The Hagstrom Report

Agriculture News As It Happens

Battle continues over farm bill safety net

The battle over the next farm bill continued today, with the American Soybean Association, the National Corn Growers Association and the National Farmers Union sending Congressional agriculture leaders a letter formally stating their support for a “revenue-based risk management program” to replace parts of the existing farm safety net.

Meanwhile, a key crop insurance lobbyist saying that any new program should not be “duplicative” of crop insurance in a way that would lead farmers to reduce their coverage.

The letter from the corn and soybean groups and the Farmers Union to the chairmen and ranking member of the House and Senate agriculture committees appeared to be a reaction to a letter the American Farm Bureau Federation sent to members of the agriculture committees on Tuesday, charging that a safety net that covers “shallow losses” could lead to farmers engaging in risky decision making.

The Farm Bureau has recommended instead that the current farm safety net be continued with reductions in each portion of it, but the letter says that if Congress writes a shallow loss program it should follow certain guidelines.

The new revenue-based risk management program “should be designed to partially offset losses caused by reduced yield or multi-year price declines not currently covered under federal crop insurance, and would not require any changes to that program,” the three groups wrote in the letter to Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich, Senate Agriculture ranking member Pat Roberts, R-Kans., House Agriculture Chairman Frank Lucas, R-Okla., and House Agriculture ranking member Collin Peterson, D-Minn.

“It should also reflect differences in production practices for commodities grown invarious regions, while avoiding distortions in planting decisions between crops,” the groups said in their letter.

The groups also endorsed the four leaders’ decision to recommend to the super committee in charge of deficit reduction that farm bill spending be cut by up to $23 billion over 10 years, but they said that reduction would “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.”

Addressing Farm Bureau’s statements that a safety net covering income losses of only 5 to 10 percent could lead farmers to buy or lease more land than they can manage or pay higher rents, ASA, NCGA and NFU said that “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. 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.”

But the possibility that some farmers might buy a lower level of crop insurance because of the benefits of the new program remains a flashpoint between the farm groups and the crop insurance industry. Roberts said in a statement Monday that there would be no cut to the crop insurance baseline “regardless of any interactions from other programs.”

David Graves, a lobbyist for the American Association of Crop Insurers, said today that the group was pleased by Roberts’ statement because its members have been worried that some of the proposals to cover shallow losses may be duplicative and undermine use of the program.

“Our thrust is to see the crop insurance program continue as is and grow even more to be a more important part of the safety net going forward,” Graves said.

ASA, NCGA and NFU said in their letter that they support “the existing crop insurance program” and that “the new revenue-based program should be designed to complement rather than overlap or replace this key part of the farm program safety net.”

One commodity lobbyist said today that means opposing any further cuts in the payments made to crop insurance companies for administering the program or any cuts to premium subsidies that go to farmers, but that if the Congressional Budget Office concludes that farmers might buy less insurance and that the government costs of the program go down, the super committee should be able to use those savings for budget reduction or for financing the new farm safety.

“There just happens to be a programmatic interaction,” the lobbyist said. “That is not a matter of duplication.”