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December 22, 2021

What Would Build Back Better Mean for U.S. Agriculture?

Passing the Build Back Better Plan could mean a historic investment in our nation’s farmers and ranchers—but could it do more harm than good?

The Build Back Better Act has come a long way from the original $3.5 trillion reconciliation package first introduced back in October 2021. After being lowered to a $2.2 trillion price tag, the bill was passed by the House on November 19, 2021, in a 220-213 vote.  

Senate negotiations towards the end of 2021 cut the total cost of the Build Back Better Act to just under $1.8 trillion. Even with drastic cuts, the bill would still be a historic investment for U.S. agriculture. But at what cost? 

According to a letter sent on behalf of the American Farm Bureau Federation on November 16, 2021, increased federal spending since the onset of the pandemic is a main contributing factor to the rising inflation that we’re currently experiencing. The fear is that passage of the Build Back Better Plan “will further exasperate that pain.”  

Keep reading to learn more about the potential impacts of the Build Back Better Act on American farmers and ranchers, what industry leaders are saying about it, and how farmers can prepare regardless of the outcome.  

Five Ways the Build Back Better Plan Could Impact American Farmers and Ranchers 

1. Climate-Smart Agriculture

One of the most prominent issues surrounding the specifics of the Build Back Better Plan is the topic of addressing climate change. Agriculture is heavily involved in the discussion as advocates for climate-smart farming practices say it’s critical to provide farmers and ranchers with the resources and guidance to transition to a more climate-resistant operation.  

The Build Back Better Plan would authorize an estimated $27 billion in new conservation funding which would be distributed through existing Farm Bill conservation programs. It would also finance the creation of new programs, such as a proposed $5 billion program to pay American farmers for planting cover crops on their operation. Climate change and conservation-related funding allocation that could impact U.S. farmers include:  

  • $5 billion: A $25-per-acre payment program for cover crops over the next five years.  
  • $9 billion: Funding for the Environmental Quality Incentives Program over six years.  
  • $7.5 billion: Funding for the Regional Conservation Partnership Program over six years.  
  • $4.1 billion: Funding for the Conservation Stewardship Program over six years.  
  • $1.7 billion: Funding for the Agricultural Conservation Easement Program over six years.  
  • $850 million: Funding for technical assistance for climate change mitigation activities through the National Resources Conservation Service (NRCS)  

The overarching goal for this boost in conservation funding is to provide U.S. agriculture with the resources to continue paving the way of lowering emissions, increasing crop yields, and sequestering more carbon in soils to help address the impacts of a changing climate.   

“Agriculture can lead the way in the fight on climate with climate-smart agriculture and forestry practices that sequester carbon, reduce emissions and create new and better market opportunities for producers.”

Tom Vilsack, U.S. Secretary of Agriculture

2. Farm Debt Relief 

With lawsuits currently tying up the USDA debt relief program for minority farmers, the Build Back Better Plan takes a different approach to the issue by aiming to provide an estimated $6 billion in funding to expand support for economically distressed and underserved farmers, ranchers, and rural landowners.  

This funding would provide full and partial debt forgiveness on direct loans and offer modification services for borrowers on USDA loans to increase operational resilience and economic vitality. Through this program, farmers who have faced unfair bias in past farm programs could be eligible for up to $500,000 in compensation. However, it remains to be seen how eligibility for this program will be decided. Nevertheless, farmers in historically underserved communities are hopeful that this could mark a pivotal shift in future farm policy.  

“The debt relief plan in the Build Back Better Act finally makes sure financial support flows to farmers in economic distress. It’s long overdue and it’s a historic turning point in farm policy.”

John Boyd, President of National Black Farmers Association

3. Tax Reform  

After months of debate over capital gains and stepped-up basis tax reform, farm tax experts say any tax changes that would negatively impact succession planning for family farms are mostly off the table as senators debate over the final version of the reconciliation bill.  

Even so, the cost for U.S. businesses remains a major concern surrounding this nearly $1.8 trillion plan. This concern was amplified with a CBO report that concluded the Build Back Better Plan would cost nearly $5 trillion if programs were made permanent—three times the proposed price ticket which critiques say hides the true cost of the bill with “arbitrary expirations dates.”   

4. Agricultural Research  

While a majority of funding for agricultural programs stayed intact throughout the legislative process, funding for ag research was one of the main initiatives from the Build Back Better Act to get a trim, down from $7.75 billion to just over $2 billion. 

  • $1 billion in ag research funding would be allocated for construction and modernization of research facilities.  
  • $420 million would be split between the Agriculture and Food Research Initiative at USDA and the Foundation for Food and Agriculture Research. 
  • $120 million would go to the Sustainable Agriculture Research Education Program. 
  • $285 million would go towards the Foundation for Food and Agriculture Research if the Senate version of the Build Back Better Bill is passed. 
  • $285 million in funding would be designated for grants through USDA’s Agriculture and Food Research Initiative in the Senate version, a $75 million increase from the House-passed version.  

