Ep. 2 Farm Bill Proposals

00;00;07;15 – 00;00;15;13
Riley Smith
Good morning. Good morning. Welcome to your episode of Ag Markets. Well, I guess it’s Morning Coffee and Ag Markets ain’t it?

00;00;15;20 – 00;00;17;24
Dr. Hunter Biram
Morning coffee and Ag market sounds fantastic.

00;00;17;24 – 00;00;31;04
Riley Smith
Yeah. Yeah. People are going to have to just forgive me. This ol’ redneck is trying to figure out this episode and podcast. so my words don’t come out just how I think, every now and then. So we are just going to have to bare with me.

00;00;31;05 – 00;00;32;12
Dr. Hunter Biram
Just add more coffee.

00;00;32;14 – 00;00;39;20
Riley Smith
More coffee. Right. But anyhow. Well, today we got Dr. Hunter Biram. Man, how are you?

00;00;39;23 – 00;00;42;18
Dr. Hunter Biram
I’m doing fantastic Riley. how are you doing?

00;00;42;19 – 00;00;45;02
Riley Smith
I’m doing about 90 right now.

00;00;45;06 – 00;00;46;04
Dr. Hunter Biram
Well 90s an A.

00;00;46;04 – 00;00;49;18
Riley Smith
Hey. Yeah, I need just a little bit more. Go go.

00;00;49;18 – 00;00;50;10
Dr. Hunter Biram
A-plus?

00;00;50;12 – 00;01;00;07
Riley Smith
Yeah. Need a little bit more. Go, go juice. But we’ll be doing okay. But, today we got Dr. Hunter in, and we’re going to be talking about different farm proposals, for the farm bill.

00;01;00;10 – 00;01;05;26
Dr. Hunter Biram
Right? That’s right. We’re going to be talking about evaluating the farm bill. Safety net proposals.

00;01;06;00 – 00;01;10;11
Riley Smith
Okay. Well, with that being said, I got a couple questions here.

00;01;10;13 – 00;01;11;17
Riley Smith
kind of just to.

00;01;11;19 – 00;01;19;02
Riley Smith
Keep a structured through the conversation, but can you get us up to speed what the current farm bill proposes? As we have right now?

00;01;19;08 – 00;01;47;21
Dr. Hunter Biram
Sure. So there are three farm bill proposals, and I’ll even back up a little bit more. This is going to be talking about federal farm bill. So these are federal policies. These are federal support programs. So this is going to be debated, on the Hill in Washington, D.C., for those who are learning anything about foreign policy. We’ll just start there and say, you know, this is this is a, omnibus, a very large piece of legislation, a lot of money going into it, you know, over this next upcoming farm bill is going to be worth over $1 trillion.

00;01;47;24 – 00;02;13;04
Dr. Hunter Biram
first one ever to be worth that much. and, primarily from nutrition spending. I won’t go into the details there. We just say it’s primarily nutrition spending, but there’s nutrition. There’s farm programs in there. There’s, crop insurance, conservation programs, trade, various pieces that go into creating a sustainable food supply, system, food supply chain.

00;02;13;06 – 00;02;32;16
Dr. Hunter Biram
And so now speeding back up to where we are now. So, you know, we the current, farm bill is set to expire, this fall actually was set to expire last fall, but there was an extension since since expire this fall. And so people are wondering, like, are we going to get a farm bill, this year or next year or the next two years?

00;02;32;16 – 00;02;47;08
Dr. Hunter Biram
And with that, I cannot tell you with exact certainty when we’re going to get one. But I can just about guarantee you that we won’t get one this year for, for many reasons, given it’s an election year. For those who didn’t know that, I’m actually. I’m not sure how you couldn’t know that. but it is an election year.

00;02;47;15 – 00;03;02;27
Dr. Hunter Biram
not just in the white House, but, in in the, in the House of Representatives, all those seats are open, and I believe there are eight seats open in the Senate. And so we have to think about those seats as well and how that might change power in the Senate. How is that going to change power in the House?

00;03;02;27 – 00;03;19;26
Dr. Hunter Biram
You know, who’s going to be in power, the Republicans in the Democrats, who’s gonna be in power in the white House, the Republicans or the Democrats. So it makes it creates a lot of uncertainty in terms of policymaking, in terms of getting legislation crafted. And so it’s it’s going to be really tough. It’s the it’s the long the short of it for this year, next year.

00;03;19;26 – 00;03;35;06
Dr. Hunter Biram
And there may be some more optimism, just given the, political landscape. that there will be more certainty with who who is going to be in Congress at that point. but in terms of a new farm bill, new programs and no changes to reference prices, which we’ll talk about here in a second. Not very likely this year.

