Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Monday 08/19/13

A Refresher on Farm Bill Commodity Provisions

With all the political static on the farm bill, there becomes a void in trying to analyze just what is in the Senate and House versions of the legislation. Early on, farmer hearings focused on bringing back some simplicity to the commodity title. Farmers didn't like the Average Crop Revenue Election program, partially because farmers lost direct payments, but there were also significant complaints about the complexity of ACRE as well as the necessity of getting the landlord to enroll in the program as well.

Farm groups and lawmakers will have some significant discussions about the role of target prices when conference talks begin about marrying the commodity titles. More farmers may also pay attention if market price declines continue and the possibility of actual payments on target prices or revenue benchmarks hit closer to home.

Keep in mind, farm groups that testified in hearings before both the House and Senate stressed that they deemed crop insurance to be more vital than the commodity title and wished to protect insurance from cuts.

Here is a simple break down of differences in the commodity titles:

Senate Bill, S. 954, Agriculture Reform, Food and Jobs Act of 2013:

Agricultural Risk Coverage: Farmers would make a one-time election to choose to be enrolled in ARC, as well as whether to enroll in individual coverage or county coverage. Payments are made on planted acres when crop revenue drops below a historical benchmark of 88%. The payment rate is based on difference between the guarantee and actual revenue, up to 10% of the benchmark revenue.

Payment for ARC is based on 65% of planted acres could be covered. For county coverage, 80% of planted acres could be covered.

Adverse Market Payment: program creates a five-year rolling average for target prices that would exclude the high and low years, which is typically called the "Olympic average." That Olympic average for commodities would then be multiplied by 55%. Thus, the floor price would adjust each year based on the rolling average. That also means that in the early years of the farm bill, 2014 and 2015, the target price for most major crops would be higher than the current counter-cyclical program.

AMP would set specific target prices for rice producers at $13.30 per cwt price, and peanuts would have a price of $523.77 per ton.

Other Senate provisions:

Direct payments are eliminated.

Marketing loan rates do not change.

Caps payments for AMP or ARC at $50,000 while keeping the $75,000 limit on loan deficiency payments.

Base Acres: Continues to make payments based on 85% of historical planting, or base acreage.

Adjusted Gross Income cap: $750,000

House Bill, H.R. 1947, the Federal Agriculture Reform and Risk Management Act of 2013:

Revenue Loss Coverage: A county revenue plan with no individual farm option, covering up to 85% of planted acreage. Like the Senate version, it creates benchmark revenue based on a five-year Olympic average of farm or county yield and five-year Olympic average on market price. The bills are comparable in that language. Actual revenue in the RLC is based on county yield only. The RLC guarantee is 85% of the revenue benchmark. The payment rate is based on difference between the guarantee and actual revenue, up to 10% of the benchmark revenue.

The RLC payment is based on planted acres.

Price Loss Coverage Program resets the target price program with new reference prices.

Barley, $4.95 per bushel

Corn, $3.70 per bushel

Grain sorghum, $3.95 per bushel

Peanuts, $535 per ton

Rice, $14 cwt

Soybeans, $8.40 per bushel

Wheat, $5.50 per bushel

Other House provisions:

Direct payments are eliminated for all crops except for cotton, which would get a two-year extension at 70% and 60% while crop insurance program for cotton is implemented.

Marketing loan rates do not change.

Payment caps for PLC or RLC at $125,000 with no cap on loan deficiency payments.

Planted Acres: bill pays on 85% of planted acreage.

Adjusted Gross Income cap: $950,000

I can be found on Twitter @ChrisClaytonDTN

Posted at 9:42AM CDT 08/19/13 by Chris Clayton
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