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Your Update from Ron Hays of RON
Monday, July 27, 2020
The US Safety Net, Crop Profitability, and a Floor on Cost of Production
Taking a look at the latest issue of the farm doc daily from Illinois University, Carl Zulauf Department of Agricultural, Environmental and Development Economics Ohio State University, Gary Schnitkey Department of Agricultural and Consumer Economics University of Illinois, Michael Langemeier Center for Commercial Agriculture Purdue University write in the Gardner Policy Series on The US Safety Net, Crop Profitability, and a Floor on Cost of Production.

Since 1980, the US crop safety net has been countercyclical to aggregate net return for the 9 crops that USDA (US Department of Agriculture) reports cost of production (hereafter, COP). Payments have risen (declined) as aggregate market return fell below (rose above) aggregate COP for the 9 crops. The safety net thus creates a floor under aggregate cost of producing these crops, explaining why cash land rents have not declined despite the large decline in crop prices and returns since 2012.

Measuring the farm safety net’s impact on crop profitability is not straightforward. Many commodity programs, including ARC (Agriculture Risk Coverage) and PLC (Price Loss Coverage), pay on past, not current, acres planted to a program crop. Moreover, a farm does not have to plant the crop receiving a payment. Payment is thus to a farm, not a crop. However, past and current acres planted to program crops overlap notably. Using data from USDA FSA (Farm Service Agency) (2020c) and USDA NASS (National Agricultural Statistical Service) (2020), during the 2014 Farm Bill 85% of all acres planted to program crops were planted on historical base acres,
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In Episode 42, KC Sheperd goes on ZOOM to talk with three Oklahoma Elementary Educators about their experiences with the Oklahoma Ag in the Classroom Program- Johnnie Keel, Lori Newmark and Jocelyn Puckett.

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Ron Hays
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