For other crops, target price levels would be based on the marketing-year average price from the past five years (2007 through 2011) and those projected by the Congressional Budget Office for the next five years (2012 through 2016).
To establish the actual target prices and provide general equity across crop sectors, these 2007-2016 average prices are reduced by 25% for corn and soybeans, 15% for wheat and 10% for rice and peanuts. Wheat has an adjustment of only 15% because it is produced mostly in the larger counties, making area yields less representative of individual producer experience and therefore less effective as a risk management tool.
The smaller 10% adjustment is applied to peanuts and rice as both crops lack insurance products that function as well as those available to the major grain and oilseed commodities. AFBF suggests the same 10% loss threshold be used to determine appropriate target price levels for rice and peanuts.
The target price will be based on 85% of planted acres, but not to exceed a producer's historical base acreage. This provides a safety net more accurately addressing the risks associated with current production decisions and eliminates the present mismatch between payments and actual production or market conditions. Capping the payment acres at the historical base minimizes any potential distortion of a target price system.
The Senate Agriculture Committee will likely begin markup of a comprehensive, long-term farm bill this month, while the House Ag Committee is considering moving a bill after the Senate Ag Committee completes its mark up.