January 29, 2019
By Jeff Helms
As Alabama farmers prepare for spring planting season, the Alabama Farmers Federation says changes in the 2018 farm bill could impact their decisions.
“For the first time in 30 years, Congress passed the farm bill in the year the previous bill expired,” said Federation National Legislative Programs Director Mitt Walker. “This gives farmers an opportunity to evaluate changes to farm programs and make informed decisions based on markets, weather and federal farm policy.”
Improvements in marketing loan rates for certain crops could affect planting intentions. Marketing loans allow growers to use their crops as collateral after harvest to take advantage of seasonal price changes. The farm bill made the first meaningful change to loan rates in over a decade. The rate for corn increased 35 cents per bushel or 12 percent, while the soybean rate increased $1.20 a bushel or 24 percent. These loans not only improve cash flow but can be an important tool in risk management because farmers may forfeit their crops without penalty when the market price falls below the loan rate.
Adjustments also were made to the Price Loss Coverage (PLC) program, which provides commodity-specific protection for farmers, as well as Agriculture Risk Coverage (ARC), which safeguards farm revenue for covered commodities.
In the 2018 farm bill, PLC reference prices are allowed to “float” higher (up to 115 percent) based on long-term average market prices. For example, the American Farm Bureau Federation said because of high prices in 2010-12, the soybean PLC reference price would have been $9.66 per bushel for both the 2015/16 and 2016/17 marketing years – triggering program payments of 71 cents per bushel and 19 cents per bushel, respectively.
The change in reference prices also benefits ARC program calculations. Meanwhile, ARC yield factors were increased from 70 percent of a county’s historic yield to no less than 80 percent. Data from USDA’s Risk Management Agency (RMA) crop insurance program will be the primary source of yield data as opposed to USDA National Agricultural Statistics Service surveys. This change is designed to improve the integrity of the ARC program by using an average of county-level crop yields reported to RMA.
One of the most significant changes in the farm bill is the ability for farmers to update yields.
“Production gains in recent years have created holes in traditional farm safety net programs,” Walker said. “By updating yields, potential program payments will be based on more realistic production numbers.”
Farmers will have an opportunity to update PLC program yields based on their 2013-17 crops, with a floor equal to 75 percent of the county average crop yield. The yield update will be effective for the 2020 crop year.
The farm bill gives producers greater flexibility in selecting programs to meet individual needs. Under the 2014 farm bill, farmers had a one-time option of choosing the PLC or ARC program. The new bill allows growers to first re-elect ARC or PLC coverage in 2019 on a commodity-by-commodity basis, effective for the 2019 and 2020 crop years. Then, beginning in 2021, growers will have an opportunity to make an annual re-election of ARC or PLC for the three remaining crop years.
“This flexibility allows growers to more frequently choose which risk management tool meets the needs of their farm and their crops for the marketing year,” Walker said.
For more information about farm bill changes, visit FB.org.