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Monday, October 03, 2011

Farm Program Proposals:  Which One Will You Endorse?


Within a year the 2008 Farm Bill will have expired, but there is no certainty new legislation will be approved to replace it.  And that gives rise to many questions.  Will there be a new “Farm Bill” in the wake of the deficit reduction deliberations?  Will it be a farm program on a consumer program?  Will there even be a farm “safety net” when all is said and done.  Is there anything on the table?

The National Corn Growers and the American Soybean Associations are working hard to push proposals for a new safety net, assuming there will be such an element in new farm legislation.  Four years ago, the National Corn Growers Association pushed for a program that evolved in the Congress as ACRE, but when all of the details were structured only 8% of farmers signed up and only 13% of farmland was enrolled.

Currently, the NCGA is pushing for a similar ACRE program, but one that addresses many of the complaints heard from farmers about ACRE.  The program is called The Agriculture Disaster Assistance Program (ADAP).  NCGA says builds on the existing structure of ACRE and is designed to address the need for simplification and elimination of overlapping coverage with individual crop insurance. Changes include the use of harvest prices and crop reporting districts to set the crop revenue guarantee and would establish a guarantee based on the five-year Olympic average of revenue.  Payments would be limited to 10 percent of the guarantee, based on planted acres and adjusted to a farm’s yield. Payments would cover lost revenue between 85 to 95 percent of the guarantee. Marketing loan rates would be restored to standard levels, rather than being reduced by 30 percent in ACRE.”

NCGA provides a more detailed description of ADAP and identifies points where it compares and contrasts with ACRE. 

The American Soybean Association proposes a similar program which also uses crop insurance as the key to risk management and then fills in various gaps.  Both groups say their proposal should be funded with money saved from elimination of the Direct and Counter Cyclical Payment program.  While the NCGA program is called ADAP, the ASA program is called RMAF. 

The RMAF proposal calls for USDA to “Provide a revenue guarantee to a producer of non-irrigated commodities against losses below 90 percent of the producer’s revenue benchmark down to 75 percent of the revenue benchmark (a 10 percent revenue loss is required before the program is applicable). For irrigated commodities, provide a revenue guarantee against losses below 95 percent of the producer’s revenue benchmark down to 80 percent of the revenue benchmark (a 5 percent revenue loss is required before the program is applicable).  A producer’s revenue benchmark for a commodity is calculated based on the higher of the producer’s APH yield, the producer’s five-year Olympic average APH yield, or 80 percent of the county yield, times the five-year Olympic average of NASS season average prices.  A producer’s actual revenue for a commodity is calculated based on actual yield times the national average price received by farmers for the commodity during the first four months of the marketing year, plus net crop insurance indemnities received.  Payments to a qualifying producer equal 85 percent of the difference between the producer’s revenue guarantee and actual revenue for the commodity.  Payments are based on a producer’s revenue for each commodity and on actual planted and prevented planted acres.

The RMAF program has many other details, which ASA provides. 
On a parallel path is the Aggregate Risk and Revenue Management program, proposed by Senators Sherrod Brown, Richard Durbin, Richard Lugar, and John Thune.  The ARRM program is a modified version of the NCGA program and the expiring ACRE program.

Subscribers to Cornbelt Update learned about this program a week ago.  Some of the important details include:

1) ARRM applies to corn, beans, wheat, and other crops covered by crop insurance.
2) It covers specific crops, not farms, and choices to participate are made annually.
3) Planted acres are covered, not prevented planting or newly tilled native sod.
4) Program guarantees and payment calculations are shifted to crop reporting districts.
5) Guarantees are 90% of an Olympic average of revenue for preceding 5 crop years.
6) Revenue is based on national average harvest price and crop district yield.
7) Revenue guarantees cannot move up or down more than 10% from year to year.
8) Actual revenue is based on national harvest price average and actual yield.
9) Payment is triggered if crop reporting district revenue is below CRD guarantee and the participant’s actual farm revenue is below the benchmark farm/enterprise unit revenue.
10) Payment is lesser of difference between benchmark revenue and CRD actual revenue, or 15% of the ARRM guarantee and 85% of enrolled acres divided by APH and CRD yield.
11) The payment will not exceed 15% of the amount of the farm guarantee.
12) Payments will be made on 85% of planted acres enrolled in the program.
13) Total amount of payment will be subject to limitations established in 2008 Farm Bill.
14) Funding for the program comes from elimination of SURE and direct payments.

Proposals are being made for a new farm safety net to replace ACRE when the current farm bill expires in a year.  The first ones to be announced are similar, and both try to repair ACRE, but use crop insurance as the primary risk management tool for farmers.  Legislation based on the National Corn Growers plan has been developed and proposed by the primary Senators who sponsored the ACRE program last time.

Posted by Stu Ellis on 10/03 at 12:00 AM | Permalink

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