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Debating Farm Safety Net Wins and Costs
By Chris Clayton
Tuesday, May 21, 2024 4:42PM CDT

OMAHA (DTN) -- Government spending on farm commodities would increase an estimated 77% over 10 years under the House-proposed farm bill. But the bill also would "magnify existing disparities" in payments per acre.

Under the House Agriculture Committee draft bill, base acre payments over a six-year period would go up 36% for corn, 80% for soybeans and 78% for wheat -- the three crops that account for nearly 84% of all base acres.

Per-acre payments for cotton would increase 153% over the same stretch, while payments for rice would go up 187% and peanuts would go up 114%. Those three crops combined make up less than 8% of base acres.

That's according to an analysis by economists at the University of Illinois and Ohio State University detailing projected spending for base acre payments under the Agricultural Risk Coverage and Price Loss Coverage (ARC and PLC) programs.

While a wheat farmer's base acres might get $16 an acre under the House farm bill, a peanut farmer would receive $255 an acre. A soybean farmer would expect to receive $18 for base acres, while a rice farmer would receive $175.

"The House's proposed reference price changes magnify existing disparities in expected payments per base acre," the economists stated on their website, FarmdocDaily.

Overall, the economists estimate changes to ARC and PLC would cost anywhere from $31 billion to $72 billion over 10 years.

Rep. Glenn "GT" Thompson, R-Pa., officially introduced his bill, HR 84676, the "Farm, Food and National Security Act of 2024," in Congress on Tuesday. The House Agriculture Committee is set to markup and vote on the bill Thursday.

Groups are still wading through the 1,000 pages of text, but the nuts and bolts of the changes are becoming clearer.

"It's a big document. By and large, we like what we see," said Sam Kieffer, vice president of public affairs for the American Farm Bureau Federation (AFBF). "More importantly, we're excited to get the process going. There are few legislative days left, so it's pivotal that we start somewhere."

REFERENCE PRICE/ARC CHANGES

Boosting reference prices has been a major focus for Republicans in Congress and farmer commodity groups. AFBF is among the groups that pushed for a stronger safety net in the bill.

Under the bill, reference price increases include:

-- Corn would go from $3.70 a bushel per acre (bpa) to $4.10 per bpa, nearly an 11% increase.

-- Soybeans would go from $8.40 bpa to $10 bpa, up 19%.

-- Wheat would increase from $5.50 bpa to $6.35 bpa, up 15%.

-- Rice reference prices would increase from $14 per hundredweight (cwt) to $16.90 per cwt, up more than 20%.

Along with increasing the statutory reference price, the bill keeps the "escalator provision" that applies to higher market-year prices over time.

Looking at ARC, the bill would increase the maximum coverage level from 86% to 90% and increase the maximum payments from 10% of the benchmark to 12.5% of benchmark revenue.

ARC and PLC are paid on base acres -- acres enrolled in farm programs and recognized by the Farm Service Agency. The bill also offers a one-time opportunity to add base acres to farms. The provision would allow up to 30 million more base acres, and USDA would set a pro-rata reduction to ensure base acres do not increase beyond 30 million acres.

FARM GROUP REACTIONS

The National Corn Growers Association (NCGA) stated in a letter that the group backs the changes to ARC and the higher reference price. "In combination, these provisions would enhance risk protection for corn growers who value the PLC program, particularly during periods of deep and sustained lower-than-average commodity prices."

Still, NCGA also is "particularly concerned" about language that would create a new price floor for corn at $3.30 a bushel, which is similar to a floor put in place for cotton seed. Essentially, if prices crash dramatically, commodity payments would only pay for the gap between the new PLC price, $4.10 a bushel down to $3.30 a bushel. NCGA stated that price floor provision would be unfairly applied to corn farmers.

While noting farmers will be pleased with the base-acre updates, NCGA also raised concerns, stating that the bill "would not provide any meaningful reforms or updates to existing base acres. We will continue to advocate for policies to ensure that all base acres, program eligibility and payments better reflect growers' recent planting history."

