The Megabill’s New Handouts to Meat & Dairy Producers, Explained

When Republican lawmakers passed the so-called “megabill” earlier this month, they packed it with new provisions for agriculture. In addition to increasing crop subsidies and cutting SNAP funding, the megabill provides more funding assistance for livestock farmers through both new and old federal programs. The assistance is meant to protect producers from losses, but the provisions may also end up discouraging farmers from improving farming practices.

Agricultural subsidies are often presented as a “safety net” for working farmers to keep them in business. But Vincent Smith, director of agricultural policy studies at the public policy think tank American Enterprise Institute, tells Sentient that most of these subsidies maintain the agricultural status quo by bolstering the largest producers and conglomerates, without requiring any further improvements.

“Almost nothing goes to the small guys, and the moderately small, and even the lower-middle sized farms,” Smith says. “The bigger you are, the better the deal in total payments.”

Such is the case for the megabill as well.

Provisions in the Megabill for Factory Farming

Increasing Payments to Livestock Farmers

The megabill increases federal payments to livestock farmers in a number of ways.

First, it does so through the Livestock Indemnity Program (LIP). This is a federal initiative that compensates farmers when their animals die under certain circumstances — namely extreme weather, disease and predation.

Previously, if a livestock farmer’s animal was killed by a predator, the government would pay them 75 percent of the market value of the animal that was killed. This only applies when the predator in question was either reintroduced into the wild by the federal government or, alternatively, protected under federal law.

The megabill raises this compensation rate to 100 percent. This is a direct increase in federal assistance to livestock farmers, but Smith argues the policy might disincentivize farmers from enacting more stringent security measures for their animals, as they know they’ll be fully compensated if and when predators strike.

“In principle, every time you reduce a deductible, you increase the likelihood that the mafia will burn down the restaurant,” Smith says. “And this is what you’re doing here. You’re reducing the deductible.”

In addition, the bill increases spending on the Livestock Forage Disaster Program, which pays livestock farmers when they lose their grazing crops to fire or drought. The change is rather straightforward: It allows farmers to start receiving these benefits after four weeks of drought, instead of the current minimum of eight weeks, and doubles the amount of benefits they receive.

This change will allow farmers to regrow their grazing crops more quickly after losing them to natural disasters, but as with other government insurance plans, it could also disincentivize farmers from taking steps to protect their crops from said disasters in the first place.

The megabill also adds a provision to this program whereby farmers can be compensated for the premature deaths of unborn livestock under certain situations, and increases annual funding for disease prevention on livestock farms through the Animal Health Protection Act.

Dairy Margin Coverage

The megabill also extends and expands the Dairy Margin Coverage (DMC) program. This is essentially a government-subsidized voluntary insurance plan for dairy farmers that shields them from market fluctuations in the cost of feed and milk: If the price of feed gets too high, or the going rate for milk drops too low, the government will pay enrolled dairy farmers the difference.

The megabill does a few things here. First and foremost, it extends the program itself, which had been set to expire at the end of the year, until 2031, thus ensuring that every dairy farmer in America can receive what is essentially government-subsidized profit insurance for at least another six years.

Secondly, it tweaks the program such that certain larger dairy producers will pay less for premium plans. Previously, dairy farms that produced over five million pounds of milk a year had to pay more for premium plans than smaller farms, but the megabill shifts that threshold to six million pounds.

In effect, this means that a certain subset of large dairy farms — specifically, those that produce between five and six million pounds of milk per year — will receive a taxpayer-funded discount on premium dairy insurance.

The average dairy cow produces around 24,178 pounds of milk every year, so dairy farms with somewhere between 206 and 248 cows on-site will benefit from this new provision; under the federal government’s definition, farms of this size can qualify as “large CAFOs,” or factory farms.

“You’re tweaking the program to give benefits to the larger farms, while the smaller farms that are producing less than five million pounds of milk in the first place get no additional benefit, unless they can grow their herd,” Smith says.

Pilot Program for Chicken Insurance

Lastly, the megabill directs the federal government to create a new pilot insurance program for contract poultry farmers. Over 99 percent of all poultry raised in the U.S. is grown by farmers under contract with large-scale meat processors. This type of farming has been criticized by current and former contract farmers who complain of crippling debt. This particular program will offer government-subsidized insurance plans to those farmers.

Specifically, these plans will give poultry farmers a payout if their utility costs rise as a result of extreme weather-related events. The details beyond that have yet to be determined; the megabill doesn’t actually create this poultry insurance program, but rather directs the USDA’s Commodity Credit Corporation to do so.

What Other Agricultural Provisions Are in the Megabill?

Other than the above measures, the megabill extends and increases spending on a number of existing agricultural programs. For instance, it increases crop insurance funding by around $6.3 billion over the next 10 years by raising payment limits, eliminating income caps for recipients, increasing reference prices and various other changes.

The bill also creates several tax benefits for agricultural producers and doubles funding for Agricultural Trade Promotion, a series of programs that aim to increase agricultural exports from the United States.

On the other hand, the megabill cuts SNAP federal funding significantly by offloading some of the program’s cost to state governments, restricting the program’s eligibility and increasing its work requirements. In addition to other impacts, this could result in Americans eating fewer fruits and vegetables, as SNAP programs are aimed at boosting recipients’ consumption of produce.

What Happens to the Farm Bill Now?

Many of the above provisions would normally be included in the farm bill, an ongoing legislative package that Congress is supposed to pass every five years. However, Congress hasn’t been able to agree on a new farm bill since 2018, and has instead passed a series of short-term extensions of the last one.

The fate of the next farm bill was uncertain before the passage of the megabill, and it’s even more uncertain now. Policies like crop subsidies, SNAP benefits and livestock insurance are usually covered in the farm bill; the fact that they’ve instead been addressed in the megabill gives lawmakers even less urgency to pass a new farm bill.

But a few of the standard farm bill policies weren’t included in the megabill, and will need to be updated before the end of the year. The most notable example of this is the permanent price support authority, a set of obsolete agricultural programs from the 1930s that Congress regularly suspends in the farm bill.

Why lawmakers have opted to continually suspend these programs, rather than repealing them once and for all, is a different question entirely, but regardless, failing to suspend them before the previous farm bill expires by the end of the year would have a disastrous effect on the agricultural economy.

There’s been talk of Congress passing a “skinny” farm bill to address this and other lingering provisions that are normally included in the farm bill but were not included in the megabill. Only time will tell if this happens, but if nothing else, it’s difficult to imagine Congress failing to suspend the permanent price support authority before the previous farm bill’s extension expires at the end of the year. The agricultural provisions in the megabill continue a long-running pattern in American government: funneling public money into meat and dairy production, with no effort to address costs to the environment or the animals. These policies don’t just help sustain factory farms, in which the vast majority of livestock are raised; they actively encourage the unrestricted growth of said farms, and taxpayers are the ones footing the bill.