00;03;35;08 – 00;03;55;00
Dr. Hunter Biram
will I’m sure we’ll just see an extension, another extension into, next year of the 2018 farm bill, which it’s, what, 2024? And we’re still operating in 2018, which is effectively 2014, if we’re all being honest here. So we’re we’re looking at about a ten year program, ten year old program, very old program, something it’s it’s time for some new changes.

00;03;55;00 – 00;04;18;16
Dr. Hunter Biram
So we have three proposals. we have the, the House proposal, from, Congressman Glenn Thompson out of, Pennsylvania. He’s the chairman of the House Committee. his proposal is out in his has actually been passed out of committee. which is encouraging. So it’s been passed out of committee. What about the other two proposals when we have two out of the Senate, one from, Senator Debbie Stabenow, out of Michigan.

00;04;18;16 – 00;04;37;22
Dr. Hunter Biram
She’s the chairwoman on the Senate committee, which means she’s the, leading Democrat on that committee since the Senate has passed, has, has the majority, or sorry that since Democrats have the majority in the Senate, excuse me. And then, Senator John Bozeman, our senior senator, senator here from Arkansas, he’s the ranking member, on the Republican side.

00;04;37;22 – 00;04;58;13
Dr. Hunter Biram
So he’s the top Republican on the Senate and committee. And so we have one proposal that is, out of the, out of the House at committee. but then we have these two Senate proposals, pretty much at a stalemate. We’ve just seen these these proposals or, you know, some common framework, these frameworks that have come out.

00;04;58;15 – 00;05;03;14
Dr. Hunter Biram
And that’s about as far as we’ve gotten. So we’ve got three different proposals that we’re looking at.

00;05;03;17 – 00;05;09;13

So any any more that so is there any more you want to add on what’s going on with the current bill?

00;05;09;13 – 00;05;17;29
Dr. Hunter Biram
That’s there’s quite a bit already. I think maybe it would be a good idea just to move into what work we’ve done here at the U of A and Ag Con.

00;05;18;02 – 00;05;26;09

Okay. So so my next question would be is like looking at the proposals that they have now. How do you evaluate those proposals?

00;05;26;10 – 00;05;50;25
Dr. Hunter Biram
That’s, it’s it’s it’s difficult. but we what we do is we take data from FSA Farm Service Agency and from Nass National Statistics Service and from ARM. So we take yield data from rms We take PLC payment yield data and base acres and payment rates, all from FSA. And then we use current planet acreage, data from Nass.

00;05;50;25 – 00;06;12;12
Dr. Hunter Biram
And we take some farm, cost data from the Economic Research Service or from IRS. And we take a lot of administrative data, a lot of data across these agencies. And what we do is we, calculate net farm income by county. So the average farm, net average net farm income by county for the state of Arkansas.

00;06;12;15 – 00;06;32;28
Dr. Hunter Biram
And we say, okay, here’s what the revenue is. Here’s here’s what the cost is. And then here’s what the ten year average of that looks like. Then on top of that, we take the ten year average of payments per base acre. for P.l.c. we’re going to focus on PLC for this. So then we add in these 210 year averages.

00;06;32;28 – 00;06;53;29
Dr. Hunter Biram
So it’s like pretty much what what we’re trying to say is over this ten year period that we’ve looked at what, what have what has farm income look like more or less under this under the current provision in the current, proposals. And then we just say, okay, well, let’s take the parameters a little. Let’s take the information that we know from the current proposals that are sitting out there in the public eye.

00;06;54;02 – 00;07;10;19
Dr. Hunter Biram
And let’s evaluate. Had we had the, each one of those proposals in this ten year frame, compare it to the task or compare it to the current set of, the current safety net. What would that change in that farm income look like?

00;07;10;21 – 00;07;17;29

So just a side note. So so what proposals who’s proposals is there that y’all are looking at right now. Yes.

00;07;17;29 – 00;07;31;29
Dr. Hunter Biram
This would be this would be, Congressman Glenn Thompson out of Pennsylvania and, Chairwoman Debbie Stabenow out of Michigan on the Senate side and ranking member, John Bozeman, the senior senator from Arkansas.

00;07;32;01 – 00;07;42;01

Okay. Well, with that, so back to what you were talking about, the, y’all are looking at the net farm income based on the ten year average.

00;07;42;01 – 00;07;42;20
Dr. Hunter Biram
That’s right.

00;07;42;22 – 00;07;45;21

So why do you look at that net farm income.

00;07;45;24 – 00;08;00;23
Dr. Hunter Biram
While looking at farm income? That’s a fantastic question, because some people might just say, well, just look at the payments per acre, because if you’re getting the most payments per acre, that would obviously be the best, the best proposal to go. Well, we argue that that’s not the case because you can’t just look at these payments per acre.

00;08;00;25 – 00;08;22;05
Dr. Hunter Biram
You got to look at where is net farm income, sitting as of now. And so what that does, looking at from income provides some context as to how much these payments actually impact the bottom line for a farmer. So we can continue to have this, stable food supply, because at the end of the day, we want to stabilize farm income for these producers.

