USDA pays out $7b for safety net

ARC/PLC payments being paid out to many of the 1.7 million farms as farm prices drift lower.

The U.S. Department of Agriculture said beginning Oct. 4, it would start making more than $7 billion in safety net payments to many of the 1.7 million farms enrolled in either the Agriculture Risk Coverage (ARC) or Price Loss Coverage (PLC) programs due to market downturns during the 2015 crop year.

Agriculture Secretary Tom Vilsack said these safety net payments will account for more than 10% of USDA’s projected 2016 net farm income. “These payments will help provide reassurance to America's farm families, who are standing strong against low commodity prices, compounded by unfavorable growing conditions in many parts of the country," Vilsack said.

Unlike the old direct payment program, which issued payments during both weak and strong market conditions, the 2014 farm bill authorized the ARC/PLC safety net to trigger and provide financial assistance only when decreases occur in revenues or crop prices, respectively. The ARC and PLC programs primarily allow producers to continue to produce for the market by making payments on a percentage of historical base production, limiting the impact on production decisions.

Nationwide, producers enrolled 96% of soybean base acres, 91% of corn base acres and 66% of wheat base acres in the ARC-County coverage option. Producers enrolled 99% of long-grain rice and peanut base acres and 94% of medium-grain rice base acres in the PLC option. Overall, 76% of participating farm base acres are enrolled in ARC-County, 23% in PLC and 1% in ARC-Individual.

Wheat farmers received roughly $1 billion in assistance, which was welcomed by the National Association of Wheat Growers (NAWG). “This has been a rough marketing year for farmers, with wheat prices dropping lower than we’ve seen in decades,” NAWG president Gordon Stoner said. “It’s years like this that a viable farm safety net is critically important, and I applaud Secretary Vilsack’s quick action to roll out these programs this new fiscal year. The program payments being announced will provide a needed cushion for farmers during these tough economic conditions in wheat country.” 

Payments are made to producers who enrolled base acres of barley, corn, grain sorghum, lentils, oats, peanuts, dry peas, soybeans, wheat and canola. In the upcoming months, payments will be announced after marketing year average prices are published by USDA's National Agricultural Statistics Service for the remaining covered commodities. These include long- and medium-grain rice (except for temperate Japonica rice), which will be announced in November; remaining oilseeds and chickpeas, which will be announced in December, and temperate Japonica rice, which will be announced in early February 2017. Upland cotton is no longer a covered commodity.

National Farmers Union (NFU) president Roger Johnson said the payments “provide needed assistance to farmers that are facing severe strife amid the current economic downturn.” Johnson said although these programs are not without flaws, producers would be in a much more difficult spot without them than they are right now.

NFU and NAWG both said they’ll be working with Congress to encourage improvements to the safety net package in a way that more accurately reflects true costs of productions.

In the interim, Johnson said NFU is calling on Congress to provide USDA with the authority to make advance payments to farmers so they don’t have to wait a full year to receive their earned payments.

NAWG said it plans to dig deeper into the data used to calculate county payment rates and will seek feedback from states about the effectiveness of these programs. USDA’s Farm Service Agency has posted maps on its website showing the payment rate ranges for wheat, corn and soybeans through the ARC-County program, as well as revenue maps for those commodities. Those maps can be found at this link.

The Budget Control Act of 2011, passed by Congress, requires USDA to reduce 2015 ARC and PLC payments by 6.8%. NFU asked that Congress repeal the aspects of the sequestration requirements that are preventing producers from receiving the full amount of assistance that they are entitled to under the 2014 farm bill. “In these difficult times, producers should not be penalized 6.8% because of the inaction of Congress,” Johnson said.

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