Canadian farm groups are wary about two new safety net programs made available to growers in the United States.
The U.S. Department of Agriculture recently unveiled the Agricultural Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, which are the business risk management cornerstones of the 2014 farm bill.
Farmers have until early spring of next year to select which program will work best for their operation until the end of the 2018 crop year.
The PLC program covers growers when the price of a covered commodity is less than a reference price.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
The ARC program covers growers when the revenue of a covered commodity is less than an ARC benchmark.
Blair Rutter, executive director of the Western Canadian Wheat Growers Association, said both programs have the potential to be market distorting because they are price-based.
“It seems a bit of a throwback. I thought we had moved beyond these types of price support programs,” he said.
“I would say these new programs are very much a concern, especially given the low market prices that we’re seeing.”
Scott Ross, director of business risk management and farm policy with the Canadian Federation of Agriculture, shares Rutter’s fears about the programs’ market-distorting nature.
“Certainly the potential is there, there’s no question,” he said.
“They’ve moved from something that was delinked from production to a set of programs that is intimately related to where prices are moving.”
It remains to be seen if the new programs will trigger more farm safety net dollars than the old direct payment regime. It will depend on what happens to crop prices and in the case of the ARC program, prices and yields.
Examples of some of the reference prices for the PLC program are $5.50 per bushel for wheat and $10.08 per bu. for canola. Today’s market prices are close to those subsidized floor prices.
Rutter is particularly concerned about the impact on small market crops. The PLC reference price for lentils is 20 cents per pound and for small calibre chickpeas it is 19 cents per pound.
“If market prices were well above the support prices, it wouldn’t have any bearing, but that’s not the case,” he said.
“Prices have gone down and they look like they’ll stay down for a while.”
The ARC program uses an Olympic average of national farm prices from 2009-13. Rutter worries that the average includes three years of pretty high prices, making it easier for growers to trigger payments at today’s values.
“That can lead to distortions in terms of cropping patterns and also leads to greater production than might otherwise be the case because if farmers are shielded from the true market price, they put on more fertilizer than they might otherwise,” he said.
