The National Corn Growers Association's new revenue assurance proposal would generate more farm program payments on some corn farms in the Midwest and result in lower payments on others.
It would also “stabilize” farm revenues by providing more benefits in years when revenue from the market is low and less when revenue from the market is adequate with less risk of violating World Trade Organization rules, according to a Corn Growers' analysis.
But the proposal would also bring significant changes to age-old mainstays of the farm programs, including changing the nonrecourse loan to a recourse loan. And it would replace the new counter-cyclical payment program in the 2002 farm bill with a revenue counter-cyclical payment or RCCP program.
The revenue assurance proposal, which was developed by the NCGA's Public Policy Action Team, is built around two new program concepts — a Base Revenue Protection or BRP program and the RCCP program. The direct payment would remain the base level of support for the proposal.
The NCGA analysis uses four representative corn farms to show how the BRP and RCCP programs would have performed compared to current programs over the period 2002 to 2005.
“BRP and RCCP would have generated more payments on corn farms in Aurora County, S.D., and on an irrigated and dryland corn farm in Sheridan County, Kan., than the current set of safety net programs,” the analysis says.
“A corn farm in Shelby County, Ill., on the other hand, would have been paid more under the current set of programs, which would include loan deficiency payments, counter-cyclical payments and crop insurance coverage, over this period.”
According to the NCGA, the Base Revenue Program would be an integral part of a “better farm-level safety net program for corn farmers.” Proposals for wheat, soybeans, cotton and rice will be released as they become available, according to the executive summary issued with the report.
Under the BRP, program payments would be triggered whenever net farm corn revenue falls more than 30 percent below the previous five-year Olympic average of per-acre net corn revenue on the farm.
BRP would calculate per-acre net revenue in any year by multiplying farm-level actual corn yield per planted acre by a national market price and then subtracting per-acre average variable costs of production. Production costs would be based on a regional estimate published by USDA's Economic Research Service.
“Increasing farm-level revenue guarantees to high levels has the potential to increase the incentive for farmers to adjust their planting decisions in response to program provisions rather than market conditions,” the analysis said.
“Thus, the next tier of support is constructed by modifying the current counter-cyclical payment program so that payments are triggered when county revenue is low rather than when farm revenue is low.”
Under the current counter-cyclical payment program, payments are made whenever the national season average price falls below the effective target price. The RCCP program would replace the price trigger with a revenue trigger. Payments would be made when actual per-acre county revenue falls below the product of the effective target price of $2.35 per bushel and the county trend yield.
Corn growers have been critical of the current farm bill because counter-cyclical payments were triggered only for the 2004 and 2005 crop years and then for marginal amounts. In 2002 and 2003, CCP payments were not made because corn prices were high, but many Midwest producer yields were low because of adverse weather.
The NCGA analysis shows that the Aurora County, S.D., farm would have received $292.48 per acre from combined BRP and RCCP payments between 2002 and 2005, compared to $170.98 per acre from loan deficiency payments, counter-cyclical payments and crop insurance payments for the same years.
The Sheridan County, Kan., irrigated farm would have received $217.66 per acre under the NCGA program for those years and the non-irrigated farm $412.85 per acre. Under the conventional program, the irrigated farm would have received $192.85 and the non-irrigated $222.28.
The Shelby County, Ill., farm, on the other hand, would have received $138.04 per acre under the BRP/RCCP scenario vs. $157.57 for the current farm program.
Because the Base Revenue and the Revenue Counter-Cyclical Payment Programs would replace the current marketing loan and counter-cyclical programs, the nonrecourse aspect of the marketing loan would be eliminated, according to the Corn Growers.
“Funding freed up by this elimination would help pay for the RCCP and the BRP,” it said. “However, many farmers would still need the financial flexibility offered by a loan program that lends them money at harvest. Farmers could then pay off their production loans and market their crops at a time of their choosing.”
NCGA says its planners believe the recourse loan could be run at a minimal cost while freeing up the other funds for the new programs. “A move to a recourse loan would also make U.S. farm programs more consistent with current (and likely future) WTO guidelines.”