 Institutions. It also established new competitive research and Extension grants for hemp research and indoor and outdoor urban agriculture. As one of the top food-producing countries in the world, public funding for agricultural research is an essential part of keeping the United States a leader in global agriculture, providing the foundation for productivity growth at home and around the world.
Title VIII, Forestry
Forestland covers nearly 765 million acres or one-third of total land area in the United States. Forests are a precious resource that provide many biological and ecological benefits to the U.S. and the world. Forests provide resources for lumber and paper along with air, water and wildlife habitat. About 58%, or 444 million acres, of all forestlands in the United States is privately owned with ownership by states and other public entities making up the remaining 42% or 322 million acres.
Title VIII of the farm bill is Forestry. This title, authorized in the past five out of six farm bills, has been responsible for the reauthorization, repeal, modification and creation of several land management and forestry research assistance programs run by USDA’s Forest Service. The baseline for the forestry title was $10 million under the 2018 farm bill.
Title IX, Energy
Agricultural energy, often referred to as bioenergy, is energy derived from agricultural or forestry feedstocks and can come in the form of liquid fuels, biomethane, electricity or heat. Ethanol is one of the most well-known bioenergies and is primarily blended with gasoline for use in motor vehicles. Bioenergy and other renewable energy technology has the potential to stimulate rural economies and presents opportunities as well as challenges.
Title IX is the energy title of the farm bill. This title primarily supports increases in energy efficiency and encourages the development of bio-based energy solutions. The 2018 farm bill extended eight programs and one initiative while removing one program and one initiative to help accomplish these goals.
The 2018 farm bill repealed both the Repowering Assistance Program and the Rural Energy Self-Sufficiency Initiative. Additionally, the 2018 farm bill established one new program, the Carbon Utilization and Biogas Education Program. Mandatory outlays for programs under Title IX total about $700 million.
Rural Energy for America Program (REAP)
One program of particular importance to rural America is the Rural Energy for America Program. REAP was intended to promote American energy independence by increasing the private sector renewable energy supply and decreasing energy demand by improving energy efficiency. The program provides guaranteed loan and grant money for agricultural producers and small businesses that can reduce energy-associated costs.
Funding is available to qualified small businesses in rural areas with 50,000 or fewer people and agricultural producers with at least 50% of gross income coming from agricultural operations. Funds can be used for renewable energy systems, to purchase, build and install energy efficiency improvements, or by agricultural producers to install energy-efficient equipment and systems for production or processing.
Rural Energy Savings Program (RESP)
The Rural Energy Savings Program is another energy program important to rural Americans. The program provides loans to rural utilities and other companies that provide energy efficiency loans to qualified consumers to implement durable cost-effective energy efficiency measures. Loans are available to corporations, states, territories, subdivisions, municipalities, utility districts and cooperative, nonprofit, limited-dividend or mutual associations that provide or propose to provide retail electric services for rural areas, the power supply needs of distribution borrowers under terms satisfactory to USDA’s Rural Utilities Service, or other eligible purposes under RESP such as energy storage or related energy conservation measures or improvements.
Other Energy Programs
The Biobased Markets Program promotes renewable products through the USDA Certified Biobased Product label.
The Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program provides loan guarantees for development, construction and retrofitting of commercial biorefineries of qualifying technologies that produce one or a combination of advanced biofuels, renewable chemicals or biobased products.
The Bioenergy Program for Advanced Biofuels authorizes appropriations of $20 million per fiscal year through 2023 and sets mandatory funding at $7 million per year to increase the production of advanced biofuels.
The Biodiesel Fuel Education Program authorizes $2 million per year through 2023 to provide resources to assist with biodiesel acceptance and understanding.
The Biomass Research and Development Initiative, relocated from the Energy title to the Research title, provides grants to entities to conduct research and development and demonstrations of new ways to refine various biomass feedstocks into biofuels or biobased chemicals and products. This program authorizes $30 million per fiscal year through 2023.
The Feedstock Flexibility Program for Bioenergy Producers was initially authorized in the 2008 farm bill and was reauthorized in the 2018 farm bill. Under this program, federal law allows sugar processors to obtain loans from USDA with maturities up to nine months when sugarcane or sugar beet harvest begins. On loan maturity the processor may repay the loan in full or forfeit the sugar to satisfy the loan. This program serves as an option to avoid sugar forfeiture. Alternatively, USDA can purchase surplus sugar and sell it to bioenergy producers to reduce the sugar surplus in the food market.
The Biomass Crop Assistance Program (BCAP) authorizes up to $25 million through 2023 to provide financial assistance to owners and operators of agricultural and non-industrial forestland who establish, produce and deliver biomass feedstocks to qualified conversion facilities.
The Community Wood Energy and Wood Innovation Program expands and creates markets for wood products and wood energy that support long-term sustainable management of National Forest System lands.
The Sun Grant Program provides grant support to universities in each sun grant region to provide competitive grants for research and education programs on technology development and implementation to address bioenergy, biomass or bioproducts research priorities.
The Carbon Utilization and Biogas Education Program establishes the Biogas Opportunities Task Force and authorizes $2 million per year through 2023 to provide public education about the benefits of permanent carbon dioxide sequestration. Funds can also be used to provide education to agricultural producers about opportunities for aggregation of organic waste from multiple sources into a single biogas system.
Inflation Reduction Act
The Inflation Reduction Act, finalized in 2022, includes provisions to use fiscal year 2022 reconciliation instructions to raise revenue to lower prescription drug costs, fund new energy, climate and health care initiatives and reduce budget deficits. The bill provided nearly $40 billion of the total $750 billion specifically to agricultural programs ranging from farm bill working lands conservation to renewable energy and biofuels. Provisions in the final bill include nearly $20 billion for conservation programs, $14 billion for rural development to support renewable energy and $4 billion to mitigate the impacts of drought in Western Reclamation states. Click here for more information on the Inflation Reduction Act and its impacts on agriculture.
Summary
Most farm bill outlays fall into four categories – nutrition, commodities, crop insurance and conservation. The remainder of outlays are distributed into the eight other titles in the farm bill. From the rural development title to research and energy, nearly all titles in the farm bill have some sort of impact on rural Americans. Although its population is declining, rural America is home to some of the most productive people in the country, including farmers and ranchers. In these places, even the smallest changes can have huge impacts and completely change people’s lives. With so many programs having such big impacts, continued innovation and support for these lesser-known farm bill titles can spur prosperity and improve our rural communities.
