A Feb. 11 hearing of the House Agriculture Committee provided plenty of opportunity for lawmakers to express unhappiness with the White House budget that would cut some $16 billion in crop insurance subsidies.
“While I thank you for your hard work implementing the farm bill -- including several improvements made to crop insurance -- I must admit that I was disappointed to see the administration’s FY2016 budget proposal that slashes $16 billion from crop insurance (a reduction of over 17 percent),” said Texas Rep. Michael Conaway to Agriculture Secretary Tom Vilsack. “With commodity markets plummeting and producers struggling to find financing, now is precisely the wrong time to weaken crop insurance.
“I would also note that, despite the economic turbulence in rural America, the Commodity Title of the farm bill is still slated to save taxpayers money relative to the old direct payment and the cost of federal crop insurance is also expected to decline. Moreover, overall farm bill savings anticipated during the farm bill debate remain intact under the January baseline.”
While cuts to crop insurance were unpalatable to many on the committee, other USDA-administered programs are sure to be targeted for fund-cutting in coming months. Conaway has already announced several committee hearings that will look at slashing nutrition programs.
In his opening statement, Minnesota Rep. Collin Peterson, ranking member, warned against such moves. “Today we are looking at the rural economy which, over the past few years, has done very well. I think that’s partly why it was so difficult to get a new farm bill passed. It’s good we were able to get it done though because the farm bill provides a safety net to farmers during difficult times. With declining commodity prices and weather-related challenges across much of the country, its important these new programs are in place.
“Even with the budget savings the new farm bill provided, I remain concerned about attempts to reopen the bill, whether by making changes to crop insurance, SNAP or any other farm bill program. This is a very bad idea and could put everything we worked for in jeopardy. I hope that this Committee will remain united in opposition to additional cuts to farm bill programs. Quite frankly, the Agriculture Committee has done our work.”
Conaway pointed out that circumstances have changed since the farm bill was passed a year ago. “As you know, economic conditions for many producers have changed dramatically since then, with commodity markets plunging by up to 50 percent. Drought and other natural disasters also resulted in disaster declarations in 33 states across the country last year. The net effect was an estimated 43 percent decline in net farm income over the past two years.
“A good many producers are struggling to demonstrate to lenders that they can cash flow in order to secure credit and farm for another year. Adding to the anxiety of producers is the implementation of the farm bill where hard decisions with very significant consequences will have to be made in the coming weeks.”
During the hearing Texas Rep. Randy Neugebauer, said he’d recently met with Michael Froman, U.S. Trade representative, and discussed the lack of transparency regarding China’s cotton program. China’s cotton reserves stand at over 50 million bales, depressing the price for the commodity.
“I think one of the concerns that a lot of the people in cotton have right now is, particularly with China, are they playing by the rules,” said Neugebauer to Vilsack. “And, you know, their policy is not very transparent, and they have a huge influence on the world price of cotton.”
Vilsack said the USTR office was “beginning the process within the WTO to raise questions about the export subsidies that China is engaged in. And agriculture is one of the industries that was identified as being part of that effort. And certainly it’s fairly clear that they have been not necessarily playing by the rules in a number of areas.”
During an earlier press conference, Vilsack was queried on the White House proposed budget cuts to crop insurance and legislation calling for a means test on the premium for risk management and crop insurance.
“When the farm bill passed, Congress was very interested in identifying savings,” said Vilsack. “That’s one reason why direct payments were eliminated and there were proposed reductions on the nutrition side of the equation.
“The reality is that on the nutrition side we’re likely to see those cuts -- and potentially larger reductions -- because of a decline of over a million (people) in SNAP participation since 2013. We are seeing savings potentially on the nutrition side.
Farm safety net
“On the farming safety net side, there were calculations and determinations that ARC and PLC perhaps wouldn’t be triggered as quickly as they’re now likely to be triggered. I don’t think anyone anticipated a 40 percent decline in certain crop commodity prices.”
Vilsack admitted expected savings from ARC and PLC versus direct payments “may not be realized. There were a couple of issues addressed by the Office of Inspector General (OIG) on prevented planting. The (General Accounting Office) has expressed concerns about the levels of subsidy on the price harvest loss.
“Adjustments were being proposed with respect to those programs in the President’s budget. But I think, overall, the safety net is still there and solid and will provide the help and assistance producers need.
Vilsack had yet to study the proposed legislation that would cap crop insurance. “I’d say we want to make sure as we take a look at making adjustments to realize savings important to Congress that we don’t jeopardize the attractiveness of crop insurance. When you take a look at the fact that the government is subsidizing somewhere between 60 and 80 percent of certain crop insurance policies there is probably some tweaking that can be done.
“I’m not certain the cap being proposed is something that could impact participation. We don’t want to get back to the days of ad hoc disaster programs being the way farmers were protected. That was much more expensive to the taxpayers.
“It’s a balance and we’re attempting to strike that balance.”
What about progress on the USDA definition of an “actively engaged” producer?
“We’ve been working on this for several months.
“First and foremost, it’s very important for folks to understand who will be covered and who won’t be covered (under) the ‘actively engaged’ in farming. Congress was concerned with reports that those with very little connection to land and operations were qualifying as ‘actively engaged’ and were therefore taking advantage of safety net programs…
“When Congress directed us to (come up with the definition of ‘actively engaged’) they told us what wasn’t to be included. They were very strong in their direction that family farming operations and family corporations weren’t to be (affected). So, that really reduces the number and amount of people that could be potentially impacted by whatever we decide.
“It’s a relatively small universe defined by partnerships. Those in limited or general partnerships in the farming operation may be impacted by the decisions we make. … I hope within the next several months we’ll complete (the definitions) so people will have an opportunity to comment.”