Author: Bart Fischer

Those who know little about production agriculture will often ask us why we have a farm safety net in the United States. While there are several justifications to choose from, one of the most notable is that farm policy is designed to help level the playing field for U.S. agricultural producers in the global marketplace. In this article, we illustrate the case of rice.

Rice is an important part of the U.S. agricultural economy, particularly in the South where a number of local communities are highly dependent on the rice industry. Despite its importance, U.S. rice production accounted for just 1.2% of global rice production over the past 5 years. Consequently, the price received by U.S. producers is very much a function of market and political dynamics originating in the rest of the world. 

In April 2015, the U.S. International Trade Commission (USITC) reported on the global competitiveness of the U.S. rice industry, concluding that the global rice market was “characterized by significant government intervention in both imports and exports.” One of the most notable serial offenders is India, deploying a cadre of input subsidies and minimum support prices that support their growers to the detriment of producers around the world.  In 2020, our own analysis concluded that U.S. rice and wheat farmers were facing almost $600 million per year in lost sales due to the trade-distorting domestic support policies that were being utilized by India (that number rose to $850 million per year in a 2022 update). In February 2024, Rep. Jason Smith, the Chairman of the House Committee on Ways and Means asked USITC to again investigate the global competitiveness of U.S. rice producers. While we won’t prejudge the outcome of their investigation, we can’t help but note that India’s rice exports more than doubled from 2015/16 (when the last USITC report was written) to 2021/22.  

The bottom line is that producers in other markets have significant, government-sponsored benefits that advantage their rice producers over U.S. rice producers. All of this helps to explain why 2022/23 marked the lowest level for U.S. rice exports since 1985/86 (Figure 1). While previous Southern Ag Today articles have explored the temporary reprieve resulting from India’s recent export ban (see here and here), the eventual return to status quo will inevitably result in lower prices for producers around the world, including in the United States. 

All of this serves as yet another reminder of the importance of the farm safety net in leveling the playing field for America’s agricultural producers. It also magnifies the importance of updating the farm safety net in the next farm bill to ensure that it is reflective of the risks currently being faced by America’s agricultural producers.  

Figure 1. U.S. Rice Exports from 1985/86 to 2022/23.

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Fischer, Bart L., and Joe Outlaw. “Leveling the Playing Field for U.S. Agricultural Producers.” Southern Ag Today 4(15.4). April 11, 2024. Permalink

The Further Continuing Appropriations and Other Extensions Act, 2024 (P.L. 118-22) was signed into law on November 16, 2023.  The bill extended various programs, including the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, through September 30, 2024.  As a result of the extension, ARC and PLC will be in place for the 2024 crop year under the same parameters as those negotiated in the 2018 Farm Bill (i.e., the same base acres, program yields, and Reference Prices, etc).  Growers have until tomorrow (March 15, 2024) to make an election between ARC and PLC on a crop-by-crop and farm-by-farm basis and to enroll their farm(s) for the 2024 crop year. 

If you are unable to make it to your local Farm Service Agency (FSA) office by the close of business tomorrow, we highly encourage you to call the office to inquire about the possibility of getting on a register to preserve the option of signing up at a later date. Under the 2018 Farm Bill, the election and enrollment are an annual decision; as a result, even if you haven’t participated in recent years, you should be able to sign up for 2024 if you wish (assuming there aren’t other factors impacting your eligibility).

For many growers in the South, March 15^th is also the Sales Closing Date for crop insurance on several crops.  As we noted in an earlier Southern Ag Today article, we highly encourage you to consider your FSA enrollment in light of the crop insurance options available to you. In many cases, the decisions you make on one will affect the other.  For example, you cannot participate in the Supplemental Coverage Option (SCO) on a farm if the base acres for that crop have elected ARC for the crop year (and vice versa, especially for winter wheat producers who have already purchased SCO on the 2024 crop).  Similarly, cotton producers cannot purchase a Stacked Income Protection Plan (STAX) policy on any farm (FSA Farm Number) where the seed cotton base has been enrolled in ARC or PLC for that crop year.

Despite bearish prices for many commodities, ARC and PLC are still unlikely to provide any assistance in most cases.  As a result, we highly encourage you to consider all of the crop insurance options available to you – including area-wide options like STAX, SCO, and the Enhanced Coverage Option (ECO) – before making your FSA election/enrollment decisions. 

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Fischer, Bart L., and Joe Outlaw. “ARC and PLC Deadline TOMORROW!” Southern Ag Today 4(11.4). March 14, 2024. Permalink

As the saying goes: a picture is worth a thousand words.  We present to you Figure 1.

Figure 1: Farm Safety Net and SNAP Spending, 1962 to 2026F

Any serious student of farm policy is taught very early on that nutrition policy and farm policy go hand in hand…and that you can’t get a farm bill done that doesn’t include both.  Why?  The argument goes like this: there are not enough rural votes to pass a farm bill, and including nutrition brings along urban votes that otherwise would not vote for a farm bill. Figure 1 paints an interesting picture of how this relationship has changed over time. Following are our observations:

• For 40 years, spending on the Supplemental Nutrition Assistance Program (SNAP) and the farm safety net were roughly equivalent.^[1] Remarkably, over the 40-year period from 1962 to 2001, SNAP spending edged out farm safety net spending by just 2/10^ths of 1 percent ($439.28 billion versus $438.39 billion). Interestingly, the House was controlled by Democrats for 33 of those 40 years.

