Lawmakers mull margin protection, permanent disaster program for crops
Concerned by rising production costs and the longevity of sky-high commodity prices, farm-state lawmakers floated margin protection for crop growers and standby farm disaster programs on Thursday for inclusion in the 2023 farm bill. However, farm bill funding may be tight, which could limit Congress’ ability to add new features to the farm program.
The House and Senate Agriculture committees are gathering ideas this summer for the new farm bill. Drafting legislation would begin next year, after this fall’s midterm elections decide control of Congress. Republicans are expected to gain seats at a minimum.
“At the end of the day, it’s not what you bring in, it’s the margin you’re left with, and I have tremendous concerns about where we’re headed right now,” said Glenn Thompson of Pennsylvania, the senior Republican on the House Agriculture Committee. “It will only take some softening of prices before producers may be underwater.”
At the hearing, Thompson, who is in line to chair the committee if Republicans win a House majority in the Nov. 8 elections, asked how a margin protection plan for row crops, already in use by dairy farmers, would compare to the current crop subsidy programs, which are triggered by low market prices. The dairy margin program issues payments when feed costs are too close to milk prices. There is a $100-a-year fee for the base level of coverage. Farmers can buy higher levels of protection.
“Well, clearly, the benefit is that it would take into consideration both the cost side and the revenue side,” responded Joe Outlaw of the Agricultural and Food Policy Center at Texas A&M. The dairy margin program needed repeated revisions, so it would be best to test the idea with a pilot project, he said. “On the cost side, fertilizer and clearly fuel and labor — and there’s a whole lot of things that would matter for a certain set of crops that might not matter for another set of crops, so we’d have to be really careful to make sure we did it balanced. But it would be worth looking at, for sure.”
The government has sent tens of billions of dollars in trade war and pandemic assistance to farmers and ranchers since 2018, including large disaster payments made this year. Rep. Al Lawson, a Florida Democrat, asked during the Agriculture subcommittee hearing about suggestions to create a permanent disaster program. Outlaw and Joe Janzen of the University of Illinois said taxpayer-subsidized crop insurance generally was sufficient. “There’s going to be natural disasters,” said Outlaw, and it would be helpful for farmers to “understand what kind of help they might get.”
Two decades ago, Congress boosted funding for crop insurance in hopes of ending frequent calls for — and the unpredictable expense of — disaster relief. Groups including the American Farm Bureau Federation and the American Soybean Association have called for higher reference prices, which are used to calculate subsidy rates. Proponents say the reference prices are below the break-even cost of growing crops.
The 2018 farm bill included an escalator provision for reference prices, based on the moving, five-year Olympic average of annual prices for a crop. The escalator was likely to be felt beginning in 2024, according to one analysis. Higher reference prices could result in higher subsidy costs when commodity prices return to traditional levels.
“Producers’ costs have increased substantially, and the current reference prices are not providing a relevant amount of protection,” said Outlaw, who also supported higher rates on so-called marketing loans in the 2023 farm bill. At present, farmers decide each year whether to enroll their crops in the Agricultural Risk Coverage or Price Loss Coverage subsidy programs. “Allow them to have the higher [payment] of the two” and eliminate the annual decision, said Outlaw. “It puts undue stress on them.” Rice growers will need additional federal support this year, he said, because of high fertilizer prices.
“Most of my suggestions require additional resources that may be difficult to secure but are necessary,” said Outlaw in written testimony.
When the 2018 farm bill took effect, crop subsidies were forecast at an average of $6.5 billion a year, crop insurance at $7.8 billion annually, and conservation at $6 billion annually.
The crop insurance “subsidy gap” has widened between white farmers, who tend to operate more acres, and Black farmers with smaller operations, said Professor Ronald Rainey of the University of Arkansas. “Because crop insurance subsidies are based on the value of a producer’s crop, the larger subsidy premiums go to producers with the highest sales. The vast majority of farmers that receive the highest subsides are white.”
Socially disadvantaged farmers and ranchers are often distrustful of the USDA, and some refuse to enter a USDA office “because of fear — based on experiences — of disparate treatment, losing their land, or being foreclosed on a loan under less than fair conditions,” said Rainey. The USDA acknowledged discriminatory treatment of Black farmers in the so-called Pigford settlements of 1999 and 2011.
To watch a video of the hearing, click here.
To read the written statements of witnesses, click here.