What is in this article?:
- Full Senate to take up farm bill, FAPRI report issued
- 2 percent ARC average, STAX, questions
- Senate leadership places 2012 farm bill second on its to-do list when the body returns from recess in early June.
- Lawmakers to read latest Food and Agriculture Policy Institute analysis of proposed legislation.
- Specifics of FAPRI study of proposed farm programs discussed.
2 percent ARC average, STAX, questions
- Estimated payments under ARC average approximately 2 percent of the market value of eligible crops. ARC payments are proportionally larger for corn and wheat than for rice and peanuts.
“The way the program works, the most you can ever get in a given year is 8 percent of the benchmark value of the crop. The program pays for losses between 11 and 21 percent. So, no matter how bad things are, the most you’ll get is 10 percent of the benchmark on eligible acres. And even if you choose the county option, you only get paid on 80 percent of your planted acres.
“So, it isn’t surprising that the average payment is about 2 or 3 percent of most crops’ value. That percentage is a bit higher for corn and wheat than it is for crops like rice and peanuts. The differences are related to our projections for future prices and the fact that yields and revenues are more variable for some crops than for others.”
- STAX net indemnities average about 5 percent of the market value of cotton production.
“In some ways ARC and STAX are similar. (However), they are different in several important respects.
“The main reason for the difference in the average benefits under STAX compared to ARC is the range of losses covered under STAX is a 20 percent band. So, ARC covers the range from 11 to 21 percent loss. In STAX, it’s from a 10 percent loss to a 30 percent loss.
“There are some offsets. If you want to be in STAX you must pay a premium. That reduces the net benefit to producers.
“On the other hand, you also have the ability to buy up to a higher payment rate. That can be up to 20 percent.”
- Budgetary outlays under ARC and STAX will vary greatly, but because both programs cover only a certain band of revenue losses, the budgetary exposure does have limits.
“Again, in years with rising prices and decent yields, there will be hardly any expenses in the programs. However, in a year when prices drop, say, 20 percent with average yields it could mean spending several billion dollars more than we’d have spent under current programs.”
Anything jump off the page when you crunched the numbers?
“It was a surprise that there were no huge average acreage impacts due to the policy changes. There may be circumstances where ARC will keep land in a particular crop, but that will depend on future prices and yields for particular crops.
On Supplemental Coverage Option…
“We haven’t looked at SCO. It’s very important and we’ll get to it.
“When the Senate bill was first being put together, CBO’s initial estimates showed small impacts from SCO. When we saw that we decided to focus on the big things and worry about things like SCO later.
“Well, now it’s clear that SCO is a much bigger deal than we thought. And it may be attractive to a lot of producers. So, we’ll revisit that and look at it carefully.”
“The fairness and equity concerns about the Senate bill largely depend on your perspective.
“If your point of reference is current law then you can argue that rice and peanut producers aren’t treated fairly under the Senate farm bill, as they see a larger proportional cut in benefits than other producers. On the other hand, if your point of reference is a world with no farm programs, then you could claim the Senate bill is more equitable than current programs because it reduces differences across crops in terms of average payment rates.”