Senate Farm Bill Draft Includes Reference/Target Price Based Option; AGI Crop Ins. Test

May 9, 2013 11:47 AM

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Contacts indicate some of draft may be changed via a manager's amendment.

Addition of a reference (target) price based program option for farmers and provisions for crop insurance that would link it to conservation compliance and means testing relative to the subsidy level are some of the changes contained in the draft farm bill legislation that the panel will use as the markup vehicle compared to the 2012 version of the legislation.

Among general changes are that the legislation now covers the 2014 through 2018 crop years. However, some determinations in the bill that were linked to using 2009 through 2012 in the version of the bill last year, those same years apply according to the draft - they do not appear to be shifted to 2010 through 2013.

Adverse Market Payment (AMP)

This is the reference/target price-based payment option and it would use the target prices in effect under the 2008 Farm Bill except for rice and peanuts, where the reference price for long and medium grain rice would be $13.30 per hundredweight and $523.77 per ton for peanuts.

The payment rate under the AMP program would be equal to the amount that the reference price exceeds the actual price.The actual price would be higher of the national average market price for the marketing year for the covered commodity and the national average loan rate. For rice, the market price and reference price would be what applies to the type or class of rice.

If payments are triggered, they are to be paid on the payment rate, payment acres (85 percent of base acres) and payment yield (same as determined in the 2002 Farm Bill except for designated oilseeds and pulse crops which would have a specific payment yield determined via this bill) for the covered commodity on the farm.

PERSPECTIVE: Clearly this is a nod to southern crop producers who felt the 2012 version of the farm bill in the Senate did not offer them adequate safety net coverage.

Ag Risk Coverage (ARC):

ARXC is also still a component of the bill, but the ARC moves to using a full market year price as opposed to the mid-season price that was used in the 2012 version of the bill.

Under ARC, the producer would have to make a one-time, irrevocable decision to have individual or county coverage.

As with the 2012 version of ARC, payments are based on:

For individual coverage the sum of 65 percent of the planted eligible acres of the covered commodity; and 45 percent of the eligible acres that were prevented from being planted to the covered commodity; or

For county coverage, the sum of 80 percent of the planted eligible acres of the covered commodity; and 45 percent of the eligible acres that were prevented from being planted to the covered commodity.

PERSPECTIVE: The only major shift here appears to be the use of the full market year price as opposed to the midseason price in calculating payments.

Conservation Reserve Program (CRP)

The only shift is that the phase-down of maximum acres in CRP would be pushed out one year compared to the 2012 version and still would be down from the current 32 million acres to 25 million acres, but the lower cap would arrive in 2018 not 2017 as was the case in the 2012 bill.

Crop Insurance

One of the biggest shifts in the draft legislation is that conservation compliance would be included but also an AGI limit of $750,000 would apply to the program relative to the level of premium subsidy a producer can receive.

PERSPECTIVE: Sources advise that there is expected to be a manager's amendment that will be offered by Chairwoman Stabenow that would eliminate the AGI portion but keep the conservation compliance as per the coalition of farm, commodity and environmental groups suggested to the panel.

Comments: Now the key will be release of the draft legislation the panels will use as the markup starting point for the bill. House Ag panel Chair Frank Lucas (R-Okla.) has said he expects 100 amendments to the bill in the committee, with still more to come on the House floor. That will be the real litmus test for the bill in both the House and Senate and floor action will set the details of the bills.

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