What is in this article?:
- Full Senate to take up farm bill, FAPRI report issued
- 2 percent ARC average, STAX, questions
• Senate leadership places 2012 farm bill second on its to-do list when the body returns from recess in early June.
• Lawmakers to read latest Food and Agriculture Policy Institute analysis of proposed legislation.
• Specifics of FAPRI study of proposed farm programs discussed.
Senate leadership has placed the farm bill second on its to-do list when the body returns from recess this week. By the time the proposed legislation is taken up, there is a great chance that the lawmakers will have read the latest analysis of it from the Food and Agriculture Policy Institute (FAPRI).
According to FAPRI, the report examines the “possible consequences of several key provisions” of the bill. Among them:
• The elimination of the current Direct and Countercyclical Payment (DCP) and Average Crop Revenue Election (ACRE) programs.
• The establishment of the Agriculture Risk Coverage (ARC) program and the Stacked Income Protection Plan (STAX).
• The reduction in the acreage cap for the Conservation Reserve Program (CRP) from the current 32 million acres to 25 million acres by 2017.
(See the full FAPRI report here).
Pat Westhoff, co-director of the University of Missouri-based institute, spoke with Farm Press following the report’s release. Among Westhoff’s comments on specific findings:
• Relative to a scenario that only eliminates DCP and ACRE, introducing ARC and STAX results in a little more land used for crop production and slightly lower crop prices.
“If you just eliminate direct payments, ACRE and counter-cyclical payments that is about $5 billion to $6 billion per year that people will lose. Most of that, of course, is in direct payments and those aren’t tied to what is produced in a given year but to base acreage over time.
“We estimate that while that has some impact on production it probably won’t be a big impact. It does mean less money in farmers’ pockets, lower land values – but likely not a big impact on the price of corn and soybeans. That doesn’t go against common wisdom.
“Obviously, it will have a larger impact on some commodities than others. If you have a corn and soybean farm in the Midwest, you’re getting about $23 per base acre in direct payments for corn and about $11 for soybeans. Rice farmers are getting, roughly, $96 per base acre.”
• Average payments to producers under ARC and STAX would be lower than payments under DCP and ACRE, so the net effect of these changes is to reduce federal farm program spending by an estimated $18 billion over the next 10 years.
“This is kind of interesting because we’re putting less money back in, on average, than we took out in the first scenario. Spending under ARC and STAX we estimate to be about two billion dollars a year less than what it would have been under the DCP and ACRE programs.
“Yet, we get about the same level of total acreage. That’s happening because these payments are tied to what you plant now. We think that means we’ll see a bit more production per dollar of subsidy from (ARC and STAX) than from direct payments.
“You will see slightly more acreage for corn and cotton and less acreage for most other crops. Per-acre benefits under ARC for corn and STAX for cotton are at least a little higher than for other crops.
“In terms of income, it’s less income to crop producers than they’d have under current programs. On average, it’s a lot less in the cases of rice and peanut farmers and a modest drop if you’re a corn or cotton farmer.
“These payments will now be a lot more sensitive to market conditions. If there’s a year with low prices and/or bad yields on your farm or in your county there could be very large payments under (the new) programs.
“On the other hand, if you have rising prices and a good crop year, farmers may see no payment at all. That’s a big contrast to the current situation where you know there will be a direct payment coming every year.”
• Reducing the CRP acreage cap would result in increased crop production and lower crop prices.
“The CRP cap would go from the current 32 million acres down to 25 (million). One question is: how much CRP acres would you get otherwise?
We’ve observed that we don’t meet the current cap and there’s a good chance we won’t meet it in the future, either. So, actual CRP enrollment probably wouldn’t have started at 32 million, anyway -- more like 30 million acres.
“On average, impacts are fairly mild. We’re talking about only increasing crop production by another one million or two million acres.”