Courage in good times
You're on your own. Even before congressional ag committees write the 2007 farm bill, that's how I see farm policy in a new era.
Because, for commodities at least, not much is going to change. What seems like a comforting, well-known safety net could be irrelevant in the ethanol age. Your land and input costs are going up. Loan rates and countercyclical payments may not, except for a slight rebalancing.
Prices, on the other hand, could very well fall. We may be at a higher plateau, but many commodity traders expect extreme volatility.
So, in years when you might get a countercyclical payment, LDP, or both, it's going to be a smaller share of your production costs. An Iowa State University calculator shows 2007 variable and fixed costs for 155-bushel corn after beans at $3.04 a bushel. A year ago it was $2.83. I hate to think what it will be in 2012, the likely final year of the new farm bill. It will be a lot more than in 2002, when the last farm bill was written.
Meanwhile, corn would have to fall to $2.35 a bushel to trigger counter-cyclical payments. And a loan rate of $1.95 looks like a safety net that's barely above some hard ground.
We may think we're getting the same thing. We're not. A warmed-over 2002 bill is a gradual phaseout of meaningful commodity programs.
Of course, the farm bill isn't written. There will be changes -- mainly in conservation and the energy title. Few signs point to bigger commodity programs. House Agriculture Committee chairman Collin Peterson told me in March at the National Farmers Union meeting in Orlando, "I think the commodity title [of the farm bill] is going to look a lot like it is now. In fact, it could look exactly like it is now."
When I asked Senate Agriculture Committee chairman Tom Harkin if he expects changes to the commodity title, he replied, "Not really . . . Some minor modifications."
Both Harkin and Peterson have worked hard to get more money for the farm bill. They may not succeed. Even if they do, extra tax dollars likely won't go to commodities.
Most commodity and farm groups support keeping 2002 commodity programs. Yet the National Corn Growers Association has courageously pushed forward with a new approach that will make more sense in the years ahead.
It's a revenue-based counter- cyclical program (CCP) that would be integrated with existing crop insurance. It would be like a government-subsidized Group Risk Income Protection (GRIP) crop insurance. Payments would be triggered by low prices, low yields, or both at a county-wide level. Depending on how this is set up, it could stay useful as input costs rise.
Marketing loans would phase out as a revenue-based CCP kicks in. No more LDP windfalls would top off high yields in some areas. But marketing loans may be harder and harder to defend, both to U.S. taxpayers and in World Trade Organization challenges like Canada's recent lawsuit.
I admire Ag Secretary Mike Johanns, too, for having the guts to propose new approaches to commodity programs. In USDA listening sessions he heard from farmers that LDPs are useless if you're hit by severe drought. So he, too, proposes a revenue-based CCP. Its triggers are national, not county-wide, so it's less generous.