Key farm groups back revenue plan
Three influential farm groups Wednesday urged the House and Senate agriculture committees to replace the main existing commodity programs with a revenue-based risk management plan that would pay for some losses not covered by crop insurance.
Today’s letter to the chairs and ranking minority members of the ag committees was signed by the American Soybean Association, National Corn Growers Association and National Farmers Union.
All three have their own farm bill proposals but they’ve united behind the idea of replacing existing farm programs, including the often criticized direct payments, with a program helps farmers only when they have losses in revenue.
The groups said that federal budget realities “make it imperative to find a viable risk management approach that can replace several existing programs, including Direct Payments, Countercyclical Payments, SURE, and the ACRE program.”
“…under a revenue-based program, compensation for losses that exceed a certain threshold would only be made as they are incurred, on all production, and only on a portion of the loss,” the groups point out. “This stands in contrast with the current Direct Payment program under which farmers receive payments regardless of whether they produce a crop or incur a loss. Also, many producers participate in the crop insurance program at levels that require losses of 30 percent or more before they are compensated. With the elimination of other elements of the farm safety net, a program is needed to offset part of these losses should they occur.”
They also voiced “strong support” for keeping the existing crop insurance program. Any revenue program “should be designed to complement rather than overlap or replace this key part of the farm program safety net,” they said.
The Corn Growers’ vice president of public policy, Jon Doggett, told Agriculture.com that he believes the agriculture committees will try to write at least an abbreviated farm bill to present to the 12-member deficit-cutting Super Committee by November 1. On Monday of this week the ag committees wrote the deficit cutters offering support for cutting agricultural spending by $23 billion over 10 years.
Normally, writing a farm bill involves a series of hearings and bill drafting that takes about 15 months, Doggett said.
“We’re accelerating a 15-month process into less than a month,” Doggett said.
“By necessity, this process is going to be done behind closed doors and by a very small number of members of Congress and we won’t know what they’re going to get done until it’s done,” he said.
And whatever the committees recommend may not be a final cost cutting bill that the Super Committee must produce before Thanksgiving. One possibility would be cutting even more. Eliminating direct payments and not replacing them with anything could save the government some $50 billion over ten years. The Super Committee could eliminate all farm programs and keep only a limited crop insurance program.
“There are members of Congress that would have no problem going down that road,” Doggett said.
Of the $23 billion in savings that the ag committees have endorsed, Doggett said he consistently hears that $15 billion would come from commodity programs, Doggett said. The amount the committees want to cut from nutrition and conservation programs varies according to different sources.
The farm groups are hoping that at least some of the funds saved by cutting existing programs would be available to pay for a revenue program.
“It’s pushing a dime across the table and getting a nickel back, but it sure beats pushing a dime across the table and having them take your hand,” Doggett says.
This week Senators Chuck Grassley (R-IA) and Tim Johnson (D-SD) wrote the committee to urge it to put a limit of $250,000 on potential payments a farm couple could receive. Their proposal is designed for existing farm programs, including direct payments and counter-cyclical payments.
But the letter to the Super Committee (or the Joint Select Committee on Deficit Reduction) also recommends adapting payment limits to any new program.
“Whatever the result, our main point is that setting a meaningful payment limitation and closing current loopholes in the law will provide savings and add integrity to the farm programs,” the two senators said.
Doggett argues that a revenue program would be more like crop insurance and it wouldn’t be fair to penalize producers who might go years without getting payments from the new program, only to limit them in a bad year when their losses exceed any payment limits.
“We don’t have limits on crop insurance,” he said, and the agricultural industry is different than it was five years ago.
“You’re insuring [against] a much bigger loss. You managing a lot bigger risk,” Doggett said.
Johnson said during a press conference on Thursday that he believes the chances of getting Congress to support strict payment limits are better than ever.
When asked if he would support limits on crop insurance, he said, “I could support that as long as they are reasonable.”