The Hagstrom Report

Agriculture News As It Happens

Farmers Union, corn and cotton growers release farm bill proposals

With concern rising that Congress might write a farm bill quickly in the midst of deficit reduction negotiations, the National Farmers Union has released its policy ideas, following recent press releases from the National Corn Growers Association and the National Cotton Council.

The Farmers Union’s study, written by University of Tennessee professor Daryll Ray, proposes reinstituting a farmer-owned reserve for major crops in an attempt to force up prices when they are low.

At a news conference at the Capitol Tuesday, Ray and National Farmers Union President Roger Johnson said that if the farmer-owned reserve had been in effect between 1998 and 2010, net farm income would have been about the same but the cost to the government would have been lower and the value of exports would have been higher.

The proposal would increase loan rates and set asides, but eliminate direct payments, marketing loans and countercyclical payments, and assumes that the average crop revenue election known as ACRE does not exist.
National Farmers Union says government costs would be lower because the loan rate would be paid on only the portion of the crop that is put into the farmer-owned reserves and not on every bushel that is produced.

“We want the market to work most of the time the policy is in effect,” Ray said. “It’s only the extremes we affect.”

The government had a program of farmer-owned reserves or held stocks of grain from the period after World War II until 1996, but some economists complained that the reserve programs interfered too much with the market and that the anticipation of release of the stocks held prices down.

Johnson noted that this proposal would be much more flexible than previous farmer-reserve programs and does not contain specific crop set asides. The proposal is likely to be greeted with substantial skepticism in Congress, particularly in the Republican-controlled House.

“There are some you can’t convince,” Ray said of the proposal, but added that it would be a more efficient system “unless you believe there aren’t going to be farm programs in the future.” Grain buyers are also likely to criticize the program because it would raise costs to them.

The NFU proposal did not mention crop insurance, but Johnson has said on other occasions that it is the organization’s highest priority to maintain it. He said Monday that the organization is still committed to crop insurance, but views it as a separate part of the farm bill.

Sen. Amy Klobuchar, D-Minn., arranged for the Farmers Union to hold the press conference in the Capitol, and was present to introduce NFU officals.

Klobuchar made clear that she has not yet read the proposal, but said the good performance of agriculture in the current economy shows the need for maintaining the farm bill.

“People like to stick pins in the farm bill, but it has provided stability,” she said. Klobuchar said her priorities are to maintain crop insurance, the milk income loss contract dairy program, and disaster relief, including the livestock indemnity program. She added that “people who live in the Twin Cities” understand the connection between agriculture and urban life, but that it is “our job" to make sure that people in other parts of the country make the connection.”

On Monday the National Corn Growers Association announced it was proposing an “Agriculture Disaster Assistance Program” (ADAP), a commodity title that would modify and replace the existing average crop revenue election program known as ACRE.

“We are focusing on simplification and faster delivery of assistance when it is needed,” NCGA President Bart Schott said in a news release.

ADAP builds on the existing structure of ACRE, but would use harvest prices and crop reporting districts to set the crop revenue guarantee, and would establish a guarantee based on the five-year Olympic average of revenue.

Payments would be limited to 10 percent of the guarantee, based on planted acres and adjusted to a farm’s yield.

Payments would cover lost revenue between 85 to 95 percent of the guarantee. Marketing loan rates would be restored to standard levels, rather than being reduced by 30 percent as they are now under ACRE.

“While today’s farm bill provides critical assistance to farmers when they face a significant loss, growers also need a program that can efficiently address gaps in protection that cannot be addressed by federal crop insurance alone,” Schott said.

On August 26, the National Cotton Council announced that has decided to back an improved crop insurance program as a key element in its safety net.

Cotton growers get large direct payments and have maintained that crop insurance products have not worked well for them, but the group said that in light of deficit reduction efforts and the pressure that Congress will face to resolve the long-standing case against the U.S. cotton program that the United States lost in the World Trade Organization, it will be back a redesign of its program.

“The industry recommends an adjustment to the current program, which will result in strengthening growers’ ability to manage risk by making an affordable revenue-based crop insurance program available for purchase,” the cotton council said in a news release.

“The revenue-based crop insurance safety net would be complemented by a modified marketing loan that is adjusted to satisfy the Brazil WTO case,” the group added.

The combination of programs will “best utilize reduced budget resources, respond to public criticism by directing benefits to growers who suffer losses resulting from factors beyond their control, and build on existing crop insurance program, thus ensuring there is no duplication and offering the potential for program simplification,” the council concluded.