Farm Bill Hearing Focuses on Risk Management

DC Dialogue

Farm community remains at odds over farm bill commodity title.

Published on: March 16, 2012

Thursday the Senate Agriculture Committee held its final farm bill hearing focusing on risk management, the underlying purpose and most watched component of the farm bill writing process.

Sen. Debbie Stabenow, D-Mich., chairwoman of the Senate Committee on Agriculture, said that strengthening crop insurance and reforming farm programs are top priorities for her as the Committee works to develop strong risk management tools for farmers. Stabenow also emphasized the need for reforms to farm programs, saying “the era of direct payments is over.”

Michael Scuse, acting undersecretary of Farm and Foreign Agricultural Services, noted that in the last farm bill the U.S. Department of Agriculture was asked to implement 15 new farm programs and modify 17 others. Two of the most complex programs – ACRE (Average Revenue Crop Election) and SURE (Supplemental Revenue Assistance Payments) were new in 2008 and Scuse noted created a tremendous burden on the staff for the implementation of those programs and was confusing for farmers causing low participation.

“We would encourage the committee to have as simple and easily understandable programs as possible going forward so we can implement in a timely manner,” he said in response to questioning.

Senators criticized President Obama’s budget which called for $8.4 billion in cuts to crop insurance, a popular program with farmers, while renewing five different disaster programs including SURE which have not been as widely used or accepted. SURE has an 18-month lag time on payments, a complaint from producers.

In questioning, Sen. Max Baucus, D-Mont., expressed support for the livestock disaster programs enacted in 2008. Scuse noted that both the Livestock Indemnity Program and Livestock Forage Program provided “some assurance and certainty” to livestock producers with the flooding disasters as well as droughts. 

Crop insurance continues to be heralded by producers. Jarvis Garetson, a farmer from Copeland, Kan., recognized that farmers realize they want to play a part in addressing growing federal deficits. “We are willing to prioritize where cuts can come from and what I’m willing to give up. And we’re willing to give up everything except for crop insurance; we want to make sure that stays intact,” he testified.

Can one-size fit all

It was clear from senators’ comments as well as testimony from commodity and agricultural groups that there remains no clear cut consensus on the main components of the commodity title.

Ranking member Sen. Pat Roberts, R-Kan., has been critical of last fall’s super committee proposal which raised target prices and also had a piece-meal approach for different commodities.

Leaders from corn, soy, peanut, wheat and cotton organizations testified as well as the American Farm Bureau Federation and the National Farmers Union. Each had its own twist on how the government can best help producers manage risk.

Corn, soy and wheat groups advocated for a program that complements the income protection under the existing crop insurance program with a revenue-based program that partially offset losses that exceed a specified revenue threshold. Cotton producers also are seeking a revenue-based crop insurance safety net complemented by a modified marketing loan and adjusted to satisfy the Brazil WTO case.

The national farm groups continue to advocate a slightly different approach to addressing the major catastrophic losses.

AFBF president Bob Stallman shared how the group’s deep loss program provides catastrophic revenue loss protection at the county or crop reporting district level rather than the farm level. Farmers can supplement coverage from the program with one of the current crop insurance programs. Stallman noted the program may not pay out as often as other proposals, but it would provide more coverage in times when assistance is most critical.

NFU proposed a new plan known as the Market-Driven Inventory System (MDIS), developed from a study written by Dr. Daryll E. Ray, director, and Dr. Harwood Schaffer of the University of Tennessee’s Agricultural Policy Analysis Center.

“MDIS is an agricultural commodity program that mitigates price volatility,” said NFU president Roger Johnson. “It provides advantages to livestock producers and the biofuels industry. In addition, it would reduce government expenses, increase the value of crop exports and maintain net farm income over time. The central feature of MDIS is a voluntary, farmer-owned and market-driven inventory system based on recourse loan rates set a level below total cost of production but above variable costs.”

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  1. Anonymous says:

    Not all risks can be transferred or financed by insurance. You can’t claim the costs of high turnover, low productivity, inadequate cash flow or a damaged reputation. While the traditional insurance agency model ignores these types of uninsurable risks altogether. Work with an insurance company that will conduct a thorough analysis of your risks and develops a comprehensive insurance and risk management solution to address all of the costs that can impact your bottom line. Than Nguyen