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Look for ARC/PLC Regs by Mid-July

June 13, 2014
By: Ed Clark, Top Producer Business and Issues Editor

Passing the 2014 farm bill was a huge accomplishment. Just as big will be USDA’s interpretation of it. Farmers won’t likely have to wait long to see what the department has in mind on key farm bill provisions, however.

USDA appears likely to roll out the first set of rules for new Title 1 programs—Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC)—by mid-July. "That’s what I’m hearing," says Tom Sell, managing partner, Combest, Sell and Associates. He spoke this week at an AgGateway conference in Altoona, Iowa.

Because in choosing either ARC or PLC producers are stuck with their choice though 2018, Sell cautions farmers to take their time in making the decision. "There’s no reason to hurry it," he says. With sign-up expected to run from late October to January, there will be plenty of time for making this important decision.

Sell, a lobbyist and former House Agriculture Committee staffer, says that PLC, a target price program based on a five-year average, appears a better safety net if program crop prices "head south and stay there," while ARC appears a better choice if prices only dip in occasional years.

One reason why many initially have viewed ARC favorably for corn in particular, he says, is that it is based on a five-year average of $5.27/bu., which for some counties could compute to a target revenue level of $1,000/acre or better. So if revenues fall below 86% of that, farmers would receive a payment. Tools to aid producers in making a decision between the two are being developed by the University of Illinois and Texas A&M University.

In Sell’s view, it’s remarkable that the farm bill passed at all, given the economic and political challenges it faced. "It’s harder passing a farm bill when there is no crisis in agriculture," he says. Perhaps more significant, however, is the sharp divide in Congress that makes passing any legislation difficult. Sell, who served on the Republican side, faults both the far left and far right for making the passage of the farm bill such an onerous task. "We had exceptional opposition," he says

The left, he says, is dominated by environmental and other groups "who want to tear down farm programs," particularly the Environmental Working Group. "These people go to work every day to make your life difficult." Meanwhile, the right is dominated by libertarian groups such as the Heritage Foundation and the American Enterprise Institute. Instead of tackling big budget items that touch everybody, the far right seems to focus inordinate attention on the farm bill, presumable because so few people are directly involved, Sell explains.

Passing farm bills is particularly difficult in the House, Sell notes, because only roughly 70 of the 435 congressional districts have significant production agriculture. Underscoring the point of relatively small pockets of farmers, he notes that the new ag census shows that commercial farmers—those with $250,000 in gross sales or more —make up just 12% of the 2.1 million "farms" in the U.S.

This small number produces 89% of annual crops that supports16 million jobs that are tied to agriculture. Because of the House make-up, this is where the major ag policy hurdles take place, Sell says. And it didn’t stop with passage of the farm bill. He notes that just this week, Rep. Ron Kind, D-Wis., introduced an amendment to the appropriations bill that would bar USDA from protecting the privacy of producer crop insurance information.

Sell notes that the blending of ag programs and food stamps "is a long term marriage" that has helped to pass farm law. Almost 80% of the farm bill is nutrition programs or $76 million out of $96 billion. Commodity programs now only make up $4-5 billion, $9 billion for crop insurance. Overall, "the new farm bill saved $23 billion," Sell says.

Crop insurance is the most important element in the new farm bill for producers, he says, and the one area in which all commodity groups were in agreement. A significant enhancement is the ability of producers to improve their APH to better reflect what they would expect to produce. Another, Sell says, is the ability of producers to purchase supplemental county-based insurance, or "SCO" and stack it on top of their individual insurance to cover a portion of their deductible. This has particular benefit for farmers who do not generally insure at higher levels because it is cost prohibitive.

Sell noted this farm bill generally offers increased flexibility to producers via improved crop insurance and the new farm programs that allow producers to update yields on some crops and not others. Another benefit, he says, is that the Risk Management Agency and the Farm Program Agency will improve data flow and management by using many of the same data sets. However, he acknowledges that many producers are justifiably concerned about conservation compliance being tied to the subsidy portion of federal crop insurance, but that it was needed in the end to get the bill completed.

 

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