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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

Update on the New Farm Bill

Aug 13, 2013

Mark Reisinger, the Global Grain Trade lead gave an update on the new farm bill this morning at the NextGen conference.

With the House failing to pass a Farm Bill that included the nutrition program, we now have a Senate/House sub-committee working on a new Farm Bill.

The Senate portion offers two programs based on an adverse price movement and a revenue based risk coverage (ARC). This is designed to cover about another 10% of the risk that is not covered by normal crop insurance (78%-88%). Can be for individual farm or county based.

The House version either has a Price Loss Coverage (PLC) or a Revenue Loss Coverage (RLC). Unlike the Senate where both programs are available to the farmer, the House version is either/or. The Price Loss Coverage is offered only for certain commodities and for certain crops such as peanuts and rice, the price levels are actually higher than the current market price for that commodity. This will most likely provide an incentive for growing more of these crops which will tend to drop the market price even lower. This may lead to another World Trade Organization dispute (similar to the Brazil Cotton payments being made by the USDA).

Assuming 2014 prices, corn farmers would get a $1 per acre, soybean farmers get zero and peanut growers get $105 per acre. This is not based on any historical price pattern, but is based on the growers associations lobbying the House for these price levels. These acres would be based on intended acres not historical. This will distort prices and most likely drive some corn and bean acres to peanut acres in the South. Barley and rice acres would also most likely increase under this program.

Under either the House or Senate version of price supports, only Barley, Peanuts and Rice would receive any material payments.

The Revenue Loss Coverage drops the 10% band to the 75%-85% range. It is only available for the county, not the individual farm.

The scoring for the AMP (Senate) is $600 million per year and the ARC (Senate) is about $5 billion per year. The House total would be about $5 billion per year with most of it being the PLC since the assumption is that most will opt into the Price Support Program.

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