Producer/banker has eyes on farm bill debate

By Larry Dreiling

Ask Alan States about the 2007 farm bill. Go ahead, people have been asking him about farm bills for years.

In the mid-1980s States served as a director of the National Sunflower Association and president of the U.S. Canola Association. He said he has bended his share of the ears of farm policy experts and politicians for longer than he can recall. States has spoken to dozens of conferences and workshops around the country on his views of farm policy.

"I decided to leave active policy work to others this time around," States said. "I did it for a lot of years and think other people need to be involved, too. Everyone in agriculture needs to be involved."

States, president of a bank in Hays, Kan., also actively operates a 6,000-acre farm in Phillips and Norton counties of Kansas.

"I've been farming since 1972, when I got back from serving in the Army," States said. "Most of the years from then until 1999 were good years. From 2000 to 2006 were the toughest years I've ever farmed. This year is pretty good--up to this point."

This is why States remains concerned about farm legislation. Bad weather ahead may harm fall crops and cause producers to seek disaster assistance because of a faulty farm bill that includes a poorly designed system of crop insurance and other risk management tools.

"I used to grow sunflowers in the 1980s, but the 1985 farm bill was very draconian and destroyed the sunflower industry and the cotton industry in southern Kansas, because it took us back to the rigid bases," States said. "That's why I got involved with the canola and sunflower associations. We worked hard to bring about planting flexibility, such as the 0/92 program for planting minor oilseeds on wheat or corn. All the flexibility was tested before the 1992 farm bill and Freedom to Farm."

Congress needs econ classes

Keep asking States what he thinks about past Congressional action on the farm bill. He'll tell you.

"The problem is Congress doesn't have to take any economics courses to qualify for their jobs," States said. "Because of that, they really make some bad choices, bad decisions. Like the '85 bill, it would never allow you to change for weather, new technology, market conditions and the like."

States also complains about loan rates and has his own solution.

"Every time they have a loan rate higher than the variable rate of the cost of production, you are going to distort production, which is not only trade illegal, it creates other problems.

"When the proper loan rate is under the variable cost of production, or zero, then they can make it up with counter-cyclical payments based on a historical base and historical yield that's tied to some price like the average of the past two years, you are trade legal, you are in the blue box."

What about set-asides?

"Maybe you have a half-percent counter cyclical set-aside. You can trade that set-aside for a CRP set-aside or a certificate from another farmer. The more flexibility the farmer has, less the government distorts trade, the more able farmers will be able to compete under market conditions.

"Right now we're heading in the wrong direction. They are doing something that doesn't make economic sense. It's a horrible farm bill. It needs a higher direct payment. If you are going to do something, create a counter-cyclical and decouple it. It can't be tied to this year's production or it won't be WTO legal."

Crop insurance fix needed

What really sets off States is any talk about the current federal crop insurance program. During his time as a leader in the oilseed industry, States said he constantly discussed changes in crop insurance with everyone from Sen. Pat Roberts, when he was chairman of the House Agriculture Committee, to Dr. Barry Flinchbaugh, chairman of the U.S. Commission on 21st Century Agriculture. States' current take:

"Under the WTO the government can't underwrite the first dollar of insurance coverage. It can reinsure after he's lost 30 percent of his yield. They should write a farm bill with no increases in bases and no increases in yields, maybe lower the loan rate to zero, make the direct payment and counter-cyclicals effective and fix the insurance program."

States uses the following scenario to describe what he considers are inequities in the program.

"If you and I farm right across the road from each other and you have a 100-bushel crop the next three years your average yield is 100 bushels. What if I take risks and buy some high-powered hybrid and put fertilizer on that crop and yield 200 bushels. The next year I burn up and get zero. The next year I go back to making 200 bushels. The next year is a disaster and I get zero. Average the four years and I get 100 bushels averaged. Our historical yields are the same, but you won't get anything because you're consistent with your yields while I stay in because I can collect every other year.

"That means the system is actuarially unsound and needs to have an adjustment on the premium to consider average yields and variances around those yields. The farmer who has a higher variance needs to have that factored into his premium. The farmer who saves his moisture should get a benefit, then we can get away from ad hoc disaster payments. Farm bills will continue to fail until we fix the crop insurance program."

Payment limits desired

States also wouldn't mind seeing changes in business taxes along with payment limits in a new farm bill.

"I hate taxes, but somehow we have to fix this distortion between large and small producers," States said. "The larger producers are specifically protected and have high incomes. There ought to be a way to help the smaller producer.

"The worst offenders in that category are farmers in the sugar program. They've hurt every other farmer," States said. "We can't do trade deals because sugar blocks them. We'd all be better off, from other farmers to consumers, except because of a couple of powerful families in Florida and Louisiana."

The cane sugar business managed to make a mess of things for sugar beet growers as well. States said he came to admire sugar beet fields as a child, when he saw them near the old Great Western Sugar Co. plant west of Goodland, Kan. in the 1960s.

"They got all these sugar beet growers going, then come to find out the business model didn't work for them. The commercial businesses get out of the beet business and the farmers wound up buying into processing co-ops. They lobbied to keep that antiquated thing going, too. The more protected you are, the less efficient you become.

"It becomes like a dam with a lot of water pressure behind it. What I fear, with a farm bill or the WTO, that dam will burst and the sugar industry--being so set and rigid in their ways--won't let the pressure off by modernizing the program or converting their plants to something else. At some point there will be a catastrophe."

Taking on corn sweeteners

States also has harsh words for the corn sweetener industry, too.

"The corn sweetener industry is built around the artificially high price of sugar," States said. "There are arguments that high fructose corn sweeteners cannot be metabolized by the human body, unlike sucrose in sugar, creating an obesity problem.

"You hear the grower saying these programs don't cost consumers anything, but then it costs the consumers more in higher sugar prices or in health problems. That's one of those big lies."

The dam's going to burst on wheat, too, but in a different way, States said.

"Wheat producers struggle with the idea of foreign buyers not accepting biotechnology," States said. "In one drought year where I didn't plant any wheat, I planted every acre to a genetically modified crop.

"All my soybeans were Roundup Ready; the corn was Bt. It even surprised my local Monsanto rep how much adaptation I had made. I'd still be growing sunflowers if it weren't for biotech soybeans moving the soybean belt westward. American wheat producers need biotech wheat now. If we don't the Chinese will beat us to it or some other nation will sneak it in somewhere from some place. We need to lead the conversation (about biotech wheat) before something bad happens there."

Larry Dreiling can be reached by phone at 785-628-1117 or by e-mail at ldreiling@aol.com.

8/27/07

	Web hpj.com

Copyright/Privacy
Copyright 1995-2008.  High Plains Publishers, Inc.  All rights reserved.  Any republishing of these pages, including electronic reproduction of the editorial archives or classified advertising, is strictly prohibited. If you have questions or comments you can reach us at High Plains Journal 1500 E. Wyatt Earp Blvd., P.O. Box 760, Dodge City, KS 67801 or call 1-800-452-7171. Email: webmaster@hpj.com