The Hagstrom Report

Agriculture News As It Happens


Corn, rice growers battle over ARC studies

A nasty battle has broken out between corn growers and rice growers over the meaning of academic studies related to the Senate Agriculture Committee’s new Agriculture Risk Coverage program.
Carl Zulauf

Carl Zulauf
Last week, Carl Zulauf of The Ohio State University released a study that said a 5-year Olympic moving average with an 89 percent coverage rate would have provided sizable price protection to U.S. crop producers during the low price period of the 1990s.

Today USA Rice Producers Group Chair Linda Raun distributed a news release that said since Zulauf based his study on price protection — rather than the change of revenue for which farmers would get payments under the ARC program — Zulauf’s study amounted to an endorsement of the rice producers’ proposal for a system of target prices and countercyclical payments.

“Dr. Zulauf did not call for a narrow 10 percent revenue band as outlined in the Senate’s revenue program, Agriculture Risk Coverage (ARC), but assumed the safety net would be there to cover deep price losses,” Raun said.

“If Dr. Zulauf had applied the Senate bill’s ARC limitations, including a 10 percent revenue band and a 65 percent or 80 percent factor, the price protection that Dr. Zulauf shows would almost completely disappear,” she said.

“For example, the maximum benefit for a rice farmer would have been approximately 24 cents per hundredweight in 2001 rather than $3.02 per hundredweight arrived at in the analysis — a 1150 percent difference between what Dr. Zulauf proposes and what the Senate bill provides.”

“I am thrilled to see the Senate Agriculture Committee and the National Corn Growers Association embrace this approach,” Raun continued. “Maybe the approach Dr. Zulauf calls for in his analysis could be part of the solution in correcting the inequities in the Senate bill and addressing the serious concerns we have that the Senate bill will not be there to help farmers if we ever see the kind of price collapse we saw in the late 1990s.”

Zulauf said in a telephone interview today that the rice producers had not consulted him before reaching their conclusions about his study or issuing their news release.

He also noted that he had tried to use the same numbers that the rice growers used but could not reach the same conclusions.

The rice growers’ statement “is what it is,” Zulauf, said, adding that he did not want to be “adversarial.”

Zulauf said the issue of fixed supports based on target prices or market-oriented supports is complicated, and referred interested parties to a paper he has written on that subject. (See link below.)

He said he did his study on price protection because the issue had been whether an Olympic moving average would provide a stream of payments that are equitable across crops, but that the issue of what is equitable is subject to debate. He also noted that the ARC program has been designed to fit within a budget and that his study was not conducted with a budget limitation.

Meanwhile, Gary Schnitkey, a professor at the University of Illinois, today issued another study showing that the target prices for rice and peanuts that were in the “secret” farm bill sent to the super committee on deficit reduction last year were above long-term prices projected by the Congressional Budget Office, and would have triggered much more frequent payments for rice and peanuts than for other crops.