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Corn Growers offer real safety net

DANIEL LOOKER 09/16/2011 @ 1:02pm Business Editor

After more than a year of careful study and preparation, the National Corn Growers Association unveiled a 2012 farm bill idea that, if adopted by Congress, could offer farmers a safety net program that works in today’s volatile market environment.

NCGA calls it ADAP, short for Agriculture Disaster Assistance Program. It would replace both the current Direct and Counter-Cyclical Program and ACRE, the Average Crop Revenue Election program. ADAP designed to cover part of the shortfall from crop insurance payments, without overlapping crop insurance.

“We believe we have created what we would call a true safety net. It only triggers when you have an on-farm loss,” says NCGA’s chairman of its public policy action team, Anthony Bush

NCGA surveyed farmers to find out what they didn’t like about ACRE and ADAP is designed to eliminate many of producers’ complaints about ACRE.

“Overwhelmingly we heard it was too complicated,” Bush tells Agriculture.com.

According to Bush, a corn, soybean and wheat farmer from Mount Gilead, Ohio, here are some of the improvements:

  • ACRE required producers to accept a 30% cut in their loan rates, which are already far below market prices. ADAP would essentially keep the existing marketing loan program without raising loan rates. But those signing up for ADAP wouldn’t have the penalty of a 30% cut.
  • ADAP payments would be made sooner. ACRE’s payments were based on farm having a loss in revenue as well as a state. The state-level revenue benchmark was set by the state’s Olympic average of yields (over 5 years, tossing out the best and worst) and by the national  average prices for crops in the two previous marketing years. A similar calculation was used at the farm level. To determine if a state and a farm qualified for payments, USDA used the national average price for eligible crops in the marketing year following harvest. ADAP speeds up that process by using harvest prices instead of the annual average.
  • ADAP payments would be based on revenue in crop reporting districts within a state, not the entire state.
  • ADAP payments would be base on a farm’s actual planted acres. ACRE made payments on .833 times planted acres, not to exceed base acres for commodity crops. ADAP payments would not be limited by base acres.
  • Farmers would not have to get long-term approval from landlords the way they are now required for ACRE. And ADAP enrollment would be annual, not for the life of the farm bill.

“We see this as an annual program tied to production,”  Bush says.

The ADAP revenue guarantee also goes up from that of ACRE. ADAP’s revenue guarantee is 95% instead of 90% under ACRE. But it pays on 10% of a farm’s benchmark revenue, not ACRE’s 25%

Here’s a rough example of how it works:

If a farm has a $1 million revenue benchmark, it revenue guarantee would be 95% of that, or 950,000.  If it triggers a payment, the maximum size would be 95,000, or 10% of the guarantee.

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