Page 46 - Farm Bill Series_The 7 Things You Should Know

The challenges ahead

Although commodity programs created by the 2014 farm bill are providing larger payments to
farmers than were projected, the overall cost of the commodity title will start falling sharply
because of the way one key program was designed, and that is going to provide a significant
incentive for lawmakers to enact a farm bill in 2018, rather than waiting until 2019 or 2020.
That’s because the lower costs lead to a shrinking baseline, potentially reducing the amount of
money available to write the new farm bill the longer Congress waits.

The program in question –
Agriculture Risk Coverage ‘Zero to Zero’ sugar plan
Fiscal conservatives had their budget-cutting knives out during the last
(ARC) – provides payments farm bill debate and one of their favorite targets was the U.S. sugar
to growers when revenue program.
falls below a five-year U.S. Sen. Pat Toomey, a Pennsylvania Republican who represents
moving average. Commodity Hershey and other candy makers who wanted cheaper sugar,
repeatedly tried to phase out or limit the sugar program. Each time
prices fell sharply after they were defeated.
hitting highs in 2012, which Sugar beet and cane producers fought back with their “Zero to Zero”
led to large ARC payments legislation, authored by Rep. Ted. Yoho, R-Fla., and others. The bill
would repeal U.S. sugar policy when other major sugar-producing
during the first few years of countries around the world would repeal all their subsidies and
the 2014 farm bill. But prices protections.
are now expected to stay at Toomey had no problem making his argument from a manufacturers’
relatively low levels for the perspective, but it was a hard argument to make from a baseline
perspective. In fact, the program that puts a floor under the price of
foreseeable future, and ARC sugar for U.S. producers isn’t expected to cost taxpayers anything
payments will be declining over the next ten years. That’s partly by design and partly because of
dramatically as the higher economic and trade expectations.
The program requires USDA to support domestic sugar prices by
prices in 2012 and 2013 controlling both imports and the amount of sugar that processors can
disappear from the moving sell. The goal is to operate the program at no cost to the government,
average. but Congress added a backstop in 2008 for periods when the import
and marketing controls fail to stop a surplus from developing: USDA
ARC payments based on purchases the surplus sugar for processing into fuel ethanol.
the program’s county- USDA wound up using the sugar-to-ethanol diversion, known as the
Feedstock Flexibility Program, in 2013 when producers forfeited
revenue option, by far the significant quantities of sugar that had been under government loans.
most popular one, are As a result of that surplus, the sugar program cost taxpayers $259
expected to peak at $5.9 million. However, the Congressional Budget Office’s latest long-term
estimate projects the program will operate at no cost through fiscal
billion in the current fiscal 2020 and just $7 million in 2021. CBO estimates cost of $12 million in
year, drop to $4.7 billion in 2022 and $14 million in 2024.
fiscal 2018, $3.2 billion in
2019, $1.95 billion in 2020,
and bottom out at $409
million by 2023. (There is a
time lag between when a crop is grown and when growers receive their government payment.
Payments made in fiscal 2017 are for crops produced in 2015. Payments for 2016 will go out this
fall after the beginning of the 2018 fiscal year.)

The cost of a second program, Price Loss Coverage (PLC), will be rising significantly, because
many farmers are expected to switch from ARC. But the increase won’t make up for the decline
in ARC payments. PLC provides payments when the price for an eligible commodity falls below
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