FARM POLICY IN THE DOWNTURN AND BEYOND

Transcription

1 FARM POLICY IN THE DOWNTURN AND BEYOND Jonathan Coppess University of Illinois

2 Part 1. SUMMARY OF THE DOWNTURN

3 INCREASED ACRES 120,000,000 Acres Planted (NASS) 100,000,000 80,000,000 60,000,000 40,000,000 20,000, Corn Soybeans Wheat Cotton

4 Bushels 480-lb Bales Cotton INCREASED PRODUCTION 16,000,000,000 Total Production (NASS) 25,000,000 14,000,000,000 12,000,000,000 20,000,000 10,000,000,000 8,000,000,000 6,000,000,000 15,000,000 10,000,000 4,000,000,000 2,000,000, Corn Soybeans Wheat Cotton 5,000,000 0

5 Bushels/Acre Pounds Cotton/Acre INCREASED YIELDS National Average Yields (NASS) Corn Soybeans Wheat Cotton 0

6 $/BUSHEL $/POUND COTTON DECREASED PRICES $ $ $ $ $ $ $ $ $ Marketing Year Average Prices (NASS; CBO) p 2017p 2018p Corn Soybeans Wheat Cotton $ $ $ $ $ $ $ $ $ $ $0.0000

7 DECREASED REVENUES $1, National Average Revenue (Estimated-NASS and CBO) $ $ $ $ $ $ $ $ $ $ f 2017f 2018f Corn Soybeans Wheat Cotton NOTE: Revenues estimated using national average yields and MYA prices

8 CORN SUPPLY & DISAPPEARANCE 18,000 Corn Supply and Use-ERS (Millions of bushels) 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, / / / / / /2016 Total Supply Food-Alcohol-Ind. Seed Feed Exports

9 Part 2. FARM POLICY S ROLE.

10 TRADITIONAL FARM COALITION

11 $/BUSHEL $/POUND COTTON PRICES & FARM POLICY HISTORY. $9.00 Decoupled Era $ $8.00 $7.00 Target Price Era $ $ $6.00 $ $5.00 $4.00 Parity Era $ $ $ $3.00 $2.00 $ AAA 1973 A&CPA 1996 FAIR Act $ $ $ $0.00 $ Corn Wheat Cotton USDA-NASS; average prices received by farmers in the marketing year

12 2014 FARM POLICY DISPUTE: PLC 2014 Farm Bill eliminated direct payments; Opened regional dispute over farm programs; $4.40 $4.20 $4.00 $3.80 $3.60 $3.40 $3.20 Price-based vs. Revenue-based. $ Deficiency Payment Market Price Reference Price

13 2014 FARM POLICY DISPUTE: ARC & REVENUE Corn Example-Revenue Policy f 2017f 2018f 2019f Co. Yield Benchmark Yld MYA Prices Ref. Price Benchmark MYA Note: forecasted yields are estimated trend; prices CBO 2016 baseline $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00

14 FARM PROGRAM DECISION Locked through 2014 Farm Bill expiration in 2018; unless Congress Acts. Vast majority of base acres are in corn and soybeans; revenue program. Farmer elections represent the regional dispute over farm policy. SOYBEANS CORN SMALL CHICKPEAS OATS LARGE CHICKPEAS WHEAT RAPESEED DRY PEAS SUNFLOWERS LENTILS MUSTARD FLAXSEED TEMPERATE JAPONICA RICE CRAMBE SAFFLOWER GRAIN SORGHUM BARLEY SESAME MEDIUM GRAIN RICE (SOUTHERN) CANOLA PEANUTS LONG GRAIN RICE Figure 1. Percent of Base Acres Enrolled in ARC and PLC. ARC-CO ARC-IC PLC Source: Farm Service Agency 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Percent of Base Acres FarmdocDaily, June 16, 2015

15 Revenue: ARC-CO $ $ $ $ $ $ $ $ $ $0.00 Corn Example f 2017f 2018f 2019f Guarantee Actual Rev. Benchmark Rev. $ $ $ $ $ $ $ $ $ $0.00 Note: forecasted yields are estimated trend; prices CBO 2016 baseline

16 PRICE POLICY: PLC $ $ $ $ $ $ $ $ $ Marketing Year Average Prices (NASS; CBO) p 2017p 2018p Corn Soybeans Wheat Corn Fixed (eff.) Soybeans Fixed (eff.) Wheat Fixed (eff.) Cotton Cotton Fixed (eff.) $ $ $ $ $ $ $ $ $ $ $0.0000

17 OVERVIEW OF CROP INSURANCE $20,000 $18,000 $16,000 $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0 Crop Insurance ($Millions) Premium Subsidy Total Premium Indemnity Farmer Paid

18 OVERVIEW OF CROP INSURANCE Crop Insurance $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Total Liability Farmer Benefit Note: Farmer benefit calculated as total indemnities minus farmer paid premium (RMA).

19 WATER QUALITY CONCERNS. Des Moines Waterworks Lawsuit Toledo & Western Lake Erie Chesapeake Bay TMDL Others (non-ag): Flint, etc. Gulf of Mexico Hypoxia

20 CONSERVATION PROGRAMS. BASELINE. $7,000 CBO (Millions) $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0 2015A CRP CSP EQIP ACEP RCPP

21 Part 3. LOOKING AHEAD: 2018 FARM BILL

22 LOOKING AT THE 2016 PRESIDENTIAL ELECTION

23 LEGISLATING A FARM BILL. The Traditional Farm Coalition & the 2016 Election results 2012 Presidential Election

24 2018 FARM BILL: SPENDING & PRIORITIES With budget pressure: partisan and difficult; competition for resources A question of priorities within the farm policy budget baseline. $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 CBO March 2016 Baseline (Billions) Baseline for Next Farm Bill? 2015a CCC Commodities Crop Insurance Conservation

25 MANDATORY SPENDING IN THE FARM BILL. CBO March 2016 Baseline (Billions) CBO March 2016 Baseline (Millions) $ $73.00 $63.00 $ $ $33.00 $23.00 $ $ Commodities Crop Insurance Conservation SNAP ARC/PLC Participants SNAP Participants

26 ELECTION TAKEAWAYS: HISTORICAL PERSPECTIVE First unified Republican government to write farm bill since : President Reagan & budget as weapon; Democratic House : Republican control of Congress; budget reconciliation; Democratic President : Republican House uses debt ceiling and budget to force spending cuts; Democratic Senate and President

27 ELECTION TAKEAWAYS: UPSIDE POTENTIAL Rural America & voters in the spotlight. Infrastructure spending: locks & dams; jobs; etc. Reduced regulatory pressures (WOTUS). Tax reforms Presidential Election results cartogram (rescaled based on population) Source:

28 ELECTION TAKEAWAYS: DOWNSIDE RISKS Misreading the rural voter. Impact of shift in trade policies. Anti-EPA & regulations impact on RFS Push to cut Federal spending impact on farm policy (farm programs to crop insurance to conservation)

29 THANK YOU!. Jonathan Coppess