Southern producers with cotton, rice and peanut base acreage would see farm program payments more than double, while growers in other regions would see smaller increases under the GOP farm bill the House Agriculture Committee will consider this week, according to a new analysis.
Overall commodity program payments for row crops would skyrocket by at least 77%, an estimate that doesn’t account for additional acreage that could become eligible for subsidies, say economists and farm policy analysts at the University of Illinois and Ohio State University.
Soybean and wheat growers could see increases of about 80% in their payments under the Farm, Food and National Security Act, which the committee will vote on Thursday. Growers with corn base would get the smallest increase, about 36%, among major commodities.
The economists say that farmers with base acreage in the southern-grown commodities would reap the biggest benefit from the bill because Price Loss Coverage reference prices for those commodities already are higher relative to the average market prices for the crops.
“The House's proposed reference price changes magnify existing disparities in expected payments per base acre,” the economists write.
Defending his bill, House Agriculture Committee Chairman Glenn Thompson, R-Pa., told Agri-Pulse Tuesday the commodity title was “based on a thorough analysis of each individual commodity and basically what those commodities would need – maybe not what they want, but what they need – to be at a point where they have confidence in that safety net.”
A separate analysis of the bill issued by the Congressional Budget Office and obtained by Agri-Pulse estimates the total cost of the changes to the PLC and Agriculture Risk Coverage programs as well as marketing loans. Marketing loan rates would be increased by about 10%.
Commodities with the largest amount of base acreage would receive the most money. Corn would get an estimated $9.5 billion over 10 years, followed by wheat at $7 billion, cotton at $5.9 billion, soybeans at $4.39 billion and rice at $4.32 billion, according to CBO. Another $2.6 billion would be paid on peanuts.
The universities' analysis accounts for changes to both PLC and ARC, the two main income support programs for row crops, but not for marketing loans, which account for less than $1 billion of the $35.8 billion in projected total payments in the CBO analysis.
PLC triggers payments to farmers when the average market price for a commodity is below the reference price for the commodity in a given year. ARC provides payments when revenue in a farmer’s county falls below a five-year average. An ARC option for individual revenue also is available but relatively few producers enroll in it.
Farmers are only eligible for PLC or ARC payments on the amount of eligible base acreage they have in the covered commodity. A separate provision in the bill would enable farmers to increase their base acreage based on planting practices over the past five years. The analysis doesn’t take into account the additional base acreage that could be enrolled under the new provision.
Farmers don’t have to be planting the covered crop to receive a PLC or ARC payment so long as they have base acreage for that commodity. That provision, which has been a key feature of several farm bills, is intended to prevent the programs from influencing planting decisions.
Under the House bill, the reference price for seed cotton would increase 13.5%, from 37 cents a pound to 42 cents a pound. Rice’s reference price would jump 20.7% from $14 a hundredweight to $16.90. The reference price for peanuts would be increased 17.8% to $630 per ton.
The reference price for soybeans would jump 19%, from $8.40 to $10 a bushel. The rate for corn would rise 10.8% from $3.70 to $4.10 per bushel, although there is a cost-saving provision for corn that puts a floor under the PLC rate of $3.30 a bushel. Wheat growers would get an increase of 15.5%, from $5.50 to $6.35.
Meanwhile, the ARC guarantee would be increased from 86% to 90% of benchmark revenue, while the maximum payment rate would be raised from 10% to 12.5%, changes that could significantly increase payments to corn growers and other farmers who choose that program. The maximum ARC payment for 2024 in Kossuth County, Iowa, would go from $101.83 to $127.28 per acre, a 25% increase, due to those modifications, according to an example developed at Texas A&M University.
Rice base gets 187% increase in payments, economists say
According to the universities' analysis, farm program payments would jump from $61 per base acre on rice to $175 per base acre, an increase of 187%. Payments for cotton base would jump 153% from $30 an acre to $76. Payments on peanut base would rise 114% to $255 per acre.
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Payments on wheat base would increase from $9 to $16 an acre. Farmers with soybean base would see payments go from $10 to $18 an acre, an increase of 80%. Payments on corn base would increase from $25 per acre to $34.
Total spending under PLC and ARC would increase to $72 billion from 2024 through 2033 under the bill, up from the $41 billion that CBO has estimated the programs would cost under current law. The analysis notes that the increase would likely be higher because the estimate doesn’t take into account the base update that the bill would authorize.
