Soybean and wheat growers are taking the lead in pushing for lawmakers to increase farm program reference prices in the next farm bill, even as lawmakers wrestle with how to come up with the extra money that would be required.
Those two grower segments are expected to receive smaller amounts of commodity program payments compared to producers of other major commodities over the next 10 years, according to a University of Illinois analysis of the Congressional Budget Office’s latest forecast of farm bill costs.
Payments under the Agriculture Risk Coverage and Price Loss Coverage programs for soybeans are never expected to exceed $25 per acre over the next 10 years, while payments on wheat are not expected to even reach $20 an acre, according to the analysis. By comparison, peanut growers are expected to get more than $150 per payment acre in three fiscal years and $149 in four years.
Meanwhile, subsidies are expected to exceed $40 a payment acre in four years for corn and three years for seed cotton.
“The differences in spending per payment is a direct result of the decisions by Congress in setting the statutory reference prices,” University of Illinois professor Jonathan Coppess, a former Farm Service Agency administrator, wrote in the analysis.
“The higher Congress sets the statutory reference price relative to actual or projected market prices, the more likely PLC will trigger payments and the larger the payments.”
ARC provides payments to farmers when area crop revenue falls below a five-year Olympic average. Under an Olympic average, the highest and lowest years aren’t counted. PLC triggers payments to growers when the average market price for a crop year falls below the commodity's reference price.
The 2018 farm bill included a provision to raise the commodity’s reference price as the five-year Olympic average price rises. But any increases in PLC reference prices are capped at 15% above the statutory reference price, which is $8.40 per bushel for soybeans, $5.50 for wheat and $3.70 for corn.
Former House Ag Committee Chief Economist Bart Fischer, now the co-director of the Agricultural and Food Policy Center at Texas A&M University, estimates a flat 10% increase in the statutory reference prices would cost $20 billion over 10 years; a 20% increase would work out to $50 billion.
Speaking on the sidelines of the last week’s Commodity Classic in Orlando, Florida, Fischer said the “time is ripe to make some of these improvements.”
Approximately 400 national, regional, and state organizations sent a letter to congressional leaders Tuesday supporting “sufficient budgetary resources” for the committees to write a meaningful 2023 farm bill.
“If a trade war with our largest trading partner hardly triggered the farm safety net provided in the current farm bill — a Title I safety net that has been shrinking over the past 20 years — it is difficult to envision a scenario that would provide meaningful assistance without significant improvement,” the letter said.
The American Soybean Association and National Wheat Growers Association both signed onto the letter among other major commodity groups, but the soy and wheat grower groups have not proposed specific increases.
“There may be different ways to address an increased reference price,” Christy Seyfert, ASA executive director of government affairs, told Agri-Pulse at Commodity Classic, the annual meeting of grain and soybean producers.
Soybean producers are also seeking an update in base acres in combination with an increase in reference prices. For soy, only 52.5 million acres of base acres are counted, compared to prospective plantings this year of 87-88 million acres.
“If you kept the reference price where it is now and you offered farmers the option to update their base acres, the resulting change may be limited given the low reference price for soybeans. It really needs to be a combination of those fixes,” Seyfert said. “Importantly, a voluntary base acre update is of great interest to those young or beginning farmers who do not currently have base acres or have a low level of base acres. They currently do not have access to the ARC and PLC elements of the Title I farm safety net and certainly would like to have that.”
NAWG CEO Chandler Goule said the $5.50-per-bushel reference price for wheat is far too low given recent increases in input costs.
“We've known all along for every penny you increase PLC statutorily it's going to be extremely expensive. And we have to remember that any additional budget authority that comes to the farm bill doesn't necessarily just go to Title 1, it goes to the farm bill,” Goule said. “I think we need to be very realistic in managing our expectations.”
One option NAWG is looking at is modifying the escalator provision in the 2018 farm bill. “We are looking outside of the box of just strictly trying to raise the PLC price,” Goule said.
In contrast to ASA and NAWG, the National Corn Growers Association and National Cotton Council haven't taken a position on whether reference prices should be raised.
NCGA President Tom Haag told Agri-Pulse his group was concerned about the steep cost of a reference-price increase. “If we find out the House or Senate says yes, there's extra money, we will be then right in agreement … and say yes, let's go that way.”
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