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Senate farm bill draft faces opposition in South

• Several sectors of Southern agriculture are especially critical of the proposed legislation. • Under this first draft, rice and peanuts are the two commodities that would have the amount of protection reduced drastically.

Reaction of commodity and farm groups to the April 20 release of a Senate Agriculture Committee draft farm bill has been mixed.

Several sectors of Southern agriculture are especially critical of the proposed legislation.

Jeffrey Hall, who works legislative affairs for the Arkansas Farm Bureau, says while there was much discussion about creating the farm bill last fall during the “super committee” process, the draft’s release “was the first time the public, commodity organizations and others actually had the opportunity to see legislative text.” The Senate Agriculture Committee’s 900-page draft farm bill “actually kicked off the first formal step in this long process.

“Looking at that, we don’t feel what has been put forth will provide an adequate safety net for Southern agriculture. We have some concerns with the direction the bill goes.”

Those concerns resulted in an April 23 letter to the Senate Agriculture Committee asking for a delay in the proposed bill’s mark-up until “at least after the upcoming recess.” The letter — sent by a group of over 40 agriculture-related organizations — says the “first blush impression is that the mark raises serious equity issues and grave concerns over planting distortions. We share in the committee's strong desire to produce an equitable bill that avoids the scenario in which the farm bill is driving planting decisions. By providing additional time for (committee members) and producers to fully analyze all the impacts of the proposal, the committee can help avoid this result.”

While the American Farm Bureau Federation (AFBF) hasn’t given a full-throated endorsement of the Senate draft, it has provided encouragement for several things that Hall says would be detrimental to Southern producers. This criticism will come as no surprise as Farm Bureau offices in Arkansas, Louisiana and Mississippi have dissented from AFBF farm bill policies passed at the organization’s annual meeting in January.

Why the dissent?

“The problem the three states have in common is we’re heavy in rice and cotton,” said Hall in mid-March. “Also, we all have a lot of irrigated acreage. We have different issues with irrigated corn than the Midwest, which doesn’t irrigate (like the Mid-South does).

“The common thread for the three states was the ‘catastrophic deep loss’ proposal that AFBF has been talking about, the two policies passed at the convention (concerning that proposed) safety net program. We’ve run the numbers with University of Arkansas economists and it won’t provide the kind of safety net that our farmers feel they need to stay in business.

“It’s tough to write a farm bill during a time of high prices. We write them for the difficult times. But we must create a program that protects farmers during those difficult times. We don’t feel that the ‘catastrophic deep loss’ program adequately does that.”

Despite reservations from Southern states — which were again expressed during a Monday conference call with the organization’s board of directors — AFBF President Bob Stallman sent a letter (scroll down to see full text) to the Senate Agriculture Committee urging the draft be used “as a vehicle to move the farm bill to the Senate floor in a timely manner.” Perhaps as a nod to Southern concerns, AFBF also stated the draft has room for improvement and needs refining.

Hall, who spoke with Farm Press on Monday afternoon, said the Senate plan would “eliminate direct payments, counter-cyclical programs as well as ACRE and the SURE programs that affect crop producers. It would create ‘shallow loss’ or ARC (Agriculture Risk Coverage Eligible Acres) and we have concerns about how that would protect rice and irrigated crops grow in the South.”

The $23 billion proposed savings through the “super committee” process remain intact in the Senate Agriculture Committee’s draft.

“There are some other changes we have concerns with on the conservation compliance issues,” said Hall. “Those are linked to the new ‘shallow loss’ and marketing loan program but not to crop insurance.

“The marketing loan does stay intact in this bill and keeps the same loan rates for all the commodities except cotton. I believe that cotton, with the STAX program (Stacked Income Protection Plan), may see reductions in the loan rate.”

Specifically for rice, where do things stand?

“Under this first draft, rice and peanuts are the two commodities that would have the amount of protection reduced drastically,” said Hall. “The bill would mandate the USDA to establish an insurance program by 2013. (The USDA’s Risk Management Agency) is already creating that product for rice and peanuts.  

“The initial analysis of what this draft bill provides for the rice industry shows it would cut 70 percent of its baseline.”

