The Hagstrom Report

Agriculture News As It Happens


NFU favors retention of target price program, opposes Gibbs amendment

The National Farmers Union today praised the Price Loss Coverage program in the House farm bill and said it is opposed to an amendment sponsored by Rep. Bob Gibbs, R-Ohio, that would reduce the target or reference prices in that program.

The American Soybean Association, the National Corn Growers Association, National Sunflower Association and the U.S. Canola Association favor the amendment on the grounds that the target prices are set so high they will skew farmers’ decisions on what to plant.

Rice and peanut groups have favored the PLC program, and House Agriculture Committee Chairman Frank Lucas, R-Okla., and ranking member Collin Peterson, D-Minn., have said it is important to offer farmers a target-price based alternative to the shallow-loss program that the corn and soybean groups have favored because several years of low prices would lower the protection that the shallow loss program.

Roger Johnson

Roger Johnson
“NFU members believe strongly in the need for farm programs for two reasons: to provide assistance in times of disastrous yields or weather conditions and to protect against agricultural commodity price collapse,” said NFU President Roger Johnson.

“The version of the farm bill approved by the House Committee on Agriculture fulfills both of those needs, through a robust crop insurance program and the inclusion of meaningful reference prices through the Price Loss Coverage (PLC) option,” Johnson said. “PLC in particular is under repeated and unwarranted attack from members of Congress, the administration, and some outside interests who seem to have forgotten the conditions of the late 1990s after the failure of ‘Freedom to Farm’ policies that eliminated farm safety net protection against extremely low market prices.”

Johnson said that Gibbs’s amendment to establish a reference price based on a five-year Olympic average price would weaken the safety net as multiple years of lower prices would decrease the support prices to very low levels.

“PLC in its current form sets fixed reference prices well below the cost of production so as to provide some help in very tough times but not guarantee profits,” said Johnson.

“For example, PLC as proposed sets a corn reference price of $3.70/bushel, while the 2012 average total cost of production for corn was $5.41/bushel. For soybeans, the reference price would be set at $8.40/bushel, but the 2012 average total cost of production was $10.03/bushel,” Johnson said.

“For wheat, the reference price would be $5.50/bushel, while wheat’s 2012 average total cost of production was $6.77/bushel. In addition, the level of support set by PLC would not distort planting decisions since the program only triggers during market collapse.”

The American Farm Bureau Federation is neutral on the Gibbs amendment, Farm Bureau lobbyist Mary Kay Thatcher said in an email. Thatcher said Farm Bureau supports giving farmers a target price-based program as an option, but has not taken a position on a particular price.