Crop-price forecast raises Farm Bill's likely cost

"Updated projections by the Agriculture Department on Thursday forecast significant price declines for corn, wheat and even soybeans — all large enough to trigger potential payments under the new farm bill," David Rogers reports for Politico. Corn prices are expected to drop to an average of $3.90 per bushel, down from a record-high $8.31 in August 2012, before dropping to a $4.65 in August 2013. Wheat could fall to $5.30 a bushel, while the price of $9.65 per bushel of soybeans is "an estimated 24 percent decline from what the department estimated for the current 2013-14 farm cycle." (Politico photo by M. Scott Maharskey: Projected prices)

"In all three cases, the numbers are below what the Congressional Budget Office assumed for crop prices in its own May 2013 baseline used to score the farm bill," Rogers writes. "This further adds to the likelihood that an updated CBO score next month will show billions more in outlays under the revised commodity title."

While soybean plantings should increase, "the latest forecast shows reduced corn plantings of 92 million acres in 2014, a drop from 93.5 million acres shows last week," Rogers writes. "And in part this reflects the increased flexibility allowed under the new law, which will allow corn growers to shift more to soybeans and still collect aid promised for their corn base acres under the new Agriculture Risk Coverage, or ARC, program."

"The gap between the earlier CBO baseline and the new numbers is large," Rogers writes. "In corn’s case, it is more than 50 cents a bushel in the 2014-2015 percent. If accurate, it guarantees corn growers substantial aid under ARC — subsidies that will begin to be paid out in 2015. In the case of wheat, the projected $5.30-per-bushel price appears low enough to qualify growers for either ARC or an alternative Price Loss Coverage plan, which sets a target price of $5.50 per bushel for wheat. Soybeans, at $9.65 per bushel, would also appear to qualify for some ARC assistance. But the margin is close enough that it could be affected by higher yields. And since corn and beans operate so much in tandem, the assumption has been that more farmers will designate their acres as corn base, not soybeans, in order to get more from ARC." (Read more)