Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Tuesday 12/11/12

Soybean Growers Criticize Target-Price Option

With the clock ticking on this farm bill, the American Soybean Association sent a letter Monday to House and Senate Agriculture Committee leaders seeking to attack the need for a target-price program in the commodity title.

The letter comes after House Ag Chairman Frank Lucas, R-Okla., made extensive comments late last week stressing the importance that producers be given a choice for a commodity program. Lucas has argued that a revenue program supported by corn and soybean groups is great when commodity prices are strong, but if there is a major collapse in prices the revenue program won't offer a satisfactory safety net for producers.

ASA, however, wrote Monday that the group "has major concerns with the Price Loss Coverage option in the House bill." The soybean growers said the program would establish "much higher and disproportionate reference or target prices that bear little relation to recent average market prices or production costs. Moreover, by tying payments to crops that are actually grown in the current year, the PLC option has the potential to significantly distort planting decisions, production, commodity prices, and government program costs in the event market prices fall. If this option is included in the farm bill, payments must be decoupled from current-year production and tied to historical crop acreages."

In an interview with me last week, staff for the National Corn Growers Association expressed similar concerns about the target-price program and the potential that payments would be coupled with production. Currently, the counter-cyclical program is decoupled.

For clarification, a lobbyist on Monday in an email gave me a little more explanation on coupling versus decoupling the program: "Producers with historical base acreages for different crops receive payments when average prices for any of those crops in the current year fall below that crop‘s target price, regardless of whether or not it was actually produced in the current year. The House bill uses the same historical base acreages, but makes payments when prices fall below the target price for the crop(s) actually produced in that same year. Moreover, it allows producers to overplant a crop base, up to the entire base on the farm, to any crop and receive payments on all base acres."

The ASA letter goes on to offer a new analysis of the affects of the target-price program done by professors at Iowa State University and the University of Illinois.…

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Posted at 6:16AM CST 12/11/12 by Chris Clayton
Comments (2)
I hardly think more options would simpify or reduce administration overhead expenses. Extending the current Food Bill and then falling over the cliff might just be the best solution to the nations oversized government ails. Some of us might just have to quit throwing food into the dumpster.
Posted by Bonnie Dukowitz at 7:05AM CST 12/11/12
Then, just as a sidebar, there's dumping two troubled manned fighters representing a $1.5+ Trillion investment over the next ten years, while we're simultaneously deploying Avenger Drones, which DARPA suggests will be the core of our Air Force Technology by 2017. That's a lot of Small Farms and Businesses that could be saved and started-imagine the revenue THAT would generate. China and Russia are creating State of the Art Stealth Fighters for a fraction of what we're spending, perhaps like the Wal-Mart method, we should just buy theirs and retrofit our tech onto them. Again, just a thought.
Posted by Ric Ohge at 9:42AM CST 12/13/12
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