5. Rural Development 

The Build Back Better Bill includes nearly $960 million for biofuel infrastructure along with proposals to rework and increase existing tax incentives for biofuels. The $1-a-gallon tax credit for biodiesel and renewable diesel would be extended through 2026 and then replaced by a low-carbon fuel credit extended to sustainable aviation fuel (SAF) as well as advanced biofuels such as ethanol produced with carbon-capture technology. Other funding allocations in the Build Back Better Plan that would benefit the development of rural communities across the U.S. include,   

  • $18.3 billion to help rural communities transition to clean energy; and 
  • $9.7 billion to rural electric cooperatives to ensure the “long-term resiliency, reliability, and affordability” of their systems. 

What Ag Groups and Industry Leaders are Saying About the Build Back Better Plan 

Agricultural groups have taken a mixed assortment of stances on the Build Back Better Act, but all collectively breathed a sigh of relief when potential changes to capital gains taxation and stepped-up basis were left out of the current Build Back Better proposal. Many ag groups joined forces to advocate the importance of stepped-up basis to protect multigenerational family farm operations. 

“I think we were willing to give up many of the other topics to protect that [stepped-up basis] because it’s vital to the family farm to continue in all of the United States and all crops. That was a big win and we’re going to continue to protect that.”

Brad Doyle, Vice President of the American Soybean Association

Beyond that, general support for the Build Back Better Plan gets a bit more complicated. Ag supporters of the Build Back Better Act, including the National Farmers Union and the National Council of Farmer Cooperatives, say the historic investment in climate-smart initiatives for agriculture will pave the way for a more resilient and sustainable food system moving forward.  

“The funding included in the framework for BBB on climate-smart agriculture will help support the farmers and ranchers interested in exploring new, innovative approaches to farming that help address the challenge of climate change."

Chuck Conner, President and CEO of National Council of Farmer Cooperatives

Ag critics of the Build Back Better Plan, such as the American Farm Bureau Federation, believe that the influx in federal spending will lead to heavier tax burdens and ultimately would harm the American family farm more than the climate provisions would help. The lack of partisanship throughout the development of the Build Back Better Plan is also a concern when it comes to farm policy reform.  

“The totality of the increased federal spending in this bill coupled with the enormously burdensome tax increases leveled on businesses and individuals to pay for it will stifle economic growth and destroy jobs.”

Zippy Duvall, President of the American Farm Bureau Federation

There is also concern that the “electric vehicle subsidies included in the Build Back Better Act could spark a trade war” with Canada and ultimately hurt American dairy farmers. 

“[Canadian Prime Minister of Finance Chrystia Freeland] warned that the electric vehicle subsidies in Build Back Better that excluded Canada would start a trade war between the United States and Canada. She warned that Canada would be forced to reciprocate by potentially suspending dairy access.”

Chuck Grassley, Iowa U.S. Senator

Other ag groups have yet to take a stand on the Build Back Better Bill because they have yet to see a full, finalized version of it. 

“We haven’t seen a package. I mean, there’s people describing the package, but you don’t know until we see the final bill.”

Jon Doggett, CEO of National Corn Growers Association

What’s Next for the Build Back Better Plan? 

The Senate’s timeline to vote for the Build Back Better proposal by Christmas 2021 was squashed by the pivotal vote of centrist Senator Joe Manchin—who has been vocal about concerns regarding the true cost of the package. This concern ultimately led to the BBB plan hitting a wall at the end of 2021 with little hope of being revived.

 However, there could be hope for a more fragmented passage of the BBB plan. In his State of the Union address on March 1, 2022, President Biden presented the stalled bill as the newly reformed “Building a Better America“, tailoring the climate and social spending bill more towards reducing federal deficits fighting rising costs for American families.

At the time of this update, Senator Manchin has expressed he is open to negotiations and is currently working on setting an agenda to build out the framework of the newly rebranded bill.

Pave Your Own Path with AgAmerica’s Flexible Financing Solutions 

Agriculture is known for cutting-edge innovation and many parts of the Build Back Better Plan contains historic funding to support these efforts. However, inflationary pressures are an understandable cause for concern given the lack of clarity surrounding the true cost of this mammoth spending bill. 

As an advocate for the American family farm, AgAmerica is committed to ensuring farmers, ranchers, and landowners across the nation are prepared no matter what the future holds. Rooted in an agricultural background, our team of land lending specialists is equipped with both the expertise and passion to keep your operation stable amid volatility and thriving in prosperity.  

Learn more about our innovative approach to ag lending by exploring AgAmerica’s spectrum of financing solutions today.  

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