Posted November 20, 2013
Falling corn prices have become a key issue for the farm bill conference, according to an article by David Rogers of Politico available here.
On Monday, December 2013 corn futures fell to a new low of $4.12 per bushel at the Chicago Board of Trade. Prices have been falling since the summer, recently affected by the Environmental Protection Agency’s (EPA’s) plan to lower ethanol targets for 2014.
It is likely that corn would “qualify for assistance next year under the new revenue-protection program” in the Senate bill, Agricultural Risk Coverage (ARC). If corn prices fall to $4 per bushel in 2014, “a farmer could double what he gets now in direct cash payments.” ARC sets a threshold of about $4.66 per bushel for 2014.
The National Corn Growers Association provided POLITICO with an analysis based on a farm with a harvested yield of 175 bushels per acre. “At a $4 per bushel price in 2014, the NCGA’s own numbers show that the farmer would get $53 per acre” under ARC, “twice the $25 per acre he receives in direct payments.”
Sam Willet, senior director of public policy for NCGA, says that “taking a longer view puts ARC in a better light.” If corn prices were to level off at $4 per bushel through 2019, the “ARC payment would run for only the first three of those six years.”
ARC “is designed as cushion to give the producer time to adapt to declining prices” according to a NCGA analyst.
In contrast, the program in the House bill would “trigger counter-cyclical payments to farmers if markets fall below fixed target prices,” which are calculated “as a rough proxy for a farmer’s production costs.” Under the House program, payments for corn would only begin when prices reach $3.70 per bushel.
Rep. Frank Lucas (R-OK), said that EPA’s ethanol decision and dropping corn prices have helped “all sides come together behind a strong farm safety net,” according to an article by The Hill available here.
Lucas said the “vulnerability of corn producers is helping resolve regional differences over whether the House or Senate farm subsidy approaches should be used.”
For more information on farm bills and commodity programs, please visit the National Agricultural Law Center’s website here and here.
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