Some farm groups are calling on Congress to allow farmers to reallocate the base acreage they have enrolled in farm programs, a move that would allow growers to increase their potential government payments.
Except for the 2018 farm bill, Congress has allowed such base updates in every other piece of legislation since 2002. But those reallocations can come with a cost to taxpayers, especially if lawmakers modify aspects of the commodity programs, and it’s far from clear if lawmakers will have any new money to spend on commodity programs when they sit down to write a new farm bill in 2023.
The American Farm Bureau Federation is the latest organization to propose that Congress allow farmers to update their base acreage allocations.
Payments under the two main commodity programs, Agriculture Risk Coverage and Price Loss Coverage, are tied to the number of enrolled base acres producers have in a particular commodity, not the acreage producers plant in a given year.
A farm’s base acres are tied to a farm’s historic production and can differ significantly from the farm’s current cropping patterns. Many farms in the northern Plains, for example, grow less wheat and more corn and soybeans than they did historically, but their program base acres may remain primarily in wheat.
Of the 252.3 million base acres recorded by USDA in 2021, 94.8 million were enrolled in corn, 63.5 million were enrolled in wheat and 53.5 million were in soybeans, according to USDA's Farm Service Agency. By comparison, FSA figures show farmers planted about 49.4 million acres of wheat that year, compared to 91.3 million acres of corn and 86.2 million acres of soybeans.
Whether farmers would want to update their base acres, if given a chance, would depend on whether they think they are more likely to get ARC and PLC payments with an updated allocation.
“Farmers and their advisers are very good at figuring out which crop is likely to pay the most, and they will adjust acres to reflect that,” said Ohio State University economist Carl Zulauf.
Carl Zulauf, Ohio State
Zulauf co-authored a recent study that said the base update authorized by the 2014 farm bill increased the cost of commodity programs by about 5%, or more than $1 billion. Farmers increased their corn base by about 10.6 million acres and added 3.4 million acres of soybean base. Wheat base dropped the most, falling by 9.9 million acres, while barley and sorghum base acres fell by 3.4 million and 2.8 million acres respectively, according to the study.
The outcome of the next update would likely depend on whether Congress also modifies the commodity reference prices that also factor into determining whether farmers get ARC or PLC payments.
Some groups, including AFBF, are urging lawmakers to increase reference prices, arguing that the current rates don’t reflect increased input costs. The 2022 PLC reference prices are $3.70 a bushel for corn, $8.40 for soybeans and $5.50 for wheat, all of which are well below this year’s market prices. PLC triggers payments to farmers when market prices fall below reference prices. The size of the payments depends on the farmers’ base acreage and yield history in a particular commodity.
The American Soybean Association is among the groups pushing for a reference price increase, and a base update to go with it. Without a reference price increase for soybeans, there’s little reason for farmers to reallocate more of their base acres into soybeans, said Scott Gerlt, ASA’s chief economist.
The soybean reference price is low enough that it has never triggered PLC payments, he noted.
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In 2019, a year in which soybean growers were reeling from the Trump administration’s trade war with China, none of the $4.9 billion in total PLC payments that year were on soybean base. The largest share of PLC payments for 2019 — $1.7 billion — was made on wheat base, followed by $1 billion on corn base and $969 million on cotton.
Soybeans need “a better safety net and have that paired with an updated base,” Gerlt said.
Under existing rules, a farmer may be better off keeping land enrolled in wheat base. Zulauf said the reference price for wheat has been relatively high for wheat in comparison to market prices, making it more likely that farmers will get a PLC payment on wheat base.
The Farm Bureau has put a related issue in play by also calling for Congress to allow farmers who have base acreage that’s currently classified as “unassigned” to allocate those acres to specific commodities, making them eligible for PLC or ARC payments.
Much of the “unassigned” base is former cotton base that farmers lost after Congress made cotton ineligible for PLC and ARC in 2014.
Cotton was made eligible for PLC and ARC under a budget bill that passed in early 2018. The amount of cotton base farmers were then allowed to enroll in the programs depended on how much of their land they had planted to cotton from 2009 to 2012. If they had reduced cotton plantings significantly, 20% of their previous cotton base, known as “generic base,” could be classified as “unassigned.” Unassigned acres are ineligible for program payments.
While the number of unassigned base acres is probably small, “for the producer impacted, it’s a big deal,” said Bart Fischer, a Texas A&M University economist who was a senior aide to the House Agriculture Committee in 2018.
The National Cotton Council has not taken a position yet on the issue.
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