Corn, Soybean, Sunflower, Canola Groups Come Out Against House Farm Bill Target Price Levels

June 14, 2013 03:49 AM

via a special arrangement with Informa Economics, Inc.

Midwest group lobbyists continue prior efforts to bolster their programs versus Southern-region initiative

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

The all-for-one and one-for-all farm group lobbying of the past continues to splinter, as Midwest-oriented farm lobbyists led by corn and soybean groups have again set their negative sights on proposed target price levels in the pending House farm bill, in a development that could eventually work against those groups, according to some farm policy veterans.

An amendment that Rep. Bob Gibbs (R-Ohio) may offer would slash target prices in the bill's Price Loss Coverage (PLC) program.

Some target price proponents charge that the Midwest groups have used and pressed for analysis reports from the University of Illinois in an attempt to bolster their case. A University of Illinois economist estimates that peanut producers would get 68 percent more from PLC than they receive now in direct payments, assuming that commodity prices stay at forecast levels. Wheat growers would receive the same under either program, while rice, cotton and corn growers would receive less, says economist Nick Paulson, who did the analysis (link) for the Environmental Working Group. If prices are lower than now projected, peanut growers could be receiving as much as $180 an acre, more than three times what they now receive in direct payments. As long as commodity prices stay close to the levels projected by the Congressional Budget Office, PLC payments would total $1.9 billion a year less than the amount of direct and countercyclical payments farmers now receive. But should commodity prices fall as much as 15 percent below the CBO baseline, the cost of PLC could shoot to $6.9 billion a year, Paulson found.

A veteran farm bill analyst told me, "This is a big mistake by these groups. This is exactly why we are having trouble getting votes for final passage. These groups aren’t working the bill—they are working the amendment. We aren’t going to have a farm bill—and the revenue plan they want—if ag continues to form its firing line in a circle. These groups and their lobbyists can’t see the forest for the trees...."

Another farm policy analyst said, "It is clear that the authors of the letter do not understand farm policy. Prior to 1996, farmers generally had to plant the crop for which they had base. If they didn’t, they would not qualify for a benefit that year and would lose future eligibility as they lost their base. The criticism here is that there was no planting flexibility to plant for the market or agronomic conditions. The 1996 Farm Bill and the succeeding Farm Bills paid producers on the crop for which they had base but did not require planting of that crop or any crop. The criticism here is that farmers were being paid even though they didn’t farm. The 2008 Farm Bill introduced a middle ground to take away both criticisms. ACRE paid on planted acres up to base. In this way, the farmer has total planting flexibility to plant for the market or agronomic conditions and he would be paid on the crop he produced. It was one of the few sensible aspects of ACRE at the time. Now, in this Farm Bill debate, the Senate shallow loss revenue program would essentially pay on planted acres up to base as would the House’s Price Loss Coverage and Revenue Loss Coverage. The authors of this letter attempt to mislead readers to believe that somehow the House would have farm policy return to pre-1996 days. The authors also attempt to explain why shallow loss revenue coverage should be paid on planted acres up to base but price loss coverage should not be. They say that because shallow loss revenue guarantees are based on the previous 5-year average prices and yields that that makes it reflective of market conditions for that year. Meanwhile, they argue that because price loss coverage reference prices are fixed in statute that they do not reflect market conditions. Thus, the former does not distort markets while the latter does. It is obvious why that is a false argument. Previous 5-year prices and production do not reflect market conditions for the current year and if it did, it would not be needed. The aim is to pay the farmer when current year revenues fall below the previous 5-year average. Moreover, the revenue guarantees are set based on very high prices and yields for some crops and as a result are more likely to trigger a payment than reference prices that are higher than in current law but still lower than expected prices going forward. As such, it is the shallow loss revenue program that runs the risk of distorting planting, not price loss coverage. One other thing: The fact that these groups are opening up internal fights just as the House takes the Farm Bill to the floor raises serious questions about their judgment. They well risk the Farm Bill as well as other important policies down the road that they care about due to this quite frankly amateur lobbying. They do not appear to be working to pass the Farm Bill but they do appear to be doing all they can to make it harder on the House to pass one."


Groups representing corn and oilseed producers are urging House members to support the Gibbs measure (see letter below).

Dear Representative,

The undersigned national farm organizations would like to express strong support for timely consideration by the House of Representatives of H.R. 1947, the Federal Agriculture Reform and Risk Management ("FARRM") Act. With current program authorities due to expire at the end of September, it is critical that the House pass its version of the farm bill and send it to Conference, where differences can be resolved with recently-passed Senate legislation. Farmers, ranchers, and others who depend on these programs need long-term certainty which only a new five-year bill can provide. In addition, both bills make significant contributions to reducing federal budget deficits.

Our organizations support many of the programs included in HR 1947, as reported by the Committee on Agriculture. The bill would consolidate conservation programs, reauthorize and fund agricultural research, energy, and export promotion programs, and make improvements in federal crop insurance. We strongly support these provisions, and ask that you oppose any amendments which would eliminate or weaken them.

We are very concerned, however, with the Price Loss Coverage (PLC) program option included in the Commodities Title of the Committee bill. The PLC program would set high, fixed reference prices for program crops which, in some cases, exceed their historical prices and cost of production. It ties payments to producers to crops they grow in the current year, which could distort planting decisions and production if market prices fall below their support levels.

Since the 1996 Farm Bill ("Freedom to Farm"), farm policy has provided planting flexibility, encouraging producers to respond to market signals in making their planting decisions rather than to the prospect of receiving government payments. We do not want to see policies return to the era of high supports tied to current-year plantings, which distorted crop production in the 1980’s. The PLC program in the Committee bill should be modified to make it responsive to the market rather than the government.

We understand Representative Gibbs may offer an amendment to set reference prices at a percentage of recent average market prices, which do not exceed production costs. The Gibbs amendment would also provide for payments on historical crop acreage bases rather than on current-year plantings. These changes would make the PLC program more market-oriented and significantly reduce the risk of distorting planting decisions and production. They would also reduce the likelihood of the program violating U.S. commitments under the WTO. Moreover, they would achieve an estimated $10 billion in savings in addition to the Committee bill.

We respectfully request your support for the Gibbs amendment during House consideration of H.R. 1947. Again, we urge you to support final passage of this legislation so Congress can complete a new farm bill this year.

Sincerely yours,

American Soybean Association
National Corn Growers Association
National Sunflower Association
U.S. Canola Association


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NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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