Groups representing producers of U.S. row crops are far from united on what Congress should do to improve commodity programs, even as the House and Senate Agriculture committees look to start writing a new farm bill in coming weeks.
Most of the commodity groups represented at a marathon, two-part House Agriculture subcommittee hearing on Wednesday agreed the reference prices in the Price Loss Coverage program are too low, given recent increases in input costs, but there’s not a consensus on whether the prices should be raised across the board. None of the groups proposed specific increases in the PLC rates.
PLC triggers payments when the average market price in a given year falls below the reference price.
Some groups, such as organizations representing soybeans and peanuts, would like Congress to allow growers to update their base acres to reflect recent planting trends, or to add base acreage they currently lack. Some groups also are seeking increases in marketing loan rates.
Commodity program debates have long been marked by distinctive economics and farming patterns.
The National Corn Growers Association favors adjusting an escalator provision for PLC reference prices that was included in the 2018 farm bill. The provision allows the reference price for a particular commodity to rise as much as 15% above the statutory reference price to reflect increases in market prices.
NCGA President Tom Haag said it would take “a lot of money” to increase the statutory reference price for corn, which is now $3.70 a bushel, well below what the Minnesota farmer estimated was the current breakeven point for farmers of $5 a bushel.
A recent analysis by economists at the University of Missouri estimated that the effective reference price for corn will rise to $4.01 in 2024 for corn and hit $4.25 by 2026, because of recent increases in market prices.
The American Soybean Association urged the lawmakers to consider either increasing the statutory reference price or modifying the escalator, or both.
ASA President Daryl Cates, who farms in Illinois, noted that the trade war with China in 2018 failed to drive soybean prices low enough trigger to PLC payments. He said it “is difficult to envision a scenario” where PLC and the Agriculture Risk Coverage program would “provide meaningful assistance without significant improvements to the current reference price and program elements.”
Brent Cheyne, president of the National Association of Wheat Growers, called for a “meaningful increase” to the statutory reference price for wheat as well as modifications to the escalator provision.
In his prepared testimony, the Oregon producer cautioned that increases in reference prices due to the escalator provision happen well after market prices have dropped and growers need help. “Overall, having an adjustment that takes years to occur is too slow with the current volatility of commodity markets and the ever-increasing cost of production,” he said.
Mississippi rice grower Kirk Satterfield, chairman of USA Rice, also pushed for an increase in the statutory PLC rates, as did Kansas farmer Craig Meeker, president of the National Sorghum Producers.
“Rice did not experience a large run-up in market prices in 2020, 2021, and the current PLC program did not adapt to the dramatic increases in the cost of production,” said Satterfield.
Meeker said the statutory rates “are now far too low” even though the escalator provision will “will create some improvement in the level of certainty and confidence of sorghum farmers.”
Andrew Moore, a Georgia farmer who is president of the U.S. Canola Association, said the PLC reference price for canola and other minor oilseeds has kept those crops competitive with soybeans, and that any increases in the rates should maintain “parity for competing crops.”
Shawn Holladay, a Texas producer who chairs the National Cotton Council, agreed that rising input costs had reduced the benefit of PLC. “You’re having to make an above average crop at a very good price to make everything work. That’s not a sustainable situation,” he said.
He appealed to lawmakers to allow cotton growers to participate in PLC, even if they also purchase a supplemental insurance product, known as STAX. The policy was designed as a replacement for commodity program support, so farmers aren’t allowed to enroll acreage in both STAX and PLC. Removing that restriction “'would allow growers to better tailor their risk management options,” Holladay said.
STAX allows growers to insure up to 90% of their county’s expected revenue, with the government picking up 80% of the premium. A similar policy, called the Supplemental Coverage Option, is available to other growers and covers up to 86% of revenue with a 65% federal subsidy. Growers buying SCO aren’t allowed to enroll the same land in the Agriculture Risk Coverage program.
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Moore, the canola grower, and Andrew Flansburg, a Washington farmer who chairs the USA Dry Pea and Lentil Council, appealed to lawmakers for yet another change in commodity program rules: They said farmers shouldn’t have to choose between ARC and PLC each year. Instead, USDA should make payments from whichever program would provide growers with the most money in a given year.
“Sometimes the hassle of picking between them is not worth the hassle” of getting landowners to sign off on program selections, said Flansburg.
ARC triggers payments when revenue in a farmer’s county falls below the previous five-year average.
Haag, the NCGA president, also asked lawmakers to consider increasing the maximum payment rate in ARC, which is currently capped at 10% of a county’s benchmark revenue. He said the cap hurt growers in Iowa and neighboring states when a derecho flattened crops in 2020.
NCGA also wants an increase in the maximum coverage level under ARC, which is now capped at 86% of the county revenue benchmark.
Both the PLC and ARC programs link payments to a farmer's historical base acreage for commodities, not the crop that is planted. While some groups are urging farmers to update their base or add base acres, the canola sector is urging lawmakers not to shift payments to planted acreage. "Tying payments to crops planted in the current year led to a major reduction in price distortions in the '80s and early '90s," Moore said.
A Senate Agriculture subcommittee will hold hearings next week on commodity programs, crop insurance and credit issues.
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