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Harkin considering revenue plan tied to rising input costs

Agriculture.com Staff 09/14/2007 @ 12:58pm

Instead of counter-cyclical payments fixed for five years (a commodity program approved by the House this summer) the Senate Agriculture Committee is looking at two approaches to a revenue-based commodity safety net that would adjust as production costs move upward.

According to a Senate Agriculture Committee staffer who asked not to be named, one approach is a refinement of a revenue-based counter-cyclical payment in the USDA's farm bill proposal. The Senate version would factor in USDA projections for increased costs each year. That new-improved version of a revenue payment would be offered along with continued direct payments and marketing loans.

The House bill does offer producers a one-time choice of something similar to the USDA farm bill idea of revenue-based counter-cyclical payments. But the staffer said it appears to be less attractive than the conventional CCP program tied to target prices. So it's unlikely that many people will sign up for the House version of a revenue-based CCP.

A second alternative that the Senate committee is considering would be more dramatic and would be based on a farm bill offered by Senators Dick Durbin (D-IL) and Sherrod Brown (D-OH) earlier this summer. That approach would discontinue marketing loans and might lower direct payments to pay for the new program. The revenue trigger would be based on the same February new crop futures prices now used to calculate revenue-based crop insurance -- multiplied by state average yields. If state yields times market prices falls below 90% of that target, all growers in a state would receive a payment.

"It's basically group risk at the state level," the staffer said of the Durbin-Brown approach.

The first alternative wouldn't be such a comprehensive revenue-based program. In essence, it's a better way of calculating counter-cyclical payments tied to base acres (not what you actually plant).

But it's an improvement over the USDA's idea, by about $10 an acre for corn and by about $20 an acre for wheat. And, the staffer said, this program being considered by the Senate committee would have provided countercyclical payments to both wheat and soybeans during the years 2002 through 2006. Under the 2002 farm bill, neither wheat nor soybeans have gotten any counter-cyclical payments.

The target revenue in the USDA farm bill proposal was $140.42 an acre for wheat, $344.12 an acre for corn and $219.58 for soybeans. Your revenue would have to drop below those levels to trigger payments. The target revenue was calculated by multiplying the target price by the average yield from 2002 through 2006, excluding the high and low years. (Because the House bill "rebalanced" target prices for wheat and soybeans, its revenue-based CCP option is $149.92. an acre for wheat and $231.87 an acre for soybeans.)

Under the Senate version of a revenue CCP, the triggers are higher than both the USDA proposal and the House bill: $160 an acre for wheat, $354 an acre for corn and $231 an acre for soybeans.

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