Today U.S. Sens. John Thune (R-S.D.) and Sherrod Brown (D-Ohio), members of the Senate Committee on Agriculture, Nutrition, and Forestry, unveiled bipartisan legislation they are advocating to be included in the 2018 farm bill. The Agriculture Risk Coverage (ARC) Improvement and Innovation Act would improve the current ARC program by modifying the payment calculation and other parts of the program to improve its safety net potential. Currently, no similar legislative proposals to improve ARC have been introduced during the 115th Congress.
By providing more equitable support prices that are reflective of the actual market value for all crops and using a 10-year market price average as a cap on reference prices, the Thune-Brown bill would take an important step toward ensuring farm programs are more fiscally responsible for taxpayers. The bill would also ensure that payments are not being made for base acres on land that is no longer being planted to commodity crops. Beginning farmers would, for the first time since 2002, have a new opportunity, based on planting history, to become eligible for new or additional base acres on certain farms that were previously ineligible or only eligible for limited commodity program assistance.
“Due to back-to-back years of low commodity prices, the ARC formula, in its current form, is no longer working as effectively as it should for the more than 90 percent of South Dakota farmers who have successfully used ARC as a safety net option,” said Thune. “The common-sense changes we’ve proposed are necessary to help make ARC work to its full potential for the vast majority of corn and soybean producers who are enrolled in the program around the country.”
“Ohio farmers need effective risk management tools — particularly when facing several years of low commodity prices. It’s time we update the ARC program so that it better protects against both price and yield disasters,” said Brown. “The improvements in this bill will better protect Ohio soybean and corn growers from risks outside their control. This bipartisan bill builds on the reforms of the 2014 Farm Bill and is good for farmers and good for taxpayers.”
“The Agriculture Risk Coverage Improvement and Innovation Act will make needed improvements to the farm safety net, ensuring ARC can continue to be a reliable risk management program for farmers during times of depressed prices,” said National Corn Growers Association President Kevin Skunes. “Based on the recommendation of the National Corn Growers Association (NCGA) grower-led Risk Management Team, NCGA is pleased to endorse this legislation and looks forward to working with the Senate Agriculture Committee on this measure.”
While ARC and the Price Loss Coverage (PLC) Program are both farm bill commodity crop safety net programs, PLC only calculates safety net assistance based on price. An effective ARC program is a critically important safety net component for producers in many states, as it provides coverage for both price and production losses for individuals or county-wide losses, depending on whether “ARC individual” or “ARC county” coverage is selected by the farmer.
The bill would accomplish the following:
- Use Thune’s previously introduced proposal (S. 1259) to calculate payments based on a county’s physical location.
- Equalize the commodity title programs’ payment structure by capping reference prices at either their current level or no more than the 10-year average price for a commodity.
- Adjust ARC to have a coverage level of 90 percent instead of 86 percent.
- Use a three-year average price with a 10-year average market price as a floor for calculating ARC payments.
- Use a crop insurance trend-adjusted yield factor to calculate the ARC benchmark yield.
- Use an 80 percent T-yield for substitute yields if historical yields are missing or lower than 80 percent (current
T-yield substitution factor is 70 percent).
- Continues to include the ARC individual option, which was removed in the House farm bill.
- Include a quality adjustment factor that could be used to calculate ARC wheat payments, when needed.
In 2011, Thune, Brown, Sen. Dick Durbin (D-Ill.), and former Sen. Richard Lugar (R-Ind.) introduced the Aggregate Risk and Revenue Management Program, which was the framework for the current ARC Program.
Click here for more information on the ARC Improvement and Innovation Act, including a more in-depth explanation of the modification to the payment calculation.