More For Less

July 28, 2010 11:32 AM

Dee Vaughan counts his blessings that he farms in the northern Texas Panhandle, an area that has enjoyed good growing conditions for several years. His neighbors downstate have suffered hurricanes, droughts and floods, causing extensive multiyear losses.

He’s watched as the complicated new Average Crop Revenue Election (ACRE) program fell short in 2010, while counter-cyclical payments and market loan programs have become overwhelmed by cost of production. If crop prices drop sharply, Texas producers will be in dire financial straits by the time these programs make payments.

Now, as U.S. lawmakers begin the process of writing the 2012 farm bill, Vaughan wonders if a single farm policy is no longer realistic.

"The farm bill is getting too complicated. We keep adding new programs to fill the gaps, but it only creates new gaps," says Vaughan, a corn, wheat, soybean, sorghum and cotton producer near Dumas, Texas. "I think change can happen, but we need brave policymakers."

Courage will be needed as lawmakers begin crafting a farm bill with a huge budget deficit on the table. House Ag Committee Chair (D-Minn.) Collin Peterson admits the deficit is one of the biggest obstacles and that agriculture programs will likely have to be reduced to help reduce the deficit.

"Farm programs are willing to contribute as long as it’s fair," he says. "I’m not going to stand for them whacking us just because they don’t like us while holding somebody else harmless."

House action on the farm bill is now in the subcommittee process. Senate Ag Committee Chair Blanche Lincoln (D-Ark.) also has begun work on the farm bill, declaring the process will not be a typical Washington command-and-control, top-to-bottom approach to policy.

"The good Lord gave us two ears and one mouth. It’s important we use them in that proportion," Lincoln says.

Crop Insurance Cuts Shrink Baseline

In a small effort to close the gap on the $1.6 trillion deficit, President Barack Obama proposed a fiscal year 2011 budget that called for billions in savings from crop insurance. USDA negotiated in July the final Standard Reinsurance Agreement (SRA) contract with crop insurance companies, which includes $6 billion in funding cuts. The department would cut payments to the companies by $600 million per year for 10 years. Two-thirds of the cut will go toward federal deficit reduction, with the remainder sent to government land-conservation programs.

Those "savings," however, are not available to farm bill writers and mean the baseline will be that much smaller when the bill is finally written.

Private insurance companies now need to evaluate how reductions will affect the quality of service they provide to producers and scramble to maintain the financial reserves mandated by the SRA. Officials at USDA emphasize that funding cuts should not affect farmers’ crop insurance premiums, which are set separately.

Top Producer, Summer 2010

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