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FAPRI farm bill analysis tracks commodity payments

The Food and Agricultural Policy Research Institute (FAPRI) at the University of Missouri today released an analysis of the impact of several key provisions in the Senate farm bill that the American Soybean Association says proves that the new farm bill is fair to all commodities, but with which other groups may disagree.

The analysis covers the elimination of the current direct and countercyclical payments and the Average Crop Revenue Election (ACRE) programs, the establishment of the Agriculture Risk Coverage (ARC) program for most crops and the Stacked Income Protection Plan (STAX) for cotton, and the reduction in the acreage cap for the Conservation Reserve Program from the current 32 million acres to 25 million acres by 2017.

The analysis, conducted by Patrick Westhoff, a former Senate aide, and his staff, concluded that the provisions would reduce government farm program outlays, farm income and agricultural land values, but would only have modest impacts on agricultural commodity markets.

Relative to the baseline, the decline in budgetary outlays is proportionally larger for rice, peanuts and wheat than it is for other crops, while soybean outlays increase slightly because soybean production has increased compared to base acreage. Reducing the CRP acreage cap would result in increased crop production and lower crop prices.

The report confirms that, under the new programs in the Senate bill, payments would follow current production rather than historic base acres. ARC benefits for all commodities would be close to 2 percent of the market value of all commodities but ARC payments are proportionally larger for corn and wheat than for rice and peanuts. Cotton under STAX would receive about 5.5 percent of market value.

Budgetary outlays under ARC and STAX will vary greatly, but because both programs cover only a certain band of revenue losses, the budgetary exposure does have limits. Other provisions of the Senate committee-passed bill are not examined in this report, FAPRI noted.
Steve Wellman

Steve Wellman
The American Soybean Association said in a news release today that the report showed that ARC “will treat program crops like corn, wheat, rice, peanuts and soybeans equitably.”

“In addition to its relatively evenhanded treatment of crops, the ARC program reflects the realities of what farmers actually are planting and provides a measure of revenue protection to farmers should yields and prices drop significantly,” said ASA President Steve Wellman, a soybean farmer from Syracuse, Neb.

“Farmers from all regions of the country have been planting more soybean acres for years in response to market signals and the planting flexibility first introduced in farm programs in 1996,” Wellman said.

“Last year, farmers planted 75 million acres of soybeans not only on acres technically classified under previous farm bills as ‘soybean base acres’, but also on acres that have been technically classified as wheat, corn, cotton, and other commodity base acres,” he said. “FAPRI’s analysis reflects these planting decisions that have been made by farmers and is consistent with the Congressional Budget Office’s analysis of the Senate Farm Bill released earlier.”

“We’re looking forward to passage by the full Senate next week, in hopes that we can get this critical legislation on to the House and passed before it expires on September 30,” Wellman added.

FAPRI: Impacts of Selected Provisions of the “Agriculture Reform, Food and Jobs Act of 2012”