The Hagstrom Report

Agriculture News As It Happens

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Changes crop by crop

Commodity group witnesses testified that the farm program is critical to provide a stable food supply, that it should be based on crop insurance, and that tighter payment limitations are onerous.

But they also stressed policies that are important to their individual commodities.

Analysis of the testimony, commodity by commodity, follows. (Commodities are listed in alphabetical order.)

Barley



Scott W. Brown, a Soda Springs, Idaho, farmer who leads the National Barley Growers Association, said his group “supports a revenue program to cover shallow losses, with the payment trigger as close to the farm-level as feasibly possible.”

Barley growers do not favor current proposals for target prices, he said.

The farm program should protect farmers against multiyear losses, said Brown.

“We firmly believe that if rotational crops (e. g. corn, wheat, and soybeans) receive relatively higher target prices compared to barley, and if these target prices are tied to current year plantings, barley acres will fall if prices decline to levels near or below the target prices,” Brown said.


Corn



Newburg, Md., farmer Chip Bowling, testifying on behalf of the National Corn Growers Association, defended the changes under the ARC program, saying. “Where decoupled payments were offsetting the higher production cost of high value crops, such as cotton, peanuts and rice, as some have characterized their purpose, some of the high value crop base acres were planted to other program crops where market returns were more attractive.

“To base projected current spending for new, coupled revenue programs on spending for past, decoupled programs, which should have adequately met their compensation objectives, would seem to have little relevance to protecting current gross revenues at current prices,” Bowling said.


Cotton



National Cotton Council Chairman Chuck Coley, a Georgia producer, urged acceptance of the council’s proposed Stacked Income Protection Plan, known as STAX, an insurance program that the council says would satisfy the case that Brazil won against the U.S. cotton program in the World Trade Organization.

Coley did not say whether the council is satisfied with the STAX proposal in the Senate bill. Lucas has said he plans to offer a slightly different version in the House bill.


Dry peas, lentils



USA Dry Pea and Lentil Council Chairman Jim Thompson, an eastern Washington farmer, said that his group supported the ARC proposal in the Senate bill.

“The commodity title must allow and encourage planting flexibility, so producers will respond to market signals rather than government payments,” Thompson said.

“We do not want artificially set target prices that will inevitably distort planting decisions. If pulse target prices are not in line with other program crops in the rotation, we could see dramatic declines in acreage,” said Thompson.

“This would be devastating to our growing pulse processing and support industry that provides important jobs in rural areas," he said.


Peanuts



Armond Morris

Armond Morris
A one-size-fits-all program will not work for peanut farmers, explained Armond Morris, who chairs the Southern Peanut Farmers Federation and the Georgia Peanut Commission.

Morris pointed out that peanut growers had adapted by moving from a quota program to a marketing loan in 2002. “Our cost structure and equipment needs alone are significantly different than the Midwest with our peanut producers requiring very specialized equipment,” said Morris.

He also said that said that there is no revenue insurance program for peanuts. Revenue proposals won’t work for peanuts, he contended, because there is no consideration for irrigated versus non-irrigated production practices--and yield differences can be great.

Peanut growers have been working with USDA and Agrilogic on a peanut revenue insurance program since 2009, said Morris, and the revenue insurance package is expected to be available for the 2013 season.

But Morris noted that peanuts have no source for a predicted harvest price and do not have a futures market like other row crops.

“We support producers having a choice between a countercyclical type program with a target price of $534 per ton and a revenue program,” Morris said, adding that because USDA estimates the market price for peanuts is more than $1,000 per ton, he does not believe a target price will increase peanut production or acreage as not beneficial to peanut producers.

The Senate Committee’s period to determine a farmer’s eligible acres is 2009-2012. This change will adversely affect peanut producers in Oklahoma, Texas and Virginia where there have been significant changes in peanut acreage since 2002, he said.

Morris added, “In examining the Senate’s ARC program on my farming operation, I do not see how it will help my farm maintain economic viability with respect to corn and wheat relative to the current program.”

He also requested that since tobacco counties in the peanut belt do not have any commodity base, this factor be taken into consideration.


