04/26/18 AM By Sara Wyant
Senators John Thune, R-S.D., and Sherrod Brown, D-Ohio, have introduced legislation designed to make the Agricultural Risk Coverage (ARC) more attractive to farmers in the next farm bill.
The two senators, who both serve on the Senate Ag Committee, say the ARC Improvement and Innovation Act would enhance the program by modifying the payment calculation and other parts of the program to improve its safety net potential.
The ARC program, which provides price, as well as revenue protection, “is not effective today because of the price circumstances we are in,” said Thune during a briefing with the National Association of Farm Broadcasting this week. “We think we need an alternative to the PLC program.”
Without significant changes in ARC, grain and oilseed growers are expected to switch from ARC to the Price Loss Coverage (PLC) program under a new farm bill. The Congressional Budget Office (CBO) predicts PLC payments will hit $5.7 billion in fiscal 2021, compared to just $448 million for ARC under the county coverage option. PLC payments are expected to total $2.7 billion for 2019, compared to $2.6 billion for ARC-CO.
“Ohio farmers need effective risk management tools — particularly when facing several years of low commodity prices. It’s time we update the ARC program so that it better protects against both price and yield disasters,” said Brown in a release.
Key changes to ARC in the bill introduced by Sens. Thune and Brown include:
- Use Thune’s previously introduced proposal (S. 1259) to calculate payments based on a county’s physical location;
- Capping reference prices at either their current level or no more than the 10-year average price for a commodity;
- Adjust ARC to have a coverage level of 90 percent instead of 86 percent;
- Use a three-year average price with a 10-year average market price as a floor for calculating ARC payments;
- Use a crop insurance trend-adjusted yield factor to calculate the ARC benchmark yield;
- Use an 80 percent T-yield for substitute yields if historical yields are missing or lower than 80 percent (current T-yield substitution factor is 70 percent);
- Continues to include the ARC individual option, which was removed in the House farm bill;
- Include a quality adjustment factor that could be used to calculate ARC wheat payments, when needed.
The National Corn Growers Association, which strongly backed ARC provisions in the current farm bill, endorsed the legislation.
“The Agriculture Risk Coverage Improvement and Innovation Act will make needed improvements to the farm safety net, ensuring ARC can continue to be a reliable risk management program for farmers during times of depressed prices,” said NCGA President Kevin Skunes.
However, many southern growers are likely to oppose the measure because of the cap on reference prices.
Under the House version of the farm bill, the ARC program would be modified, but without an increase in coverage levels to make the program more competitive with PLC. Changes include:
- Yields would be based on Risk Management Agency data;
- Commodity revenue would be separately calculated for drylands and irrigated acreage;
- ARC coverage also would be based on the county where a farm is physically located;
- Individual ARC coverage would be eliminated.
The House version would enable higher price supports for the PLC program. Key changes include:
- An escalator provision would raise reference prices whenever the moving five-year Olympic average of commodity prices rises 15 percent above the reference price;
- Producers who experienced severe drought from 2009-13 would be allowed to update their PLC yields, potentially benefitting many cotton growers in Chairman Mike Conaway’s home state of Texas.
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