Farm Bill Fiasco
May 03, 2013
For more than a year now, the Congress has worked on a new farm bill, in fits and starts, but has never been able to get it together. We are farming now under an extension of the old bill. I think that, at long last, we are positioned to get a new 5-year bill by this fall. Both the House and Senate Ag Committees plan to start mark-up this month.
The process is still going to be messy. A lot of compromises will be necessary. I would expect that direct payments that have been a main stay of recent farm bills will be gone. Direct payments, in these days with a booming farm economy, are hard to defend. You don’t have to do anything to earn the money.
Look for crop insurance to take center stage, filling the role of risk management. Crop insurance last year served as a life preserver for many farmers caught in the severe drought. So, in that regard, crop insurance did the job. But on the other hand, it cost a lot of money. Insurance paid out 17 billion dollars in indemnities.
Of course, farmers must pay for crop insurance, but it is heavily subsidized. There will be some pressure to require farmers to pay more for the insurance. There may be requirements tying conservation compliance to crop insurance. After last year’s drought, I expect more farmers to sign up for insurance this year.
Besides costing too much, there are other criticisms of crop insurance. It can be argued that it encourages some farmers to plant certain crops – not because of market incentives, but because of the crop insurance guarantee. Still, at the end of the day, crop insurance will be the primary safety net for farmers.
The House will be looking for ways to save 38 billion dollars over the next 10 years. A significant part of that savings will come out of the Food Stamp Program. I cannot imagine how we got to where we are today, spending more than 80 billion dollars on food stamps. The Senate will not be willing to cut the nutrition programs as much as the House. They will have to find middle ground.
When all the dust clears, I think we will get a farm bill. Considering how difficult it is to pass this bill – makes me wonder if there will ever be another.
In closing, I would encourage you to access my website which archives my radio commentaries dating back 10 years and will go back 20 years when complete. Check on what I said back then. Go to www.johnblockreports.com.