Rice



Linda Raun, an El Campo, Texas, rice producer testifying for the US Rice Producer’s Group, said price protection for rice “is a must.” Prices are driven by global demand, she said, and price is one of the most protected and sensitive global commodities in trade negotiations.

Raun said the rice program should “take into account the lack of effective crop insurance policies for rice.” She said she has been “amazed at some of the assertions about a price-based policy distorting planting decisions and resulting in large acreage shifts.”

Raun noted that the rice industry is split between the Sacramento Valley in California and the southeastern growing areas in the Mississippi Delta region including Arkansas, Mississippi, and Missouri and the Gulf Coast region of Texas and Louisiana.

In the Mid-south and Gulf Coast production regions the most effective way, Raun explained, would be a price-based loss policy relevant to current cost of production, paid on planted acres or percentage of planted acres on current yields. For this area, the lack of effective crop insurance policies for rice should be factored in.

In the California production region what could work, said Raun, is a revenue plan administered at either the county or crop reporting district level — rather than lowering guarantee levels to use farm-level yields.


Sorghum



J.B. Stewart, an Oklahoma grower representing the National Sorghum Producers, said the new farm program should not distort planting decisions, but he said the ARC program does not offer strong coverage for any crop but because the benefits are tied to planted acres it could still have an impact on planting decisions.

Stewart said that the program is essentially “free insurance,” and that sorghum growers are worried that farmers or lenders would pick the coverage with the high amount of coverage per acre for any crop.

Stewart said sorghum growers are also worried that the proposed STAX program for cotton could lead to a decline in sorghum acres.

“A program should be built to withstand a multi-year low price scenario,” Stewart said. “Whether in a revenue plan, or a price-based countercyclical plan, we would prefer to have a set minimum price that serves as a floor or reference price to protect producer income in a relevant way in the event of a series of low price years.”

J.B. Stewart testimony

Soybeans



Steve Wellman

Steve Wellman
American Soybean Association Chairman Steve Wellman said a revenue program, although it would be tied to current-year production, would have only a marginal impact on planting decisions because it requires actual losses that are based not only on declines in prices, but declines in yields.

Wellman, a soybean producer from Syracuse, Neb., also noted it would be far more difficult to anticipate payments prior to planting.

He added that, since the revenue benchmark is adjusted annually to reflect Olympic average prices and yields, it would be less likely to get out of line with market conditions over the five-year life of the farm bill.

Wellman also noted that the CBO’s projection of increased outlays for soybeans reflects the fact that actual planted acres of soybeans have shifted from 50 million acres when the U.S. soybean base acreage was established in 2002 to 75 million acres today.

“Payments under a revenue program would go to producers who, in response to the market, have decided to change their cropping patterns,” Wellman said.


Wheat



Erik Younggren


Erik Younggren
National Association of Wheat Growers President Erik Younggren, a Minnesota farmer, said his group supports a revenue-based program with an on-farm trigger rather than a county- or crop-reporting district.

Wheat growers, he added, “are also cognizant of the concerns expressed in the House about protection during consecutive years of low commodity prices.

“Wheat is a unique crop, grown in some of the riskiest areas of the country and in rotation with nearly every other program crop,” Younggren said, pointing out that wheat “is harvested many months out of the year.

“The price wheat farmers are paid,” he said, “depends not only on market factors, but also on quality characteristics and wheat class, which are not pertinent for some program crops.

“Therefore, we realize it is important for growers to have choices, which can be provided in a multi-legged plan,” said Younggren.

“Since we export so much of our wheat crop, wheat growers are also very concerned about distortions of the market from any price protection program and, therefore, (about) compliance with World Trade Organization,” he said.

“We feel it best to keep any price protection program decoupled from current year planted acres, said Younggren. “ However, we realize that the base acres utilized in farm programs for almost 30 years are outdated and irrelevant.

“Most farms have changed dramatically since base was set and many do not grow the crops for which their fields have base, said Younggren. “We would recommend that this subcommittee update base acres for any Title I price protection program to more accurately represent what is planted on the farm and to maintain WTO compliance.”