Senate Ag Committee holds hearings on farm bill safety net
By Jennifer M. Latzke
In the past 30 days the U.S. Senate Committee on Agriculture, Nutrition and Forestry has been busy holding final hearings on various titles in the 2012 farm bill.
Senators received input on energy, economic growth, conservation, health and nutrition, risk management and commodity programs for the next farm bill from leaders in the ag community.
March 15 was the final Senate Ag Committee hearing and covered the risk management and commodities title of the farm bill--and, most importantly, what a safety net for farmers should look like in the next bill.
As she opened the hearing, Sen. Debbie Stabenow, D-MI, committee chairman, reiterated that risk management must be effective for all producers, while still being defensible to taxpayers and consumers.
"At a time when all of us struggle to lower the deficit, we can't be focused on individual programs," she said. "What programs we do create must be effective and defensible and not just to this committee, not just to American farmers, but to the public at large. That's why the era of direct payments is over. We are reforming farm policy and transitioning to a risk-based tool that helps farmers who have suffered a loss."
For his part, ranking committee member Sen. Pat Roberts, R-KS, agreed with Stabenow and reiterated his commitment to strengthening crop insurance as the cornerstone for the farm safety net for producers and their lenders.
"Crop insurance is a big tent," he added. "It protects 250 million acres of cropland in the United States, and yet only two-thirds of eligible acres are covered." The more affordable we can make crop insurance, the more acres of crop land we can cover with that tent, the more stable our food supply will be, he said.
The hearing led off with Acting Undersecretary Michael Scuse of the U.S. Department of Agriculture Farm and Foreign Agriculture Services testifying about the work of the Risk Management Agency in implementing the various programs of the farm bill.
Scuse said that while strong prices are fueling opportunities in rural America on and off the farm, agriculture still faces volatile input cost and unexpected weather threats. A safety net, he said, is particularly important for beginning farmers and ranchers who have half the capacity to pay their debts as established producers.
Crop insurance, a public-private partnership administered by the RMA, and farm programs that are administered through the Farm Security Administration are the two parts of the safety net. Last year, Scuse testified, the crop insurance program paid more than $10 billion in claims for crop and revenue losses.
He also testified that President Barack Obama has proposed changes to crop insurance to save $7.6 billion over 10 years. However, the crop disaster programs ACRE and SURE, authorized under the 2008 farm bill, gave out $3.8 billion to more than 200,000 producers. Scuse said the president has proposed extending funding of these crop disaster programs in his budget.
"Crop insurance is a key component for managing risk today," he testified. "It's used by a large percentage of farmers, even in the 14 underserved states." The SURE program, he added, was controversial because it was confusing for producers, took massive amounts of data from producers to implement, and paid out a year in arrears, but in those areas where there had been a disaster declaration it had provided additional assistance.
Roberts questioned the logic of the president's budget blueprint that takes money from crop insurance, which farmers have testified that they prefer, and putting more money into SURE, which has had implementation issues.
"I have not had one single farmer tell me he preferred a disaster program to crop insurance, and my question is, have you?" Roberts asked Scuse.
"No, I can't honestly say I have not," Scuse said. "Although in my conversations with members of the ag community, where they have received some of those SURE payments they are appreciative of what they received."
Roberts followed by saying that he wasn't sure a lender appreciates getting a disaster payment 18 months after the disaster, and that while SURE had its pros, cuts to premium assistance to farmers and ranchers is money taken directly out of that producer's pocket.
Scuse said the public-private partnership in delivering federally backed crop insurance is working, and RMA is working with the industry to develop new products.
Improving crop insurance
The second panel consisted of growers and crop insurance professionals to testify about the stability crop insurance provides to growers and their lenders as a risk management tool.
Jarvis Garetson, Copeland, Kan., testified that effective risk management tools, such as crop insurance, helped his family survive 18 months of drought.
