AGRIBUSINESS: Farm Program Payments Examined

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University of Illinois Economist Gary Schnitkey says corn growers will see farm supports shaved under all farm bill scenarios currently pending in Congress if commodity prices drop significantly.

Schnitkey says Price Loss Coverage (PLC), the House Ag Committee’s optional target price program, provides very little protection at price scenarios that have a good chance of occurring over the next several years. He says the Senate’s Agricultural Risk Coverage (ARC) generated modest corn payments at season-average prices of four-dollars, but nowhere near current Average Crop Revenue Election (ACRE) coverage.

Schnitkey measured the impact of commodity program payments under ACRE, ARC, Revenue Loss Coverage (RLC) and PLC using a typical McLean County, Illinois corn grower with average yields and three price scenarios from 2013 through 2016. Under all price scenarios, Schnitkey finds the ACRE program has higher payments than commodity programs proposed for the new farm bill. Schnitkey says growers with high land costs could face stark economics should prices tumble with any of these new safety nets in force.

The bottom line, according to Schnitkey, is that none of the programs proposed in the 2013 Farm Bill prevent revenue from going below production costs under periods of prolonged low prices. He says the programs may aid in buffering cash shortfalls - but will not prevent occurrences of financial stress. If growers didn’t like ACRE, Schnitkey says they won’t like what’s in this next farm bill.