Declining Grain Prices Could Trigger New Farm Bill Assistance, USDA Economist ProjectsThu, 20 Feb 2014 12:20:46 CST
Significant declines in grain prices and significant increases in federal budget outlays are ahead according to projections released Thursday by the USDA. The price drops in corn, soybeans and wheat could be enough to trigger payments under the new farm bill according to USDA Chief Economist Joe Glauber. Glauber released his findings during a presentation at the department's annual two-day Agricultural Outlook Forum. (Click here to see the charts and graphs Glauber used during his presentation.)
Glauber's projections indicate corn prices could fall to $3.90 per bushel in the coming crop year despite decreases in planted acres. Decreases in planted acres would not help wheat prices either, with Glauber projecting a price of $5.30 per bushel.
Soybeans would be hurt the least, with a projected price of $9.65 per bushel. That figure, however, represents a 24 percent decline from the current USDA estimate for the 2013-2014 farm cycle.
The prices for all three commodities fall below assumptions used by the Congressional Budget Office when it scored the 2014 farm bill. An updated CBO score next month will use the new USDA projections and is likely to show farm bill outlays will increase billions of dollars.
The new numbers reflect the dynamics of the new farm bill signed into law earlier this month by President Obama.
Previous projections had shown corn prices would drop as low as $3.65 per bushel under the old law, so the new projection of $3.90 represents a modest improvement on hopes that reduced acreage will stabilize prices. Even with the improvement, the gap between the earlier CBO estimates and Glauber's new projections looms large. If the projections are accurate, corn growers will receive substantial aid under the new Agriculture Risk Coverage program. ARC subsidies would be paid out in 2015.
If Glauber's projections of $5.30 per bushel wheat hold true, farmers would qualify for ARC payments or payments under the alternative Price Loss Coverage plan. The PLC target is $5.50 per bushel.
At $6.95 per bushel, soybeans might or might not qualify for ARC assistance depending on yields. Since farmers would have flexibility under the new farm law to designate acres as corn base instead of soybeans, they could do so in order to receive larger payments under ARC.
Glauber noted during his presentation that farm earnings for 2014 will likely fall to $101.9 billion. That's a reduction of almost 22 percent from the previous year. Even so, 2014 earnings would still be slightly above the ten-year average, Glauber said. He pegged farm debt at 10.5 percent, the lowest level since the USDA's Economic Research Service began compiling the data in 1960.
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