A Look at Possible New Target Prices in Farm Bill Debate

February 15, 2012 04:00 AM

Although there is no official draft farm bill language relative to the aborted attempt late last year to link a new farm bill with the failed Super Committee bill, the following, according to usually reliable sources, were the proposed target prices (called "reference" prices in the draft) -- Note: As part of its farm bill proposal, the National Cotton Council (NCC) did not include a target price for the cotton program.

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Based on talks with government, farm organizations, and industry analysts, there is a lot of disagreement over whether the proposed target prices were set too high, or too low.

One example of the difference of opinion concerns rice. While a lot of the media coverage noted the reference price was too high, some industry and other analysis suggest that the proposed level should be higher, especially if one uses costs of production and even figures for that topic vary considerably. However, some observers say the target/reference price for long grain rice is high relative to that for medium/short grain rice.

Some say the target prices for sorghum, barley and oats are high relative to that for corn.

The target price for sorghum, wheat and peanuts, some say, are high relative to that for soybeans.

Target prices for canola and safflower, some signal, are high relative to target prices for other oilseeds, and the target/reference price for dry peas, some note, is high relative to the target prices for competing crops.

The American Farm Bureau Federation has done some analysis of the proposed target/reference prices for some commodities, and presented the following information at a recent crop insurance industry conference:

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Comments: It is clear that the issue of what target/reference prices should be set at will not bring agreement among industry participants and other observers. Some note that the likely elimination of direct payments will impact rice growers far more than other farm program crops, as rice currently receives $100 per acre guaranteed via direct payments. One farm bill observer concluded with this important note: "If target prices are not needed, then show me how the revenue plans will protect the producer if we experience a situation (like from 1996-2002) when prices unexpectedly fall? I've yet to find a satisfactory response -- or one that works for Southern crops, including wheat."


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