"Quite frankly, without strong and effective crop insurance tools, Garetson Brothers Farms could likely have been preparing for a farm sale this spring," he testified. "Instead, we're planning and preparing to plant."
Garetson suggested the program could be improved by allowing producers to designate enterprise units between irrigated and dryland acres. Additionally, he asked the committee to consider the concept of a limited irrigation insurance product that would encourage conservation, allowing producers with declining water supplies to plant at lower populations and set lower yield goals and still maintain insurance coverage at better than dryland levels.
Garetson also testified that data collection could be improved for the crop insurance program, simply by using the technology already in the fields today. With today's precision ag tools, FSA and RMA could collect data in real time and improve efficiency of the program.
Finally, Garetson said additional cuts to crop insurance "will likely result in increased premiums to producers or reductions in the products available or the level of service companies are able to provide. We simply cannot afford additional cuts in today's high risk marketplace," he said.
The committee also heard from the American Soybean Association, National Corn Growers Association, National Association of Wheat Growers, Western Peanut Growers Association, and the National Cotton Council about the need for safety nets for their members.
The future of agriculture
The morning testimony wrapped up with the point of views of the general farm organizations, with testimony from Roger Johnson, president, National Farmers Union; Bob Stallman, president, American Farm Bureau Federation; and Ryan Best, president, National FFA Organization.
Johnson urged the committee members to balance the federal budgetary constraints with the nation's food security in writing a new farm bill. "Production agriculture is a primary economic driver, and as such, when production agriculture prospers, a multiplier effect results," he said. Jobs and tax revenues at all levels are added without raising tax rates, he added.
Johnson reiterated that NFU believes that farmers shouldn't receive support in the good times, but that farm policy should provide economic security to farmers who have no market power in bad times.
He explained NFU's proposal of the Market-Driven Inventory System as an ag commodity program that mitigates price volatility and benefits livestock producers, the biofuels industry and consumers. "The central feature of MDIS s a voluntary, farmer-owned and market-driven inventory system that operates under market forces during normal conditions but moderates prices at the extremes," he said. It would smooth out wild price swings for farmers and for livestock producers and allow for a consistent supply to the biofuels industry--thus managing risk.
Stallman testified that Farm Bureau's policy proposal for a flexible and fair safety net would include strong crop insurance and a continuation of the marketing loan program with changes to reflect market conditions to protect at the individual farm level.
The third leg of the stool, Stallman said, should provide catastrophic revenue loss protection at the county or crop reporting district level to address moral hazard concerns and keep administrative costs down.
"Our plan focuses on protecting farmers from these situations and brings program benefits into play only when they are needed, rather than being considered a supplemental source of annual income," he sad. The Farm Bureau plan provides coverage to each program crop, as well as apples, potatoes, tomatoes, grapes and sweet corn, at a level equal to 75 percent of the last five years' Olympic average revenue, and at a charge of $300 per commodity per county.
"Farmers can then supplement that coverage with one of the current crop insurance programs based on their own assessment of their farm's risk management needs," Stallman said. This "deep loss" program wouldn't pay out as often as other proposals, but it would provide more coverage in times of catastrophic losses, he added.
The last testimony the committee heard was from Best, representing half a million FFA members who will be the future farmers and ranchers that will benefit from this farm bill. Best said it should include support from federal agencies for beginning farmers to start their businesses or to continue in production agriculture.
"USDA should help transition farms from older farmers to younger or beginning farmers who may not come from a farm," Best continued. "It should help keep young people in rural communities and make them an even more important part of our nation's economy and society. And USDA should strengthen the capacity of agricultural education to produce more students who pursue production agriculture and related careers."
Best said FFA is trying to motivate students about careers in agriculture. The next farm bill is an opportunity for Congress to demonstrate that it believes in the future of agriculture "with a faith born not of words, but of deeds."
For complete testimony of this and the previous Senate ag committee hearings on the farm bill, visit www.ag.senate.gove/hearings.
Jennifer M. Latzke can be reached at 620-227-1807, or email@example.com.