Leaders of major crop groups say the farm bill commodity programs won’t adequately protect their margins at a time of skyrocketing input costs, but they aren’t ready to propose specific changes.
Groups representing soybeans, sorghum and rice, among others, told the House Agriculture Committee on Tuesday the reference prices that trigger payments to farmers under the Price Loss Coverage program are too low and should be increased.
The groups largely steered clear of proposing specific increases, however.
It’s not clear where Congress would get the funding to increase the PLC prices, which would likely increase the program’s cost in the next farm bill. But the groups found sympathy for their arguments that input costs were offsetting much of the benefit of higher commodity prices.
“We can have record-high commodity prices but with inflation, it’s the margin that matters,” said the committee’s ranking Republican, Glenn “GT” Thompson, R-Pa.
Congress is due to pass a new farm bill in 2023.
Crop insurance wasn't the focus of the 3 1/2 hour hearing, and there was only limited discussion of the topic. However, crop insurance price guarantees will be at record or near-record levels this year because of the surge in commodity markets. Experts say the high insurance protection will help farmers manage their revenue risk.
Brad Doyle, an Arkansas farmer who is president of the American Soybean Association, said the China trade war demonstrated that the PLC reference price for soybeans — $8.40 a bushel — is inadequate. He noted that there were no PLC payments for soybeans despite a 20% drop in market prices.
“It is hard to imagine a scenario where the Title One safety net could provide meaningful help with the current reference price,” Doyle told lawmakers, referring to the farm bill's commodity program title.
While ASA isn’t recommending how much the PLC price should be raised, Doyle said a Purdue University study found the break-even point for soybean production was more than $11 a bushel.
Verity Ulibarri, a New Mexico farmer representing the National Sorghum Producers, suggested tying the reference prices to an index for fuel and fertilizer prices as a way of accounting for fluctuations in input costs.
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“We believe reference prices and marketing loan rates must be adjusted upward to remain relevant,” she said.
Wheat growers are seeing some of the most market volatility of any commodity, in part because of the Russian invasion of Ukraine. The crop insurance price has hit $9.19 a bushel this year, up from $6.53 a year ago. But Nicole Berg, a Washington state farmer who is vice president of the National Association of Wheat Growers, warned that the high prices won’t last.
She said the committee should consider changes to the Agriculture Risk Coverage program as well as “how to improve PLC to be more reflective of the current cost of production.”
The ARC program triggers payments to producers when individual or county revenue falls below the five-year average.
Jennifer James, an Arkansas farmer representing USA Rice, stressed to the committee that rice growers rely heavily on PLC, and while rice prices haven’t risen to the extent prices for soybeans and wheat have, they are now too high to trigger PLC payments.
Cotton is another crop that is trading well above its PLC reference price, and many growers are forgoing PLC for at least this year to buy a special supplemental insurance policy, known as STAX, that is available to cotton farms. Jaclyn Ford, a Georgia farmer representing the National Cotton Council, told the committee production costs have risen 30% to 40% this year, leaving growers only able to break even at current prices.
Sugar growers aren't covered by ARC or PLC. Instead, the industry relies on USDA to prop up domestic prices through marketing loans and import controls. The loan rate effectively sets the floor under domestic prices, and it's too low, said Rob Johansson, director of economics and policy analysis for the American Sugar Alliance. He didn't say how much it should be increased.
"The loan rate for raw sugar cane and refined beet sugar has not kept up with inflation or the rising cost of production. It no longer provides a realistic safety net for our producers," said Johansson, a former chief economist for the Agriculture Department.
The loan rates vary by region annually based on levels set by the 2018 farm bill. The rate for refined beet sugar in fiscal 2022 is 25.16 cents per pound in Minnesota and the eastern half of North Dakota and 26.26 cents per pound in Michigan and Ohio. The rates for cane sugar vary from 19.01 cents per pound in Florida to 19.73 in Texas and 20.76 in Louisiana.
Members of the National Corn Growers Association will be debating their farm bill positions at the annual Commodity Classic next week in New Orleans and again in Washington in July, said NCGA President Chris Edgington, an Iowa farmer. He said NCGA had commissioned a survey of growers on commodity and conservation programs.
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