Questions for Ag Secretary Perdue

In looking at the 2014 farm bill, I find that the PLC subsidy trigger for peanuts, (Perdue’s home state,) and rice are much more favorable than the subsidy triggers for other major crops, (corn, wheat, soybeans, barley, sorghum, and especially oats! Well, compared to full costs as measured by USDA’s Economic Research Service (ERS).

Subsidy triggers (technically “Reference Prices,”) are the key standards for calculating subsidies. If average market prices for a crop, (as defined in certain ways for a given year,) fall below the Reference price it triggers a subsidy amounting to 85% of the amount below the reference, multiplied by historical yields, which can be up to 90% of recent yields. (85% x 90% = 76.5%) So the subsidy makes up for about 75% or less of the amount below the reference price.

But if the reference price is only about 85% of full costs (and falling over time as costs rise?), as in the case of soybeans (85% x 75% = ) then the subsidy brings you back up to only about 64% of full costs, in the case of soybeans, (less for wheat, barley, sorghum and especially oats; more for corn).

Ok, PLC: that means Price Loss Coverage. It’s like the earlier countercyclical program and still earlier deficiency payments. This is the countercyclical option, where subsidies are directly related to the need for subsidies, (unlike in the Crop [revenue] program, ARC, Agricultural Risk Coverage,) so it’s quite important. After the 2008 farm bill, farmers overwhelmingly rejected the crop (revenue) insurance program (ACRE), but then that rejected (insurance) program is the one that Congress pushed for farmers for 2014, with help from some of the big commodity groups, (i.e. National Corn Growers Association, American Soybean Association,) and Farm Bureau (insurance company).

Cornbelt and Wheatbelt Ag Committee Members Betrayed Us

Well, except those in Congress advocating for peanuts and rice. Unlike cornbelt and wheatbelt ag committee members in places like here in Iowa, the peanut and rice voices won a strong PLC peanut program for their crops. So their farmers had no need to gamble on revenue insurance programs that don’t help you much at all if prices go low and stay low, (as they have no fixed standard of need, but rather use floating, free market standards, relativism, (technically olympic year averages). And that part about not helping you much at all? That’s exactly what CBO has projected ahead for 10 years, (and similar for ERS). The major farm prices will go low and stay low, (and so far they’ve been mostly lower than projected). And then the subsidies will ALSO be less, because the free market says that the cheap prices are appropriate.

(But, of course, the free market chronically fails for agriculture, as is well known, so the crop [revenue] insurance programs favored by Farm Bureau Insurance and their friends in some of the big commodity groups are basically a “theater of the absurd,” a recipe for existential nausea. No wonder farmer suicide rates are so high!)

Betraying Sustainable Agriculture

How about sustainable agriculture! How about a crop rotation that gets you away from row crops, with sod crops such as powerful legumes (alfalfa, clover,) to take large amounts of nitrogen free from the air, without fossil fuels. And then you need a nurse crop, like oats or barley. But the subsidy trigger for oats is only 47.1% of full costs (barley: 77.1%, wheat: 71.1%)!!! That’s how much Congress is helping sustainability, where it counts, in terms of money!

How About a $4.70 Subsidy Trigger for Corn, Instead of $3.70?

What if the subsidy trigger for corn was $4.70 instead of $3.70? That’s what it would have been if it had been equivalent to peanuts. We need to ask Secretary Perdue about that! A lot more corn farmers would have signed up for PLC! Unfortunately, most corn farmers were encouraged to sign up for ARC, the program that’s projected to be a disaster for farmers.

Bottom line: it’s not just that Congress hasn’t restored fair price floors to eliminate the need for any subsidies, to make a profit on farm exports and free up nearly $100 billion for other, better uses. Congress has also reduced subsidies.

Well, not so much for Georgia peanuts and Arkansas rice. It’s really the cornbelt and wheatbelt ag committee members who are betraying farmers at the most extreme levels.