00;08;22;07 – 00;08;35;10
Dr. Hunter Biram
And so instead of just looking at payments per acre, well, that’s a very simple metric. We want to look at the payments per acre in the context of the net for making, because at the end of the day, we are focused more on keeping these farmers in business.

00;08;35;12 – 00;08;43;23

So do you count for in your analyzes? Do you account for the difference in planted acres and base acres?

00;08;43;27 – 00;09;03;06
Dr. Hunter Biram
You know that that’s a question that we get a lot. And it’s a question, that I think people should be asking, you know, because farm program payments importantly are paid on base acres. They’re not paid on planet Acres. And often these differ. The planet acres and the base acres differ. The short answer is yes we do. We do account for these differences in plant acres and base acres.

00;09;03;06 – 00;09;25;12
Dr. Hunter Biram
So the revenue in the cost on the you know, the first part that I was talking about earlier, that will account for, planned acres and then the farm program side, we’re going to do that, farm program payment by base acre. And so we make an adjustment and we say, okay, what’s the ratio? What’s the ratio of, of base acres to planet acres.

00;09;25;12 – 00;09;52;21
Dr. Hunter Biram
And then once we get that ratio, we apply it to that farm program payment at the very end to get everything in the common denominator if dollars per planet acre. And so we’re looking at the impact of that farm income per planet acre. But we’re accounting for the amount of base. So what you’ll see is in these maps that, that, that we’re eventually going to be releasing their are newsletter if we haven’t already released them by now, is you’re going to see some counties maybe getting a lot of payments, but that could be because they have a lot of base.

00;09;52;21 – 00;10;02;05
Dr. Hunter Biram
Maybe they don’t plan a lot of corn in a certain county, for instance, anymore. But there’s base there, and the base acres are based on historical planted acres.

00;10;02;08 – 00;10;15;18

So with that being said, looking at the proposal, the three different proposals that that we’ve talked about or you’ve talked about, do you see a proposal with a stronger safety net for our soil producers?

00;10;15;21 – 00;10;43;28
Dr. Hunter Biram
so the short answer is yes. I think there’s definitely a clear frontrunner, maybe two front runners. so the on the House side, Chairman Thompson’s Mill, for rice and for corn and really for any, any, any of our six crops. Because what we mean when we look at corn, soybeans, rice, cotton, wheat and peanuts even and, from what, from what we see is the, the, the house house proposal from Chairman Thompson and the Senate proposal from Senator Boozman.

00;10;43;28 – 00;11;00;11
Dr. Hunter Biram
The ranking member from Arkansas. those two proposals are clear frontrunners for, for Arkansas producers in terms of, how much do these payments help to, reduce the risk of, you know, losses in the form of lower net farm income?

00;11;00;17 – 00;11;10;16

So this is not looking necessarily at how much they’re making in a net income. This is how much they’re trying to basically save them from law.

00;11;10;18 – 00;11;48;24
Dr. Hunter Biram
Absolutely. Because that’s a that’s a great way to look at because at the end of the day, this is a these programs are a risk management tool. So PLC is a risk management tool. So the risk being managed is the price falling below a certain specified level. That specified level is set by the statutory reference price. And so when we look at is risk reduction for from each one of these programs or from, from each one of these proposals, based on the parameters that they set forth, in their, in their current current proposals, I make you send their proposals, but that’s and then the de we’re just looking at,

00;11;48;26 – 00;12;05;16
Dr. Hunter Biram
what what Senator Boozman has proposed, which is, you know, roughly 15% increase in stage two reference prices across the board. you know, Senator Stabenow thinks about 5% across the board. and then for Chairman Thompson, anywhere from a 10 to 20% increase in the statutory reference price.

00;12;05;18 – 00;12;09;29

Well, good. Well, maybe we can cross their fingers and their toes and we’ll have a farm bill next year.

00;12;10;03 – 00;12;15;17
Dr. Hunter Biram
Hey, let’s let’s cross our fingers, our toes, our eyes, our arms, our legs, everything we can cross.

00;12;15;17 – 00;12;22;03

I know there’s producers out there. That question, man, I wish they’d hurry up and get it out the door. But that’s absolutely that’s that political timeline for you.

00;12;22;05 – 00;12;25;24
Dr. Hunter Biram
That’s right. It’s very difficult. It takes an act of Congress quite literally, you know.

00;12;25;24 – 00;12;37;09

Quite, quite literally. Well, with that being said, we, I want to thank you for coming in and talking, perform proposals with us today, that we hope everybody.

00;12;37;11 – 00;12;43;16
Riley Smith
Had a great morning, had a great cup of joe. And thank you all for joining another episode of Morning Coffee and AG Markets.

00;12;43;16 – 00;12;45;16

We’ll catch you on the flip flop. Bye bye. Now.