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RSS By: Chip Flory, Pro Farmer

This is a private blog for Pioneer.

Roberts criticizes PLC

Feb 07, 2014

Pro Farmer Extra

- From the Editors of Pro Farmer newsletter -

February 7, 2014

Today's perspective is provided by Pro Farmer Washington Consultant Jim Wiesemeyer, Pro Farmer Associate Editor Meghan Pedersen and Sr. Market Analyst Brian Grete:

Roberts criticizes PLC

Most are giving the new farm bill a “farmer-friendly” read, but some are displeased, including Sen. Pat Roberts (R-Kan.), former ranking member of the Senate Ag Committee. He is opposed to the Price Loss Coverage (PLC) safety net option that is based on reference (target) prices. Roberts says the measure “marches backward toward producers making decisions based off of government subsidies.”

Roberts says PLC “sets high fixed target prices and subsidies for all commodities and regions,” and that in some cases price guarantees are so high they are at or above a farmer’s cost of production. This will encourage growers to plant crops that guarantee the highest subsidy payment from the government, not the market, according to Roberts.

He says early analysis he has seen shows “target prices are high enough that rice, peanuts and barley growers will receive a subsidy payment at least 75% of any given year, likely triggering a payment four out of the next five years. Other commodities are not treated as favorably, with wheat prices likely to trigger a payment on average only 35% of the time and soybeans less than 15%.”

Besides the (likely) possibility this will result in World Trade Organization (WTO) challenges, Roberts also says the incentive PLC gives farmers to plant certain crops based on subsidies will eventually result in production surpassing global demand for certain crops, like wheat.

However...

Roberts has long been against target prices, so his opposition now is no surprise. As for his contention that high target prices could distort planted acreage and production, the fact PLC pays on base acres, not planted acres, likely counters his argument.



 

Follow Pro Farmer Editor Chip Flory on Twitter: @ChipFlory


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