Watch marketing year average price to help farm bill decisions

Everyone says the 2014 farm bill is complicated, and part of the reason it’s complicated is the number of choices farmers have when they sign up for its provisions. That’s not necessarily a bad thing, says Texas A&M University’s Joe Outlaw.

Dr. Outlaw, co-director of the Agricultural and Food Policy Center at Texas A&M, had some blunt advice for members of the audience for a panel discussion on “The 2014 Farm Bill: What You Need to Know,” which was held at the USA Rice Outlook Conference in Little Rock, Ark.

“The big deal is you have choices, and people fought for the right for you to have those choices to make your operations have the best safety net you could have,” said Outlaw, who also conducted a “How-To” session on the farm bill decision aid developed by the Agricultural and Food Policy Center at the Outlook Conference.

Outlaw urged rice producers to begin analyzing their options with “someone’s decision aid – the University of Illinois, ours or someone else’s” as soon as possible even though all of the details of the programs may not be fleshed out yet.

“I will tell you this: That yield update is hugely critical,” he said. “Whether you’re a big fan of ARC (Agricultural Risk Coverage) or PLC (Price Loss Coverage), it doesn’t really matter. If you look at the way prices tend to be shrinking now for every crop, the ARC concept is something that is not going to be pushed very hard for the next farm bill.”

“It won’t be pushed, and we’ll probably be looking at some sort of a plan that is based off a government yield number. So we need to have those updated if we can.”

Outlaw says every projection he’s seen shows the ARC benchmark price will be low throughout the life of the 2014 farm bill and support prices will be down for the next farm bill.

On the question of ARC or PLC for rice, Outlaw says the choice is easy. “Frankly, it’s a no-brainer for long grain rice. Medium grain rice in Arkansas? It’s more of a toss-up, and it’s not a no-brainer. For Japonica rice in California, it’s less of a toss-up, and there’s some support there.”

Growers also need to remember that to sign up for the Supplemental Coverage Option or SCO under the new farm bill, they must enroll in the PLC or Price Loss Coverage program, Outlaw noted. “So that might help make the decision with FSA one way or the other.”

Dr. Outlaw said he was pleased to see the SCO rates for rice that were recently published. “They’re not bad at all, and, frankly, I think it is a pretty good buy. Maybe not everyone will want to do this; you’re buying up for higher levels; you’re already doing something on revenue insurance.”

As growers start thinking about policy and how they’re going to get the most out of the new safety net, they need to remember that marketing year averages are what’s used to make the payments that farmers will receive, not an individual’s average or some other farmer’s average. Becoming familiar with the marketing year average for all crops will provide more information for making decisions.

Another important factor may be what happens to Section 179 expensing for machinery purchases, Outlaw noted. The House has passed legislation extending accelerated depreciation for asset purchases, but it is still pending in the Senate.

“I think there will be payments across the board on crops regardless of which policy you pick for 2014,” he said. “Those payments will be made after Oct. 1, 2015, and if you don’t have Section 179 at that point in time, there will be a lot of taxes paid. I work enough with y’all to know that you don’t like to pay taxes, and you would rather go buy stuff. That’s OK, but realize you need to be making smart decisions about this.”

For a different look at the 2014 farm bill, visit http://farmdocdaily.illinois.edu/areas/2014_farm_bill/.

Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish