May 01, 2018
WASHINGTON, DC – Last week, Senators Sherrod Brown (D-OH) and John Thune (R-SD) introduced marker legislation intended to influence the direction of the Senate Farm Bill, and the rice industry is concerned that the Senators appear to be using a program that works well for rice to pay for their new approach.
The bill is designed to attract farmers into electing the Agriculture Risk Coverage (ARC) program under the next Farm Bill by calibrating the program to increase the possibility the program will generate payments for certain crops, at least in the first couple of years, similar to how the current ARC program did before it dried up. The Price Loss Coverage (PLC) program is being used as the funding.
In order to generate payments for the first couple of years under ARC, the loss threshold would be reduced from 14 percent to just 10 percent, meaning farmers would receive an ARC payment after only a 10 percent revenue loss.
Currently, the ARC program uses the previous five-year Olympic average of prices and yields to determine benchmark revenue. Under the proposal, the price used to determine the benchmark revenue guarantee would be reduced to the previous simple three-year average — unless any of the three years are less than the 10-year average price in which case the 10-year average price would be substituted.
There are also other substitute yields that can be plugged in along with other bells and whistles that would alter the “market oriented” nature of ARC thereby guaranteeing payments, but only for a few crops in insulated regions and again, only for a short period of time.
Most concerning, Brown and Thune would pay for their parochial program by eviscerating the Price Loss Coverage (PLC) program that is working as designed – protecting farmers from multiyear price declines, and providing a true safety net. The proposed changes to PLC would be effectively neutering reference prices, which would be the lesser of current reference prices or the 10-year average. Rice farmers would see their reference price cut from $14.00 down to a projected $13.07. This means rice farmers would experience a dramatic reduction of assistance in the first couple of years and then zero protection in the following years.
Base acres are also moved to unassigned base on farms where actual planting or prevent planting of covered commodities never equaled or exceeded base from 2009 through 2016, with base reduced to the highest number of acres planted or prevented from being planted.
Rice farmers could experience a 40 percent drop in base acres under this provision, exacerbating the already severe harm done to the rice safety net through changes in the reference price.
Then, under the new arrangement, farmers would be allowed to make a new election between ARC and PLC — for the entire farm, rather than commodity by commodity, another hit at rice farmers who often choose PLC for rice but, perhaps, ARC for soybeans.
The changes would likely generate ARC payments in the first couple of years for a few select crops and then fade out in the same way the current ARC program did, leaving the farmers who benefit in the short run struggling along with the rest over the long haul.
Few, if any, farmers would be unaffected by the direct cuts to PLC at the beginning of the next Farm Bill or the drying up of ARC over time. Some of the hardest hit besides rice farmers include producers of barley, seed cotton, PULSE crops, peanuts, and wheat.
“On its face, the Brown-Thune proposal would deny all farmers, including America’s rice farmers, an effective safety net going forward and all for the sake of making a few payments for a few crops early on and would worsen an already struggling farm economy," said Ben Mosely, USA Rice vice president of government affairs. “If taken seriously, or even worse, enacted, a ransacking proposal like Brown-Thune, would double down on past mistakes and further undermine the whole purpose of the farm bill which is to provide an effective safety net for American farm families.”
Mosely went on to say that when it comes time to write the 2023 Farm Bill, the new ARC would further deplete the budget baseline, meaning even less money to work with developing the bill. To improve ARC for the 2023 Farm Bill, more programs, including crop insurance, would need to be raided to once again ramp up ARC for a few more years.
One can only wonder how many farmers will still be around after five years of Brown-Thune to ask whether it was all worth it.
USA Rice continues to closely monitor Senate action on the Farm Bill. The Senate’s legislative calendar for May and June is still uncertain but the next few months are crucial for Senate Agriculture Committee action since the November midterm elections are fast approaching.