Page 49 - Farm Bill Series_The 7 Things You Should Know

require lifting that cap, which would in turn encourage private companies to develop new LGM
products, says John Newton, an economist for the Farm Bureau.

ARC. Some corn and soybean growers believe they are getting shortchanged under the current
system relative to farmers in neighboring counties. A provision in the Senate’s fiscal 2017
USDA spending bill would set up an alternative way of calculating ARC payments, based on
yields in contiguous counties.

But changing the calculations will require more money, and CBO projects most farmers who are
now enrolled in ARC – 80 percent of corn acreage and 70 percent of soybean acreage – will
switch to PLC under the next farm bill because of the better prospect for payments.

Economists say the disparities in county ARC payments largely result from natural
differences in yields from one county to the next. But growers, particularly in North Dakota,
believe they are also getting underpaid because of the county yield estimates that USDA uses for
its revenue calculations when it has inadequate survey data.

There also are concerns with the program’s requirement for calculating county revenue
guarantees using a five-year Olympic average of yields. (An Olympic average excludes the
highest and lowest yields during the five-year period.)

“The problem is multiple-year yield losses will generate a low ARC revenue guarantee,” said Art
Barnaby, a Kansas State University economist.
An analysis by Newton and Jonathan Coppess, a former administrator of USDA’s Farm Service
Agency who’s now a professor at the University of Illinois, shows that allowing the revenue
guarantee to be based on a 10-year average, rather than five, would have increased the 2014
ARC payments for corn, soybeans and wheat by 13 percent, or $448 million.

Sen. John Hoeven, a North Dakota Republican who is a member of the Senate Agriculture
Committee and chairman of the Agriculture Appropriations Subcommittee, says the future of
ARC will depend in large part in what lawmakers hear from farmers in coming months. He has
supported offering farmers both ARC and PLC but he didn't rule out leaving ARC
behind. "We want the best countercyclical safety net. I like the idea of options, but we’ll see
what makes sense," he said.

Conservation. There is pressure to reverse
some of the drop in CRP enrollment that the
2014 farm bill required as a budget-saving
measure. The ranking member of the House
Agriculture Committee, Collin Peterson of
Minnesota, has recently called for raising the
CRP cap from 24 million acres all the way up to
40 million acres, which would cost billions of
dollars. Every million-acre increase in the
CRP limit would cost $300 million to $400
million, conservation groups have been told.

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