Southern senators: Farm Bill boosts Midwest, leaves Dixie with peanuts
Growers in the Mississippi Delta want more priority put on price supports than crop insurance
by Ted Carter
Published: June 17,2012
Southern farmers say they expect to be on the short end of a new five-year farm bill unless Congress can accommodate the special circumstances of the nation’s farming regions.
Growers in Mississippi and elsewhere in the South are holding out hope that the House prevails with a yet-to-be-written bill its Agriculture Committee chairman promises will be tailored to each region instead of the once-size-fits-all measure the Senate is considering.
As senators made that body’s version of the farm legislation a moving target last Wednesday with the introduction of more than 200 amendments, farmers and lawmakers said the only sure outcome is that the nation’s farm policy of the future won’t much resemble today’s policy, starting with an end to the direct payments growers have been receiving since 1996. Totaling $5 billion last year, the payments went to farmers whether or not they actually planted a crop and for programs that reward farmers when prices fall below a targeted level.
One reason for the shift in policy: The Agriculture Reform, Food and Jobs Act of 2012 must cut its projected decade-long cost of more than $975 billion by 30 percent, or an estimated $23 billion.
Nutrition programs, primarily food stamps, are the other hurdle. They make up about 80 percent of the cost in the $100 billion-a-year bill.
The Senate proposal would cut the food stamp program now serving about 46 million people by $4 billion over the next decade — largely by targeting abuses. Some senators and the Republican-controlled House would like to see a far bigger cut, mainly by tightening eligibility for food stamps, The Associated Press reports.
The move from direct payments to risk management stems, in part, from the political difficulty in justifying direct payments without those payments tied to losses.
The rub for Southern growers of crops such as rice and peanuts is the uniform nature of the bill that passed the Senate Agricultural Committee in early June. They say it tilts the crop yield insurance program more in support of Midwest growers whose wheat, soybean and corn crops carry more risk and cost less to grow than Southern crops such as cotton, rice and peanuts.
Crops grown in the Mississippi Delta and elsewhere in the Mid-South and Southeast typically benefit from more rainfall and irrigation than do crops in other regions. Thus, they aren’t likely to gain much from the yield protections in the crop insurance proposal, said Chip Morgan, executive director of the Delta Council, the region’s economic development entity.
While the Southern planters believe their yields are safer, they carry ample risks with swings in crop prices and production costs, Morgan noted.
In dissenting in the Senate bill’s Agriculture Committee vote, Southern senators Thad Cochran of Mississippi, Saxby Chambliss of Georgia and John Boozman of Arkansas contended “various crops are not taking their proportionate share of the cuts,” Morgan said.
“The target is to cut 30 percent. In the instance of rice, they are cutting 70 percent.”
This is because yield protection won’t kick in for growers of irrigated crops until they have a 70 percent loss, according to Morgan.
“If you have a 70 percent loss in crops like rice you don’t need insurance,” he said. “What you need is a bus ticket and it needs to be headed to Canada.”
The Senate’s insurance proposal, officially called the Agriculture Risk Coverage program, relies on a yield and price formula, and growers say it doesn’t protect them against long periods of depressed prices because it uses an Olympic average, which excludes the highest and lowest price of the last five years from the calculation, reports Katie Micik, markets editor for DTN/The Progressive Farmer.
The Agriculture Risk Coverage program is designed to cover shallow losses — when payments cover 10 percent of the losses after prices reach 89 percent of the Olympic average.
The Congressional Budget Office estimates this new shallow loss program could save taxpayers some $8.5 billion over the next five years compared with the current subsidy system.
The entire bill, which also covers conservation and research programs, would reduce spending by $23.6 billion over the coming decade.
Republican Sen. John Boozman, whose state of Arkansas is the nation’s largest rice grower, told The Associated Press the Senate bill “will have a devastating impact on Southern agriculture.” Chambliss complained that peanut growers in Georgia, the national leader in peanut production, would be shoehorned into a “a one-size-fits-all policy” that would force farmers to switch to crops that enjoy better coverage for losses.
The Southern senators want to negotiate changes to the bill that would allow a choice between the Senate’s current crop insurance and revenue protection programs and some modified form of existing target price program. They want this program, which is preferred by the rice and peanut growers, to compensate farmers when prices dip below a certain level. The bill already has a separate revenue insurance program tailored to the needs of cotton farmers.
As written, the Senate measure would not provide a price support until the crop dropped 30 percent in price, according to the Delta Council’s Morgan. “If we have got to lose 30 percent of our house before our insurance kicks in, that’s a hard deductible,” he said.
The Associated Press reports that a recent study by the Food and Agriculture Policy Institute at the University of Missouri in Columbia does show that rice and peanut growers who are the main beneficiaries of direct payments would lose more than 60 percent of their government support over the next decade under the new system.
But the same report also found that the shallow loss program was generally equitable among the major crop groups, the AP reported.
Meanwhile, House Agriculture Committee Chairman Frank Lucas, R-Okla., has made clear that the yet-unwritten House bill will include an alternative to meet the concerns of Southern planters. The safety net, he told the AP, “has to exist for all regions and all crops, and it has to be written with bad times in mind. These programs should not guarantee that the good times are the best, but rather that the bad times are manageable.”
A spokeswoman for the House Agriculture Committee said the panel hopes to have a bill to consider by mid June and take a vote on it before the July recess.
The current 5-year Farm Bill expires in September. Without a new bill, the nation’ agriculture programs would be subject to automatic cuts of up to $15.6 billion beginning in January 2013. Those cuts would be triggered by the budget deal the White House and Congress agreed to in August 2011 in an extension of the federal debt ceiling.
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