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Farm bill brings changes for peanut producers

LEE DICKERSON from left AgriAFC Grand Bay Ala Mark Platt Platt Farms Fruitdale Ala and Tom Mabry AgriAFC Hattiesburg Miss were among those attending the annual meeting of the Mississippi Peanut Growers Association
<p><em><span style="font-size: 13px;">LEE DICKERSON, from left, Agri-AFC, Grand Bay, Ala.; Mark Platt, Platt Farms, Fruitdale, Ala.; and Tom Mabry, Agri-AFC, Hattiesburg, Miss., were among those attending the annual meeting of the Mississippi Peanut Growers Association.</span></em></p>
&ldquo;Crop insurance has become more prominent in the new farm bill &mdash; crop insurance acres in the U.S. continue to climb, and the value of crop insurance has gone up over five-fold,&rdquo; says Keith Coble. &nbsp; &nbsp;

It was “a big deal” when lawmakers included peanut revenue insurance in the 2014 farm bill, says Keith Coble. The result is “a new, different product.


“ How well it will work is yet to be seen, but it’s something peanut producers need to be asking their crop insurance agents about,” he said at the annual meeting of the Mississippi Peanut Growers Association.

“The real issue was that there wasn’t a futures market for peanuts. Corn and soybeans had revenue insurance driven off the futures markets. The agency had to figure out how to deal with this for peanuts. It wasn’t easy.”

Coble, who is Giles Distinguished Professor of Agricultural Economics at Mississippi State University, served as chief economist for the minority staff of the Senate Agriculture, Nutrition and Forestry Committee during the 2013/14 farm bill debate.

Click for photos from Mississippi Peanut Growers Association 2015 annual meeting
Click for photos from Mississippi Peanut Growers Association 2015 annual meeting

“I’ve worked on risk and policy-related issues for a long time, because I thought they were relevant to agriculture,” he says. “But I never dreamed the day would come when risk programs would have such a prominent role in agriculture policy.

“Crop insurance has become more prominent in the new farm bill. Crop insurance acres in the U.S. continue to climb, and the value of crop insurance has gone up over five-fold.”

A reality of the new legislation, Coble says, is that it was written with the knowledge that “agriculture has good times and bad times. We knew we were in a period of high prices that would likely be coming down — and that’s exactly what has happened. Times are not so great now in the ag sector in terms of market prices.”

A difficult bill to pass

It was, he says, “very, very difficult to pass this farm bill. The context, the environment, nutrition issues, all were very controversial.”

IT WAS "very, very difficult" to pass the new farm bill, says Mississippi State University Agricultural Economics Professor Keith Coble, who was chief economist for the Senate Agriculture Committee's minority staff.

The legislation still is not fully implemented, Coble notes. “It’s in the hands of the USDA, and there are a lot of complex provisions for them to implement.”

All of which will be complicated, he says, by the nation’s budget deficit — “it was hanging over our heads when we wrote this bill; it’s still hanging over Congress’ heads as they go into this new session. Agriculture gave up some things to get this bill passed, but until Congress tackles some hot button issues, we’re not really going to make a real headway on the deficit.”

When he began working in the ag policy arena in the late 1980s, Coble says, “We didn’t even talk about including crop insurance in farm bills — it was a separate piece of legislation. The last standalone crop insurance bill was in 2000. Since then, price and yield risk have become overlapped in revenue-based programs, with peanut revenue insurance as an example.”

Peanut revenue insurance, Coble says, “is something you should talk to crop insurance agents about. Get details, find out how it would work for you. The price discovery system for this is going to be pretty unique, compared to other crops.”

In the farm bill debate, he says, payment limits “were one of the most difficult issues we had to struggle with.” The result, he says, “is complicated because loan programs are included — I think it’s going to frustrate producers and marketers.

“The thing you to need to understand  — and you need to make your bankers aware of this — is that there will be years you’ll get zero from these payments, and other years you may get very large payments. And those are the years when you’re going to have a problem with payment limits.”

Issues with crop bases

As lawmakers and staff worked on the new legislation, Coble says, “We knew we had a huge discrepancy in terms of program base and crops farmers were actually growing, and Mississippi was a prime example of that. We had relatively large amounts of cotton and rice base. That’s where there was a desire to realign program base with what farmers were actually growing — thus the opportunity to update base acres.

"THERE WAS a desire to realign program base with what farmers were actually growing."

“The Congressional Budget Office asserted that we saved $23 billion with this legislation. I think we actually saved a little more than that. The big giver was the commodity titles. Nutrition, a much, much bigger piece of the pie, lost less. The big gainer was crop insurance.”

Politically, Coble says, “Direct payments were dead before I got to D.C. — there was no chance of keeping them in this bill. It wouldn’t have passed the House or Senate. We did away with countercyclical payments, but revamped them into a new program.

We created two new three-letter acronym programs, ARC (Agricultural Risk Coverage) and PLC (Price Loss Coverage). These are programs you can choose on a commodity-by-commodity and farm serial number-by-farm serial number basis. If you want to choose one option on one farm serial number, and another on a different farm serial number, you can.

“The bottom line: This bill cut support for commodity programs. In return, producers got a lot of options. You’ve got to sort through these options, and that can be confusing. Mississippi State University is trying to help you understand these options so you can make informed choices.”

The options ultimately ended up on a decoupled basis, Coble says, “so you can be collecting a rice payment and be growing peanuts, or vice versa. There’s a one-time opportunity to reallocate existing base acres and to update base yields.”

In the crop insurance title, he notes, there are “two new items, SCO (Supplemental Coverage Option) and STAX (Stacked Income Protection Program), the latter designed by the National Cotton Council.

“The big compromise between farm groups and environmental groups is that there now is conservation compliance on crop insurance. That isn’t a big deal for program crops growers who were already dealing with it. But it will be applied to some non-program crops that may require attention by producers.”

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There are a couple of changes to traditional crop insurance programs that matter, Coble says.

“Producers may need to be thinking about enterprise units broken out by dryland versus irrigated. More than half the corn and soybean acres in the U.S. are now insured with enterprise units. If you haven’t taken a look at this, you should.

Separate coverage level by practice is another option to consider, he says. “If you want to buy higher coverage on your dryland production and back off on your irrigated acreage because you think it less risky, you can do that now.”



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