New report makes case for House version of farm safety net

By Sara Wyant

© Copyright Agri-Pulse Communications, Inc.



COLLEGE STATION, TEXAS, July 9, 2012  - A new report comparing the farm safety net provisions of the House and Senate farm bills on 64 representative crop farms finds that, under prices projected in the current farm bill baseline, those farms would prefer the House Agriculture Committee's Price Loss Coverage (PLC) option over any option provided in the Senate bill.

 

The results were very similar during periods of lower prices, except that more farms would choose the individual yield based option under the Senate's Agricultural Risk Coverage (ARC) over county-based ARC. In a declining price scenario, a large number of these farms would prefer to “opt out” of either ARC program in favor of a Supplemental Coverage Option (SCO) crop insurance option with a wider payment band.  The representative farms would prefer the House PLC option over the RLC option primarily due to RLC not having the SCO option.

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The report, produced by Dr. Joe Outlaw, Dr. James Richardson and others at the Agricultural and Food Policy Center at Texas A & M University, measured the farm's preference for one commodity policy alternative over another by looking at the highest average net cash farm income (NCFI) over the five-year life of the bill. The difference in NCFI between the most preferred House option (PLC) and the most preferred Senate option is $44,200 per year.

Titled “Economic Impacts of the Safety Net Provisions in the 2012 Senate and House Farm bills on AFPC's Representative Crop Farms,” the report is expected to add further “fuel” to the growing debate over whether or not the farm safety net should include a program that triggers payments when prices fall below a certain “target price” level, as the House Ag Committee's farm bill draft proposes and as some U.S. Senators adamantly oppose.

 

The report considers the combined government support of Title I programs (Agriculture Risk Coverage (ARC) in the Senate, Price Loss Coverage (PLC), and Revenue Loss Coverage (RLC) in the House version, along with the Supplemental Coverage Option (SCO) and Stacked Income Protection program (STAX) for cotton in Title XI. In addition, both Adjusted Gross Income (AGI) and individual payment limits were taken into consideration.

 

The report notes that the farm program payment limits, set at $50,000 per person for the Senate's ARC program, and the Adjusted Gross Income limits, set at $750,000 in the Senate's version, could encourage more growers to “opt out” of ARC. The House farm bill package sets a $125,000 per person limit on farm program payments and AGI cap of $950,000.

House Agriculture Committee Chairman Frank Lucas, R-Okla., issued the following statement regarding the release of the new study:

"The House farm bill saves taxpayers $35 billion, with more than $14 billion in these savings achieved by reforming U.S. farm policy. What the AFPC study says is that the House managed to save taxpayers money and reduce the deficit while still providing a safety net that farmers can truly depend on in hard times.  The biggest take-away from the study is the absolute importance of real price protection in a farm bill.  When presented with the various choices, the study reveals that, wherever they farm and whatever they grow, farmers are better off under the risk management option that marries a strong crop insurance policy with a farm bill that focuses on providing real price protection against multiple year price declines.  I hope producers and my colleagues in Congress will give a close look at the study's findings."

 

To read the full report, click:

http://www.agri-pulse.com/uploaded/AFPF_Study_Safety_Net.pdf

 

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