• In contrast, over the past 20 years (2002-2021), SNAP spending has outpaced spending on the farm safety net by 242% ($1,231.87 billion versus $360.14 billion).  While part of this increase is certainly attributable to the Great Recession and COVID, it was also the subject of considerable scrutiny during both the 2014 and 2018 Farm Bills. Interestingly, the significant increase in SNAP spending occurred despite the fact that Republicans controlled the House in 14 of the last 20 years.

• In spite of the politically-charged concerns over SNAP spending levels in each of the last two farm bills, in 2021 the Biden Administration revised the Thrifty Food Plan market basket which was estimated to further increase spending on SNAP by $254 billion from 2022 to 2031.^[2] As a result, according to the last estimates from the Office of Management and Budget (OMB), over the next 6 years, SNAP spending is projected to outpace farm safety net spending by 508% ($787.44 billion versus $129.49 billion). Notably, that provision was estimated to be budget neutral in the 2018 Farm Bill.

• With respect to the farm safety net, spending over the last 20 years has been flat. In inflation-adjusted terms, spending is actually declining.

While we are simply making observations, the purpose in doing so is to help paint a picture for why it has become so painfully difficult to get a farm bill done. In our judgement, this latest administrative action – against the backdrop of what had already been a considerable amount of angst over SNAP spending levels – is putting a significant amount of strain on that historic coalition.  At the same time, grower comments at listening sessions across the country over the last two years have repeatedly highlighted what is self-evident in the chart below: the farm safety net is lagging behind. 

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^[1] For purposes of this article, we are equating farm income stabilization (budget subfunction 351) and the farm safety net.

^[2] https://www.whitehouse.gov/wp-content/uploads/2021/08/msr_fy22.pdf

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Fischer, Bart L. and Joe Outlaw. “Farm Bill Fault Lines: Why is the Farm Bill Debate Stuck in Neutral?” Southern Ag Today 4(7.4). February 15, 2024. Permalink

On November 16, 2023, President Biden signed H.R. 6363 – the Further Continuing Appropriations and Other Extensions Act of 2024 – into law. The bill extended the Agriculture Improvement Act of 2018 (2018 Farm Bill), reauthorizing programs like the Agriculture Risk (ARC) and Price Loss Coverage (PLC) programs through September 30, 2024. Producers will have an opportunity to make a one-time election between ARC and PLC for the 2024 crop year. USDA opened the election and enrollment period on December 18, 2023, and it runs through March 15, 2024.^[1]

The ARC/PLC decision for 2024 is against the backdrop of a general softening in prices, but the implications vary by crop. For some crops, the decision may be clear-cut. In this article, we illustrate the case of wheat (Figure 1). While Effective Reference Prices are projected to climb starting next year for wheat, it is important to remember that you are making a one-year decision for crop year 2024, where the Statutory Reference Price remains at $5.50/bu. With a projected Marketing Year Average Price (MYAP) of $6.63/bu, it is unlikely (though not impossible as we are very early in the growing season) that PLC will trigger. While some may be tempted to elect ARC as a result, note that the 86% trigger threshold is at a price of $5.34/bu, largely indicating that any hope of receiving an ARC payment would rest on very low yields. In other words, in the case of wheat, it’s unlikely that either ARC or PLC will trigger (unless there is a disaster that results in low yields).

Figure 1. Historical and Projected Wheat Prices and What They Mean for the ARC/PLC Decision.

As we have noted in the past,^[2] we highly encourage you to also look at tools like the Supplemental Coverage Option (SCO) or the Enhanced Coverage Option (ECO), both of which provide area-wide coverage for part of the deductible not covered by your underlying policy. Importantly, if you elect ARC, you cannot purchase SCO. In other words, you are essentially evaluating ARC versus PLC + SCO. Even if PLC is not expected to trigger, you may still choose to elect it and purchase SCO, particularly if the value of SCO is expected to exceed that of ARC. 

For cotton producers, we continue recommending that you first evaluate the Stacked Income Protection Plan (STAX) before making decisions about ARC/PLC. In the case of cotton, STAX cannot be purchased on any farm where the seed cotton base has been enrolled in ARC or PLC for that crop year. As we will discuss at the Red River Crops Conference in Altus, OK, later today, in a scenario where the crop is a total loss, the area-wide policies can provide considerably more coverage than ARC. For example, as noted in the example for Jackson County, OK, in Table 1, STAX can provide more than twice as much support as ARC in a total loss scenario.

Table 1. ARC versus STAX Comparison for Cotton in 2024, Jackson County, OK

Practice	Maximum Possible ARC Payment	STAX				Ratio:  STAX-to-ARC
		Expected County Yield (lint lbs/ac)	Maximum Possible Indemnity	Producer-Paid Premium	Maximum Possible Net Indemnity
IRR	$126	1,273	$243	$30	$213	1.69
DRY	$31	385	$74	$9	$65	2.08

As always, we aren’t in the business of telling you exactly what to do because, frankly, we don’t know what will end up being the best choice. But, as with previous years, we do have a decision aid available at www.afpc.tamu.edu where you can input your info, and it will show you expected payments under as many different price scenarios as you want to look at. We also have students who will input your information for you and call you to discuss results. All you need to do is call (979) 845-5913 and ask for decision aid help.

Hopefully we have given you something to think about as you consider your signup decisions. We wish you luck, and don’t hesitate to call for assistance.

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^[1] https://www.fsa.usda.gov/programs-and-services/arcplc_program/index

^[2] https://southernagtoday.org/2023/03/02/strongarc-plc-sign-up-deadline-just-weeks-away-strong/

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Fischer, Bart L., and Joe Outlaw. “Making the ARC/PLC Election for 2024.” Southern Ag Today 4(3.4). January 18, 2024. Permalink