By TIM ALEXANDER

Illinois Correspondent

EAST PEORIA, Ill. — When the University of Illinois Department of Agriculture and Consumer Economics’ (ACES) farmdoc team of ag economists, professors and pundits prepared for their five-city Farm Economics Summit tour on Dec. 16, they were unsure as to whether a new farm bill would become reality.

By the time they had reached East Peoria – the third stop on their yearly circuit – on Dec. 19, they owned a much clearer picture of what risk management and crop insurance programs would look like for farmers moving forward. This was because President Donald Trump had agreed to sign into law the Agricultural Act of 2018 – the farm bill – the following day.

After the U.S. House was forced to concede its demands for increased work training requirements for nutrition assistance recipients and the elimination of the Conservation Stewardship Program, the final agreement looks similar to the 2014 farm bill, according to Nick Paulson, associate professor and economist for the College of ACES.

“The new farm bill appears to be a continuation of business as usual from the 2014 farm bill,” Paulson told some 300 farmers and agribusiness leaders attending the summit at the Par-A-Dice Casino Hotel and Conference Center, “but with some key changes” to risk management and crop insurance options that benefit farmers.

He detailed the performance of the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs established in the 2014 bill, noting they largely responded as designed to the lower crop prices farmers have experienced. Spending on ARC and PLC exceeded expectations for the bill, according to data from the Congressional Budget Office.

“We will continue to have an ARC program and the PLC program, and will be able to make a choice between them again, (but) you will get to revisit that election in 2021. Back in 2014 when you made that choice, you were told it was locked in for the full five-year farm bill duration; there will now be a midterm option to change your decision,” Paulson explained.

The ag economist opined that PLC and ARC payments could take a back seat in importance to farmers compared to Market Facilitation Program payments, however, if the current international trade wars affecting agriculture continue into the next year and the program is continued by the USDA.

Tweak to program

In addition, a tweak to the ARC-County (CO) program will allow farmers to ensure their farm coverage is based on where an operation is physically located, rather than the mailing address of the business enterprise that owns the farm, according to Paulson.

“There have also been updates to the yield history used to determine the ARC-CO benchmark yield each year. They are switching to prioritizing the use of RMA (Risk Management Agency) crop yields rather than NASS (National Agricultural Statistics Service) crop yields, and they will be building in a trend adjustment to the five-year history to determine yield benchmarks,” he said.

There is a change in how average program yields will be determined for farmers electing PLC on FSA farms in the 2018 farm bill.

“In 2014 you compared your current program yields to 90 percent of the average yield on a farm from 2008 to 2012. The 2018 rule is based on 90 percent of 2013 to 2017 averages compared to your current yield, but then they apply another factor based on national yields from 2013-2017, versus national yields from 2008-2012,” Paulson explained.

“What that means for corn is that you are effectively going to be taking 2013-2017 yield averages and multiplying that by 81 percent. For wheat, you get the full 90 percent; for soybeans, we are estimating 81 percent.”

Another change adjusts rules of the PLC “reference price escalator” clause to allow for reconfigurations of average reference prices used to determine benefits, he continued.

“This clause says that if the five-year average is above the actual reference price, that reference price can be adjusted. This would have been great, had we had it in the 2014 farm bill. You would have seen a reference price on corn at $4.45 versus $3.70 (and) a reference price for beans on beans at $10 or higher in 2014-2016.”

The farmdoc team and Gardner Agricultural Policy Program, along with the National Center for Supercomputing Applications, have partnered to develop a Web-based tool that will help producers decide which ARC or PLC program is best for their operations.

“It spits out a year-by-year comparison of what we expect payments to be for the two programs over the next five years,” said Paulson. The free resource should be available soon on the U of I farmdoc website.

As to crop insurance, the economist said the new farm bill “holds no significant changes” that would negatively impact coverage, along with “no changes to premium subsidies and rates.” There was what Paulson termed an improvement in coverage incentives for farmers electing to use cover crops, and a provision in the crop insurance title that will allow enterprise units to cross county lines.

The provision, championed by the Illinois Corn Growers Assoc., will not be available for farmers until 2020, said Gary Schnitkey, U of I farm economist and another presenter on the Summit tour.

“This will allow farmers who own more than one piece of farmland, or enterprise unit, in one county and another enterprise unit in another county to combine the farmland into a single insurance policy,” he said.

With good yields in recent years and a lack of widespread agricultural disasters, the crop insurance program has performed better than expected since the 2014 bill, according to the U of I presenters. “Loss ratios for corn and soybeans have been below 0.5 and the program has cost the federal government far less than expected,” said Paulson.

Slides of presentations offered at the Summit can be viewed at www.farmdocdaily.illinois.edu/presentations/IFES_2018