Most Farmers Would Prefer House Over Senate Farm Bill

• July 10, 2012
• Paul Neiffer

Texas A & M just published a very good report on the key differences between the House and Senate Farm Bill.  The report indicated that for almost all farmers, the House version of the farm bill would provide more revenue over the five year period than the Senate version and in the case of lower prices, the House version would be substantially more than the Senate.

The primary reason for this is as follows:

• The Senate bill has a hard cap of $50,000 per year.  The House version has a cap of $125,000 per year and married couples are allowed $250,000 without having a requirement of both spouses being actively involved in farming
• The Senate bill has a $750,000 AGI limitation, while the House limits AGI at %950,000
• The House version has revenue and price protection tied to market prices, however, there is a floor on these prices that would kick in if prices got too low.  For example, the wheat floor price is $5.50.  If reference prices were to drop below the $5.50 range, then the amount paid would be based on $5.50, not the lower price.  Corn floor is $3.70 and beans are $8.40.

The report ran various scenarios based upon representative farms across the US.  As an example, it ran the numbers for a 1,725 wheat farm in the Palouse country of Washington state.  The total amount of expected payments under each Bill is as follows:

• Revenue and loan deficiency payments would range from about $11,000 for the Senate bill to either $11,000 or $20,000 for the House bill under a baseline assumption 
• The Supplemental Coverage Option (SCO) would be about $3,000 for the Senate bill, but for the House bill, it would be zero assuming a Revenue Loss Coverage (RCL) option or $14,000 for a Price Loss Coverage (PLC) option.
• Under a declining price scenario, the total payments received by this wheat farmer would be about $15,000 under the Senate bill and either $20,000 for the RCL or about $69,000 for the PLC option.

As you can see, the House will with the PLC option appears to be the best scenario for this farmer under either a baseline or the declining price assumption.  The conclusion of the report is that in almost all cases, the House PLC option was best for all farmers.

There is a lot of data in the report and we know that the final bill will not look exactly like the two current options, but it should be somewhere in between.

Paul Neiffer, CPA

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