The base update would be based on planted and prevented planting acreage from 2019 through 2023 and is expected to cost taxpayers $9.2 billion to $10.8 billion, according to CBO. If more than an additional 30 million acres were eligible under the update, USDA would have to pro-rate the total.
Up to 15% of a farm's acreage that is planted to non-covered crops such as fruits and vegetables or alfalfa could be eligible for PLC and ARC base under the bill.
Jonathan Coppess, farm policy expert at the University of IllinoisJonathan Coppess, a farm policy expert at the University of Illinois and one of the authors of the analysis, said the disparity in relative reference prices means that a farmer growing soybeans in the Midwest would get significantly smaller payments from USDA than a farmer growing the same crop on rice, cotton or peanut base acreage in the South.
“How is that at all good for Illinois farmers that other farmers get 250 bucks an acre on base acres and grow the same crop?” he asked rhetorically.
Authors of the analysis, in addition to Coppess, are Gary Schnitkey, Bruce Sherrick and Nick Paulsen of Illinois and Carl Zulauf of Ohio State.
A House committee GOP staffer said the reference price increases were based on changes in per-unit production costs in order to account for growth in yield and productivity.
“What we've heard from producers loud and clear [are] the impacts that inflation is having on their operations,” said the aide, who described development of the commodity title at a media briefing.
“Since the 2018 farm bill was signed into law, total production expenses are up over 30%, credit conditions continue to worsen year over year, working capital is down 17%, and it shows no sign of stopping. Commodity prices continue to soften and input prices remain high,” the aide said.
The staffer added that farm lenders are particularly concerned about farmers' situations because “they know that unless something drastic happens, whether it's an improvement in the market or that better farm safety net, many of these farms are not going to be able to cash flow next year.”
The National Cotton Council, USA Rice and American Soybean Association have issued statements in support of the bill.
NCC said the bill “significantly increases the support levels for cotton producers, who have been weighed down by the recent rise in on-farm production costs.”
USA Rice said, “Numerous provisions in the bill could prove very beneficial to the U.S. rice industry, and we particularly appreciate the meaningful improvements to the farm safety net through the increased Price Loss Coverage Program rice reference price.”
ASA said in a letter to the committee on Monday that the commodity program “provisions are unmatched by other congressional proposals to date. We believe this approach will improve the effectiveness and accessibility of the farm safety net for soybean farmers, who sorely need it. “
The National Corn Growers Association provided a mixed assessment of the draft bill's commodity title in a letter to the committee on Tuesday. NCGA welcomed the changes to ARC modifications and the higher PLC reference price but expressed concern about the cost-saving floor that would be under the PLC reference price.
A spokeswoman for the National Association of Wheat Growers said it wouldn’t issue a statement until after Thursday’s committee action on the bill.
Thompson, the House Ag chairman, heads into Thursday’s committee debate facing a $45 billion funding gap for the changes to the commodity and crop insurance titles.
He wants to offset the cost of those titles by limiting USDA Commodity Credit Corporation spending authority, but the Congressional Budget Office estimates the savings at only $8 billion, far less than the $53 billion Thompson needs. Thompson argues that CBO is incorrect.
Sugar deal would give producers major boost in price floor
Sugar producers would get an historically sharp increase in the marketing loan rates that serve as a floor under domestic sugar prices as part of the bill. The support price for raw cane sugar would jump more than 21%, from 19.75 cents a pound to 24 cents. The loan rate for refined beet sugar would increase 29% from 25.38 cents to 32.77 cents.
The loan rates for cane and beet sugar were set at 19.75 cents and 25.38 cents starting in 2020 after being fixed at 18.75 cents and 24.09 cents since 2012.
The provisions in the bill, which have the support of groups representing sugar users, growers and processors, also change regulations for marketing allotments and the operation of tariff rate quotas. The program supports the price of domestic sugar by limiting imports of cheaper sugar.
The bill would require USDA and the U.S. Trade Representative to act more promptly to reallocate 90,000 tons of the 1.2 million tons in total tariff rate quota. The 90,000 tons were allocated decades ago to countries that no longer export to the U.S., an industry official said.
The bill would require the agencies to decide at the beginning of the marketing year which countries are not going to use their quota and reassign those volumes to other countries. The marketing year for sugar runs from Oct. 1 to Sept. 30. “USDA often does reallocate the TRQ shortfall, they just do it later in the year, sometimes as late as June,” the official said.
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