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FAPRI takes look at modest reference price boost

An analysis from the University of Missouri’s Food and Ag Policy Research Institute highlights the impact of a 10% reference price increase for various crops in the next farm bill.

Reference prices are used to calculate payments for the Price Loss Coverage Program. PLC is a program included in the farm bill that provides protections to farmers when crop prices drop.

Pat Westhoff, the director of FAPRI, says Midwestern soybean producers might not benefit as much as other crops from the modest increase in risk protection, because many soybean farmers are enrolled in the Ag Risk Coverage Program, a revenue protection program.

“It would only make a difference if they’d switch to the PLC program and if were to actually pay out,” he says. “Given our projected prices, the amount of money a soybean producer can expect from a modest increase in reference prices is relatively small.”

Westhoff says commodities like peanuts and long-grain rice would benefit the most from a reference price boost, because their commodity prices are typically below the reference price. And he says a modest reference price increase would also increase land values.

“The higher reference prices and the expected higher payments might make people more eager to have cropland eligible for the payments. Landowners would be able to charge more for the land and rental costs would probably increase, along with the land’s value.”

The increase in reference prices is a top ask from commodity organizations for the new farm bill, but it’s got a big price tag. FAPRI’s estimated total cost for the modest boost is $15 billion. Westhoff says lawmakers are considering the change, but a budget is needed before any policies in the farm bill can be updated.

Read the FAPRI report.