Ag Policy Blog

ASA: Study Raises Questions About House Safety Net

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The American Soybean Association pointed to a new university analysis this week to show that the key commodity program in the House version of the farm bill could distort crop production.

The Food and Agricultural Policy Research Institute at the University of Missouri released the report comparing the commodity programs in both versions of the farm bill.

ASA stated the study shows problems with the fixed target-price program in the House bill, the Price Loss Coverage program. The soybean association stated "the potential for high, fixed target prices coupled to current plantings to cause global market distortions, which would increase U.S. farm program vulnerability to challenges under the World Trade Organization."

ASA argues that the FAPRI report makes it clear, "Target prices need to be decoupled from current-year planting decisions under any price-based program. “The FAPRI report drives home our concern that the House PLC program could cause planting distortions by tying target price payments to planted acres,” said ASA President Danny Murphy, a soybean, corn and wheat farmer from Canton, Miss. “For example, the report highlights the potential for significant increases in planting and production of barley, rice and peanuts, which would push down prices. While producers of these crops would receive larger government payments, the lower prices would also decrease market receipts for peanuts by $70 per acre, rice by $20 an acre, and barley by $15 an acre.

Those price and market distortions were highlighted last month in a report by the U.S. Chamber of Commerce, which raised issues about program changes such as shifting from base acres to planted acres.

Murphy stated that “these lower prices would then impact other countries that produce the same crops, potentially spurring WTO complaints similar to what we saw when Brazil successfully challenged the U.S. cotton program under the WTO. While we didn’t like the WTO’s decision in the cotton case, legislators need to be mindful of the outcome of this case and avoid increasing the vulnerability of U.S. farm programs to potential challenges.”

(I wrote on the FAPRI report earlier this week as well.… )


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10/9/2013 | 7:20 AM CDT
The ACRE program had the best approach. It needed to be fixed by two things: One, making the time frame for average calculation based on a Calendar year instead of a Crop Marketing year, and two, making the yield calculation on a county weighted average, with the home county value being 50% and the adjacent county's values accounting for the other 50%. It is a lot of paperwork, but with the tie in to yields for crop insurance, it was really pretty painless to keep up with. While the ACRE program used the current year's crop yields and market price for calculation of loss, the bases for price was five year average, insuring that overproduction would eventually, likely within one year, cause a drop in the price of that commodity. It was on the fringe of WTO rules, but I don't think it was ever challenged.
George Hanson
10/4/2013 | 10:29 PM CDT
More reasons many USDA employees are nonessential.