Base Acres and the Next Farm Bill

OMAHA (DTN) -- As Congress tries to draft a farm bill, the National Corn Growers Association is calling on lawmakers to add a one-time mandatory base-acre update for commodity programs.

Last week when NCGA held its Corn Congress in Washington, D.C., the group's delegate farmers voted on a proposal from its South Dakota members to back a policy that would lead to a "one-time nationwide mandatory base-acre update, as determined by recent planting history."

Politico reported on the NCGA policy proposal, which "has sent ripples of anxiety through congressional offices working on the farm bill."

NCGA, in a statement to DTN, stated one of the group's principles for the next farm bill is to strengthen the producer safety net.

"Because the base acres used for the Agriculture Risk Coverage and Price Loss Coverage commodity programs do not reflect recent crop planting history, corn growers voted to adopt a new policy supporting a nationwide mandatory base-acre update. If enacted by Congress, this policy would modernize base acres and address the accessibility of these farm programs."

Going back to the 1996 farm bill, base acres were created to "decouple" direct safety net payments from actual planted acres but tie them to historical production on the farm. Congress crafted base acres as a way to meet World Trade Organization agreements and ensure planting decisions were not distorted by farmers planting specific crops in a given year because of government programs.

It's unclear how much a mandatory update of base acres would cost. The Congressional Budget Office has been overwhelmed with requests for budget scores from lawmakers working on farm-bill proposals.

The Congressional Research Service (CRS) issued a brief report on base acres in May. CRS researchers stated opening up base acres for updates in acreage or yield could increase the costs for the ARC and PLC programs, and "may require additional funding or reductions for other farm bill priorities."

The CRS report also suggested Congress could consider the impacts of mandatory or voluntary updates of existing base-acre reallocations.

BREAKING DOWN BASE ACRES

USDA reports there are 274 million total base acres across 11 commodities. Corn (100.7 ma), wheat (69.7 ma) and soybeans (55.8 ma) take up 82.5% of total base acres.

If producers were required to update their base acres based on actual planting, soybeans would see a significant increase in acreage while wheat acres would decline. Certain states would also see shifts in acreage as corn and soybeans are grown more in Northern Plains states.

Nine states account for nearly 63% of all base acres -- Illinois, Indiana, Iowa, Kansas, Minnesota, Nebraska, North Dakota, South Dakota and Texas. The states with the highest number of base acres are Iowa (21.5 ma), Kansas, (20.9 ma) and Illinois (20.2 ma).

Looking more at base acres actually enrolled in the Agricultural Risk Coverage/Price Loss Coverage (ARC/PLC) programs, USDA reports 239.7 million acres enrolled in those programs for 2023. That acreage has been slowly declining over the past two farm bill cycles. In 2015, USDA reported 254.3 million base acres.

That amounts to a 14.6 million-acre decline in cropland enrolled in USDA commodity programs over the past eight years. The gap between "total base acres" and "enrolled base acres" has widened to 34.3 million acres as well.

SOYBEAN PERSPECTIVE

The American Soybean Association (ASA) proposes a voluntary update of base acres, but ASA wants to see the $8.40-a-bushel soybean reference price increased. Soybean prices fell during the 2018-19 trade war with China, but didn't come down enough for the ARC/PLC payments to kick in.

Steve Censky, CEO of ASA, said either a mandatory or voluntary update of base acres would cost more money with a shift in acres. A voluntary update would add base acres to the overall program. While NCGA is advocating for a mandatory reallocation of base acres, Censky said that might not be popular if farmers were forced to declare more soybean acres, especially without a higher reference price.

"A mandatory reallocation is likely to be very controversial with producers because why would they want to take their better-supported base -- whether it's rice, cotton, peanuts, corn or wheat -- and reallocate it to lower-supported soybean base?" Censky said.

SHIFTING ACRES

Depending on how Congress looks at a base-acre update, the Congressional Budget Office could find savings -- especially if there are millions of acres that are no longer planted with commodity crops. Without a tweak to soybean reference prices, a mandatory acreage reallocation also could lead to some savings.

"You shift a bunch of acres of wheat, corn, cotton, rice and peanuts out of those acres and into soybeans, which don't have the potential payments," said Jonathan Coppess, a former Farm Service Agency director and now associate professor in farm policy at the University of Illinois, reiterating Censky's take.

A mandatory base-acre update also would shift commodity programs for states such the Dakotas and Kansas where there are a lot more corn and soybean acres than 20 years ago.

"There are a lot of states where the farmers are growing corn like North Dakota where the base doesn't match what they are planting," Coppess said.

The CRS report noted there also are farmers who began growing commodities after the last time new base acres were granted. So far, those producers have been shut out of signing up for ARC and PLC because they do not have historic base acres.

"There are some producers who are farming with only 20%-30% base acres," Censky said, "So they really don't have much of a safety net. They're farming 70% to 80% of their acres without any kind of Title I (commodity) support. And we hear that from a lot of younger farmers as well."

PAYMENT YIELDS

A base-acre update would also include an update of payment yields. Congress allowed voluntary updates for payment yields in the 2014 and 2018 farm bills.

The CRS report stated a mandatory update of payment yields based on recent actual yields would require USDA to reduce payments for some commodities while increasing them for others. Looking at actual crop yields, a mandatory update would increase payments for corn, soybeans and wheat, as well as several other crops, CRS cited.

CRS report on base acres and yield payments: https://crsreports.congress.gov/…

Farmdocdaily look at base acres: https://farmdocdaily.illinois.edu/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

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