Farm bill conference issues
Direct Payments and Upland Cotton
Both the Senate and House farm bills eliminate the direct payment program after the 2013 crop year, except that the House bill retains direct payments for the 2014 and 2015 crops of upland cotton. The payment level is phased down, with the percent of base acres on which payment is made declining from 85% for the 2013 crop to 70% for the 2014 crop and 60% for the 2015 crop. The issue is whether the other crops will also want a phased down extension for direct payments. In addition, if an extension of the 2008 farm bill is the path taken; these lower rates for direct payments could be part of the extension since a number of nonfarm legislators have stated that their support for a farm bill extension will be conditional on reducing or eliminating direct payments.
Multiple Year Crop Safety Net
The House bill provides farms with a choice between a Price Loss Coverage (PLC) and Revenue Loss Coverage (RLC) programs. PLC is a target price program that makes payments when the market price is less than a reference price (i.e., price target). Payment is made on the basis of planted acres subject to a total farm payment limit based on the farm's historical base acres. The reference target prices are fixed in the House bill. RLC is a revenue target boundary program that covers revenue shortfalls that fall between 75% and 85% of a revenue target. The revenue target moves with the market based on a 5-year Olympic moving average of yield and price. RLC specifies that the crop's fixed reference price is a lower bound on the price used to calculate the revenue target.
The Senate bill offer farms both an Adverse Market Payment (AMP) program and an Agriculture Risk Coverage (ARC) program. AMP, like PLC, provides price deficiency payments when price is below a reference price. The reference price is set at 55% of a 5-year Olympic moving average (removes low and high value) of prices except that fixed reference prices are specified for rice and peanuts. ARC, like RLC, is a revenue target boundary program. It provides payments when revenue falls within a range between 78% and 88% of a revenue target determined by using a 5-year Olympic moving average of past yields and prices. ARC, like RLC, provide both shallow loss coverage and coverage for multiple year losses since a moving average adjusts more slowly than the market. AMP payments are based on historical base acres. ARC payments are based on planted acres subject to a cap for the farm (not on individual crops) determined by the farm's planting history for the 2009 through 2012 crops. The Senate bill is able to provide both a price and revenue program to farms because its reference price for most crops is much lower than the reference price fixed by the House bill.