Study: Farmers Would Prefer House

Version of Farm Bill
July 9, 2012

DTN/ Progressive Farmer
Chris Clayton

A Texas A&M analysis comparing how representative farms would fare under the House and Senate farm bills shows it's a slam dunk that farmers would lean toward the commodity programs being proposed by the House bill.

The study by Texas A&M's Agriculture and Food Policy Center examined a farm's preference between the two farm bills based on which programs offered the highest average net farm income over the five years of the bill.

Based on assumptions of baseline farm prices, the Texas A&M study shows 64 farms chosen to represent average commodity farmers across the country would all prefer the House farm programs over the Senate's version of the bill. The House option gives those 64 farmers a chance to make an average of $44,200 more in taking the best commodity program option in the House over the Senate bill, the A&M study stated.

House Ag Chairman Frank Lucas, R-Okla., cited the study as a boost of support heading into Wednesday's committee markup for his version of the farm bill, the "Federal Agriculture Reform and Risk Management Act, or "FARRM."

"The House farm bill saves taxpayers $35 billion, with more than $14 billion in these savings achieved by reforming U.S. farm policy. What the AFPC study says is that the House managed to save taxpayers money and reduce the deficit while still providing a safety net that farmers can truly depend on in hard times. The biggest take-away from the study is the absolute importance of real price protection in a farm bill. When presented with the various choices, the study reveals that, wherever they farm and whatever they grow, farmers are better off under the risk management option that marries a strong crop insurance policy with a farm bill that focuses on providing real price protection against multiple year price declines. I hope producers and my colleagues in Congress will give a close look at the study’s findings."

The only counterpoint to such an argument is if this farm bill is meant to reflect the nation's level of commitment to austerity, does the House bill effectively demonstrate the necessary fiscal restraint if every farmer would flock to it?

The Texas A&M study does provide a good primer in spelling out the various new acronyms in both the Senate and House farm bill, changes in base acres and percentages for payment triggers, as well as other nuances of the program options.

The House bill right now offered a wider band of payment under particular programs, but the game changer is the House Price Loss Coverage program, which is an updated target-price program. Texas A&M stated the PLC "provides support at meaningful levels when prices decline."

Out of 62 farms analyzed, all of them would pick the House target-price program over the shallow-loss program. Assuming the current price baseline remains, the average farm would receive $81,400 more in income per year picking the PLC over the Revenue Loss Coverage program, the report stated. For rice producers, the difference would be $112,600 per year.

The difference in farm numbers analyzed (62 versus 64) stems from two small cotton farmers that would only be enrolled in the cotton insurance program, the Stacked Income Protection Plan, or "STAX."

The House version of the farm bill also has a better version of STAX. The House bill also has a reference price of .6861 cents a pound. If prices fall, the reference price provides a better protection option than the Senate bill.

Current overall profitability for farmers also played a factor in which version of the legislation producers backed. Texas A&M researchers noted that "the Senate AGI (adjusted gross income) and payment limit restrictions were the direct cause of 11 farms choosing one of the House farm bill options." Larger farmers leaned toward the House plan.

The Senate bill has a hard $50,000 payment cap and a more stringent rule for being "actively engaged" in farming than the House bill. The House has a $125,000 cap on a combination of the PLC and RLC programs. The $125,000 cap also is doubled if a producer is married, regardless of whether their spouse is considered actively engaged.

The Senate also goes with a $750,000 adjusted gross income cap while the House goes with a $950,000 cap, thus far.

The full Texas A&M report can be found at http://afpc.tamu.edu/…

Savings Aren't (in) Peanuts

Peanut production also should explode under the House bill if prices collapse. Under the House plan, peanut farmers get a separate, $125,000 payment cap from everyone else. Thus, they can collect payments for their other crops up to the $125,000 cap, and then collect on their peanuts if the conditions are met. Then the payments can be doubled for the spouse as well.