A long list of state and national groups supports the changes in commodity programs.

"Farmers face significant headwinds -- including an unfavorable farm income outlook and volatility in access to export markets -- and strengthening the farm bill is more important than ever," said Josh Gackle, a North Dakota farmer and president of the American Soybean Association.

The National Cotton Council thanked Thompson "for producing a farm bill that significantly increases the support levels for cotton producers, who have been weighed down by the recent rise in on-farm production costs."

The U.S. Peanut Federation also backs the bill. USA Rice said the bill would benefit the rice industry, "and we particularly appreciate the meaningful improvements to the farm safety net through the increased Price Loss Coverage Program rice reference price."

Nathan Reed, president of the Agricultural Council of Arkansas, stated in a letter that the House Ag GOP staff posted on the social platform X, "Within your proposal, it's clear that 'putting more farm in the farm bill' was more than a slogan. We appreciate the efforts to improve and strengthen conservation programs as well as key safety-net policies in the crop insurance and commodity titles."

HOW IS IT PAID FOR?

The Congressional Budget Office hasn't released a score on the full costs of the bill in the markup or changes.

The "pay-fors" in Thompson's bill set up multiple hurdles.

Anti-hunger groups are pointing to $27 billion that would be taken out of the Supplemental Nutrition Assistance Program (SNAP). House Democrats have made it clear they won't back any cuts to SNAP or move money out of the nutrition programs. Rep. Jim McGovern, D-Mass., a senior member of the House Agriculture Committee, took to X on Tuesday to air his complaints.

"We must reject this MAGA messaging farm bill that hurts hardworking Americans, including many in rural communities, who rely on SNAP to make ends meet," McGovern stated. "Congress must come together to pass a bipartisan farm bill. America's farmers and families are counting on it."

But the new debate over spending comes down to the House Ag Committee bill cutting off USDA from using the Commodity Credit Corp. CBO has reportedly stated that "savings" from blocking the agriculture secretary's authority would be about $8 billion over 10 years. A Democratic staffer, on background, stated to DTN that Thompson's staff maintains the dollar savings on the Commodity Credit Corp. provision is actually $53 billion over 10 years. The plan is to use $50 billion for the commodity programs and another $3 billion in crop insurance. To use the CCC dollars like this, Thompson will need to get the House Budget Committee chair to sign off on it.

FARM SUBSIDY CRITICS

The Environmental Working Group and taxpayer advocate organizations that typically call for spending cuts joined forces on Tuesday to hammer on the potential increases in reference prices and on the plan for paying for them.

"If this farm bill would become law, cotton, peanuts and rice farmers would receive payments every year," said Scott Faber, Environmental Working Group's head of government affairs. He added, "A farm safety net that pays off every year is not a safety net, it's a trampoline."

Josh Sewell, director of research and policy at Taxpayers for Common Sense, pointed to record net farm income in 2022 and "above-average income almost continuously" since the 2018 farm bill. He criticized farm groups for pushing to increase reference prices to guarantee payments for some commodities.

"More subsidies are not needed, especially as 70% of farmers don't even grow a commodity eligible for Agricultural Risk Coverage or Price Loss Coverage," Sewell said.

Sewell also challenged how the GOP staff are looking at the CCC provision and savings. He said his groups would like to restrict USDA's authority to use the fund, "But we don't see it as a pay-for." He added, "They use it as the main pay-for in this bill, and it's not going to produce any savings."

While Thompson also may have GOP members of the Agriculture Committee lined up to vote for it, taxpayer advocates said House conservatives would oppose the bill if it reaches a floor debate.

"I certainly think enough Republicans are going to be concerned this is not going to just sail through," said Bryan Riley of the National Taxpayers Union. "There's going to be significant opposition."

FarmdocDaily analysis: https://farmdocdaily.illinois.edu/…

Also see:

"House Plan Boosts Reference Prices and Commodity Support," https://www.dtnpf.com/…

"Rolling Out a Trade Program Using CCC Dollars, Vilsack Defends Ag Secretary's Flexibility," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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