Joe Outlaw may have worn out a few suitcases over the past few months as he traveled across the country explaining the new farm program.
He was back in Texas recently to make another stab at clarifying the often confusing programs at the 30th annual Texas Ag Forum in Austin.
Outlaw, Texas AgriLife Extension economist and co-director of the Agricultural and Food Policy Center in College Station, said the new programs, though sometimes complex and frustrating to many, still “provide tremendous support to production agriculture.
The Agricultural and Food Policy Center, which is a part of Texas A&M University, developed the Farm Bill Decision Aid tool under contract with USDA. The computer software has allowed many growers to calculate the impact of a number of different farm program options on their individual farming operations.
“It does not guarantee a profit,” he added. “I hope farmers never collect a penny from ARC (Agricultural Risk Coverage) or PLC (Price Loss Coverage) because that means they are seeing high prices.”
He understands farmers’ frustration. “It’s complicated,” he said, “but farmers should compartmentalize the program and do it a bit at a time.”
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Initial debate on the new farm bill began back in 2010, when commodity prices were near all-time highs. “The world changed for commodity prices during that debate,” Outlaw notes “Options that were promising then are not as helpful with recent steep declines in prices. Peanuts were bad the whole time, but wheat has dropped, and some growers will get a payment this year. Cotton prices dropped in 2011, 2012, 2013 and 2014.
“Unless producers are kidding themselves, right now there are few crops in Texas where expected prices appear to provide a profit this year, and some get worse in the next few years. Also remember your estimated payment is paid on 85 percent of your base acreage, at best.”
But producers can’t just back off for a year. “If farmers want to keep land and have it available when prices are better they have to keep farming, even when prices are low. ARC or PLC? Either is a good option if things go wrong.”
Wildcard is insurance
Crop insurance will “be the wildcard going forward,” and will be more complicated than the farm program.
He said the Supplemental Coverage Option (SCO) and the Stacked Income Protection Program (STAX) for cotton “will be useful tools to some, but the yield exclusion may make both less attractive once producers figure out what to do with the new APH yields relative to cost. STAX may work better when cotton prices get higher.”
Outlaw said farmers also should consider that enterprise units may be separated by practice—dryland or irrigated—for insurance.
Beginning farmers get a 10 percentage point discount for all crop insurance programs.
He cautioned growers to take crop insurance decisions seriously and evaluate each farm and each crop.
Do the math
“If your insurance agent suggests that you do just what you did last year, look for a new agent.”
Outlaw said producers should have taken advantage of the yield update opportunity. “It’s a no-brainer.”
That opportunity expired with the Feb. 27 deadline for producers who did not call FSA and set up appointments to complete the process. Same with base reallocation.
He said the yield exclusion allows producers to increase insurance coverage for no more money.
He summed up by saying that the farm bill “provides a significant amount of protection from price and/or production disasters, but only after producers have incurred a loss.
“All the decisions you get to make allow you to tailor the bill to your operation much better than in the past.”
But that means individual farmers must do analyses on their operations to determine which program fits best. “No one, not me, not your friends, can tell you how to sign up. What is good for one of your farms might be terrible for another. “
He added that in the course of his many opportunities to help farmers understand the farm bill over the last few months, a “lot of people attended who knew nothing about the farm bill. That’s scary.”
He admits that the program is not perfect and that farmers remain vulnerable to debt, low prices and disasters. “I’m more worried about our producers today than in quite some time.”
He said if he “had one wish it would be not to give people money who do not farm. We should base payment on planted acres.”