The ongoing decline in commodity prices is expected to pinch farmer revenue, but a commonly proposed solution — higher crop support rates — would provide little immediate relief, said farm policy expert Jonathan Coppess on Thursday. Subsidy payments are based on the average national price for a crop over a year, which means they won’t arrive until at least a year after harvest.
It’s a fundamental flaw in farm program design that is decades old, wrote Coppess, an associate professor at the University of Illinois, at the farmdoc daily blog. “Designing policies that help farmers in the short term without harming them in the long run is a difficult task.” Over the years, Congress has set commodity supports at different levels to shield farmers from low prices. Crop insurance was the most notable exception to the fixed-price approach, he said.
“Low crop prices are one of the primary risks that farmers must manage to survive and succeed,” said Coppess. “Price risk is second only to the in-season weather risks to crop production, and both present real challenges to farm income.”
One of the enduring arguments over the moribund farm bill is whether to increase so-called reference prices, which would make it easier to trigger subsidy payments. “An extension of current policies appears the most probable outcome,” said Coppess.