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Complaints Mount Against Senate Farm Bill Draft, But More Money Surfaces

April 24, 2012
By: Jim Wiesemeyer, Pro Farmer Washington Consultant

Some say groups came too late to note concerns, offer suggestions | Others charge bill has equity problems

An omnibus farm bill package is never easy, but one written by just a few people in era of budget cuts and not spending add-ons like the 2002 Farm Bill has produced a torrent of complaints from notable farm groups and others. But some groups, namely soybean and most corn growing states, like what they see in the farm bill draft released last Friday by Senate Ag Chairwoman Debbie Stabenow (D-Mich.).

On Monday, a long list of groups, including the National Cotton Council, several peanut groups, several state Farm Bureaus, a host of rice groups, and several peanut groups urged a postponement of Wednesday's scheduled markup. The groups sent a letter (see related story) noting more time is needed to better understand the markup vehicle and its implications, and to offer "constructive suggestions for improvement.

Some farm-state senators and their staffs are also unhappy over the short time they were given to offer amendments (by late Monday), and the slow process in getting budget scores from the seemingly always busy Congressional Budget Office (CBO).

A source notes that 125 amendments have already been filed. It will be interesting to see the details of an expected manager's amendment.

However, based on CBO's estimates of budget savings from the Senate farm bill draft, the plan saves $26.4 billion over ten years, $3.4 billion above the $23.0 billion targeted by the Senate Ag Committee. Thus, it appears Senate Ag Committee staff has up to $3.4 billion that they could work with relative to complaints from various farm groups and farm-state lawmakers.

The following are just some of the concerns being expressed regarding the Senate farm bill draft:

Cotton: One cotton policy analyst said, "What they did on STAX is a dangerous precedent for crop insurance. Limiting the amount a producer can cover. I don't buy that this is due to concerns from Brazil. After all, STAX is nothing but a GRIP policy and for many cotton producers all they will really have since they won't buy much if any individual coverage in many places. The added feature is the 65 cent base price, but this is down considerably from the 2008 Farm Bill and that itself is a concession to Brazil along with giving up direct payments and counter-cyclical payments (and target prices). This looks like what it is: a gratuitous hit at cotton."

One STAX modification from the original proposal is that the Senate draft eliminated planting flexibility. Example: If a producer has 500 acres in cotton and 500 acres in soybeans and decides to plant 1,000 acres of soybeans, only 500 acres can go into the Ag Risk Coverage program.

CBO estimates released late Monday. The Congressional Budget Office's estimates of the impacts of the Senate farm bill draft was released, at least to the public, after the deadline senators and their staffs were giving to offer budget-neutral amendments.

Rice: This is a regional crop, with major differences between states such as California and rice growing states in the South. This is part of the reason why California rice growers likely did not sign the letter Monday that some major rice industry groups signed to postpone Wednesday's markup. The reason: The proposed Ag Risk Coverage plan better suits California growers than southern rice producers. For years, rice growers have tried to get USDA's Risk Management Agency to approve major, new crop insurance programs, including a cost-of-production policy, but to no avail. Being an irrigated crop, insurance doesn't fit as a safety net nearly as well as it does for other crops. In this case, one size doesn't fit all crops. From a political standpoint, the election loss of former Senate Ag Chairwoman Blanche Lincoln (D-Ark.) has really impacted the southern rice industry.

Unless some major modifications occur relative to the pending Senate farm bill, southern rice growers will very likely put their hopes in the House farm bill process, which at this stage looks to be more equitable across commodities than the present Senate approach. The reason is that the coming House measure may be closer to the approach taken last fall by the four Agriculture panel leaders in which they would have offered a farmer a choice between an Ag Risk Coverage (revenue assurance) program, or higher target prices. The Senate bill eliminates target prices.

The elimination of direct payments impacts rice, cotton and wheat growers far more than it does soybean and corn growers, based on a lengthy list of analysis papers on the topic. So by eliminating direct payments, that puts even more emphasis on getting an effective safety net.

Move from base to planted acres a major change in farm policy, with significant impacts. The following table shows why the implications are significant.

The major reason why soybeans fare far better than any other program crop versus the 2008 Farm Bill is the Senate move to basing a new revenue assurance program (called Ag Risk Coverage/ARC) on a recent planted acreage formula, rather than the past approach of using base acres. The table below illustrates the situation:

04 24 12 img1

As the table shows, cotton, rice, and wheat have garnered direct payments despite lower plantings in recent years because those payments were pegged to base, and not planted acres. This information also shows why soybeans, especially, and corn come out ahead payment wise in the Senate farm bill moving from base acres to planted acres for ARC payment eligibility.

Analysis of the impacts of eliminating direct payments on program crop and replacing with a planted-acreage based Ag Risk Coverage program.

Notes:

  1. This looks at state average five-year Olympic average revenue by crop for 2012. Some may argue that you should look at farm or county level, but those only affect the probability of triggering a payment. These averages represent the revenue, on average, that producers in that state are receiving for that crop.
  2. The ARC payment listed is the MAXIMUM payment that could be paid in 2012, no matter the size of the loss. This can increase marginally over time (but is constrained by the Olympic average calculation); conversely, it can fall over time. It is also important to note that this looks at the farm-level band (10%) and payment factor (60%).
  3. This analysis compares the maximum potential ARC payment with the Direct Payment only. It does not account for the fact that under a maximum loss scenario, the producer could also currently receive a counter-cyclical payment in addition to the Direct Payment shown here. As a result, this is a conservative comparison.

 

04 24 12 img2

Why did Minnesota and Colorado corn grower associations sign the letter urging a markup postponement? One source said, "Minnesota and Colorado both advocated: (1) no harm to crop insurance; (2) producer choice; (3) price protection in both revenue and price-based option; (4) no more changes to pay limits, AGI, etc. And, the Wednesday markup does not give time to sort out problems on these fronts."

Why did some peach groups sign the letter to postpone markup? Some sources noted there is no specialty crop fix for crop insurance. Also, changes to new products may retard better risk management tools for specialty crops.

Some questions farm bill observers say they want answered relative to the Senate farm bill draft include:

  1. Has USDA given any opinions regarding potential WTO and acreage distorting implications?
  2. What were the impacts to the originally proposed STAX and what occurs in the draft?
  3. Equity used to be the word for farm program safety nets. Is this equitable?
  4. Why is gong to a planted acreage formula not going to lead to distortions in plantings in the US and to potential WTO challenges?
  5. If you lowered CBO price projections by 20 percent, and 30 percent, what would be the budge exposure by crop?
  6. What would be the savings if you had just a countywide ARC versus a choice of countywide or farm level?
  7. What are the budget costs for the crop insurance changes made in the draft, by commodity? (yield plug, etc.).
  8. What are the acreage estimates for the next 10 years based on the Senate draft? How many rice, cotton, and wheat acres would go to soybeans and corn, for example? If this analysis was not done, then why not?

 

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RELATED TOPICS: Inside Washington Today

 
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