Another potentially thorny aspect of the proposed farm bill is how it addresses the current set of reference prices on commodities. The House version maintained prices at the 2014 levels, however, there is a marker legislation introduced in the Senate that would increase the formula to boost payments for corn and soybean producers under their revenue-program.
The Title 1 – or commodity title – offers the Price Loss Coverage (PLC) or Agriculture Risk Coverage (ARC) program for producers to use as their safety net. The PLC program pays farmers when the market price drops below the established reference price. If the crop year U.S. average market price is less than the reference price on a particular commodity, a farmer who grows that commodity is eligible for payments.
ARC is based on a revenue formula of an Olympic five-year average. The last farm bill brought payments under ARC in initial years, but now as the average prices have dropped, fewer payments are being made under ARC.
Some farmers are concerned that current reference prices are too high for some commodities and too low for others. To some, the current reference prices for commodities including rice, peanuts and cotton are high compared to the reference prices for, say, corn and soybeans. So, farmers of some commodities are benefiting more than farmers of other commodities when measured on a per acre payment basis, Zulauf said.
“People on both sides of that issue get really passionate about it,” he said.
USA Rice, an industry group representing rice growers, is already criticizing Sens. Sherrod Brown (D., Ohio) and John Thune (R., S.D.) marker legislation introduced last week aimed at boosting subsidies for corn and soybean farmers. (View additional details on the bill here.)
The bill is designed to attract farmers into electing the ARC program under the next farm bill by calibrating the program to increase the possibility the program will generate payments for certain crops, at least in the first couple of years, similar to how the current ARC program did before it dried up. The Price Loss Coverage (PLC) program is being used as the funding.
In order to generate payments for the first couple of years under ARC, the loss threshold would be reduced from 14% to just 10%, meaning farmers would receive an ARC payment after only a 10% revenue loss. The crop price used to determine overall revenue would also be based on averages over 3 years instead of 5 years, and would set a floor at the 10-year average.
In order to pay for the changes to ARC, Thune has proposed changes to the PLC program. USA Rice explained, “The proposed changes to PLC would be effectively neutering reference prices, which would be the lesser of current reference prices or the 10-year average. Rice farmers would see their reference price cut from $14.00 down to a projected $13.07. This means rice farmers would experience a dramatic reduction of assistance in the first couple of years and then zero protection in the following years.”
Some of the hardest hit besides rice farmers include producers of barley, seed cotton, PULSE crops, peanuts and wheat.
"On its face, the Brown-Thune proposal would deny all farmers, including America's rice farmers, an effective safety net going forward and all for the sake of making a few payments for a few crops early on and would worsen an already struggling farm economy," said Ben Mosely, USA Rice vice president of government affairs. "If taken seriously, or even worse, enacted, a ransacking proposal like Brown-Thune, would double down on past mistakes and further undermine the whole purpose of the farm bill which is to provide an effective safety net for American farm families."
The National Corn Growers Assn. (NCGA) endorsed the Brown-Thune ARC improvement bill and said it would help ensure “ARC can continue to be a reliable risk management program for farmers during times of depressed prices,” said NCGA president Kevin Skunes.