Weighing in on the farm bill safety net: Part 2

Greg Cole makes no secret of the fact he believes farmers, particularly those in the Mid-South, would have been better off from a safety net point of view if Congress had kept direct payments in the Agricultural Act of 2014.

Cole, president and CEO of AgHeritage Farm Credit Services, has told several audiences “the loss of direct payments in the new farm bill will have a greater impact on farmers in the Mid-South than in any other part of the country,” a comment he repeated at the Mid-South Agricultural and Environmental Law Conference in Memphis, Tenn.

“You only get help when things are not so good,” said Cole, who spoke on his impressions of the signup for the new farm bill. “So if you trigger a payment, more than likely you’re already losing money on an overall basis. So that’s a fundamental shift.”

The new law ended direct payments, which Cole said creates a different dynamic in farm country. “Obviously, we liked direct payments. Producers liked them. They were easy to quantify; you knew how much they were. “You knew when you were going to get them. And for lenders, it was easy to make that link.”

Cole says it appears most farmers in the area served by AgHeritage selected the Agricultural Risk Coverage or ARC program for corn and soybeans. Most rice producers chose Price Loss Coverage or the PLC program for their crop.

“With the rapid decline in rice prices, it looks like if they did get signed up, there will be a pretty good payment for the 2014 crop,” said Cole. “Obviously, we want receive that until later at the end of the fall.

Those who follow rice know it has joined other markets as a crop with an excess of supply and a rapid decline in price to about $4.50 per bushel after selling for $6 to $7 per bushel during the 2013-14 marketing year.

The new farm bill, on the other hand, offers a $6.30 per bushel reference price for PLC calculations for rice (minus any discounts and multiplying it by 85 percent of a grower’s base acres. But some observers may not have considered all the dynamics of the situation.

“You may think that if I sell my rice for $4.50 per bushel, I’m going to get $6.30 because of the reference price,” says Cole. “But if the price of rice rises for the remainder of the year, you may not get a payment. So you basically just sold your rice for $4.50.” He suggested growers try to hedge against such developments by using co-op pools

Cole said he was somewhat surprised to see that sales of federal crop insurance coverage, which was supposed to be the underpinning of the new farm programs, did not increase in the Mid-South for the 2015 crop year.

“In the Mid-South, we haven’t used crop insurance to the same level they have in the Midwest,” he said. “But I thought we have a lot more producers buying crop insurance. But in our area, in our part of the Mississippi Delta we haven’t seen that. Actually the sales are flat or down where I thought they would skyrocket.”

To read more about the Agricultural Act of 2014, visit http://www.usda.gov/wps/portal/usda/usdahome?navid=farmbill

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