The Senate approach to Adjusted Gross Income (AGI) would be another major change.

“The last farm bill had ‘farm’ and ‘non-farm’ categories — $750,000 and $500,000, respectively,” said Hall. In the draft, “‘farm’ and ‘non-farm’ are combined and the total is dropped to $900,000.

“The payment limit didn’t change anything on eligibility. However, it changes the payment limits to $50,000 under the ‘shallow loss’ program. That’s a $50,000 payment limit for you and/or a spouse.

“With the size of the operations in the South that would be problematic -- a drop in the bucket.”

AFBF letter

The April 23 letter from Stallman to the Senate Agriculture Committee reads:

 “Dear Chairwoman Stabenow and Ranking Member Roberts:

“The American Farm Bureau Federation commends you for moving forward in a bipartisan fashion to write the 2012 farm bill. Overall, we place a high priority on your decisions to:

  • Stand firm on utilizing the figure of $23 billion in savings suggested to the Joint Committee on Deficit Reduction last fall as the committee’s reduction target for this bill.
  • Protect and strengthen the federal crop insurance program and not reduce its funding.
  • Develop a commodity title that attempts to encourage producers to follow market signals rather than making planting decisions in anticipation of government payments.
  • Refrain from basing any program on cost of production.

“While the draft legislation addresses many of our policy priorities, it is our sincere hope there will be additional opportunities to make adjustments and refinements to improve this legislation. Some of the areas we believe would benefit from additional policy work include:

  • Improving the equity across all commodities. The variety of program options continues to raise concerns that some programs will cause planting decisions based on farm program benefits that accrue more beneficially to a particular crop.
  • Addressing the net effect of the ‘Agriculture Risk Coverage (ARC) Eligible Acres’ provisions to ensure a true “planted acres” approach and avoid recreating ‘base acres’ issues that raise equity and planting distortion concerns. While we support the requirements in the Committee Print to eliminate ‘double dipping’ between either ARC or Stacked Income Protection Plan (STAX) with crop insurance, we still have concerns about an 89 or 90 percent coverage level being so high at the farm level as to induce fraud or abuse, as well as the fact that the federal government should not be covering losses that could be managed through the normal course of business.
  • Re-instituting current payment limitations and the Adjusted Gross Income provisions in current law.

“Fundamentally, Farm Bureau continues to support a single program option for the commodity title that extends to all crops. We believe the safety net should be comprised of a strong crop insurance program, with continuation of the marketing loan program and a catastrophic revenue loss program based on county level losses for each crop. We are confident our approach can easily be tailored to meet the committee’s goals to provide a safety net that meets regional and commodity differences while also meeting the established savings target.

“Catastrophic loss events are typically beyond any producer’s control, and endanger the financial survivability of the farm -- the type of events that in the past have prompted enactment of ad hoc disaster programs. Having a catastrophic loss program in place would protect farmers from these situations and extend benefits only when needed, rather than potentially being a supplemental source of annual income.

“Under our plan, each producer of a program crop, as well as producers of apples, potatoes, tomatoes, grapes and sweet corn, would be provided a coverage level equal to 80 percent of the last five years’ Olympic average county revenue. As you no doubt recall, we have discussed a 70 percent coverage level for several months.

“However, after receiving some numbers from the Congressional Budget Office recently for a 70 percent program, we now believe it is possible to provide support at the 80 percent revenue level of coverage for all program crops and the five fruits and vegetables. In addition, we believe there would be enough money to increase the coverage for those participating in the Noninsured Assistance Program (NAP) from 50 percent loss coverage to 70 percent. This would save $15 billion from the commodity title to apply towards budget deficit reduction. To be clear, this is based on the premise of eliminating authority for the direct payment program, the counter-cyclical program, Supplemental Revenue Assistance Payments (SURE) and Average Crop Revenue Election (ACRE), as your draft bill proposes.

“We do want to point out policy areas in the bill supported by Farm Bureau, which include:

  • Elimination of Direct Payments, Counter-cyclical Payments, ACRE and the SURE program.
  • Maintaining the current marketing loan program.
  • Rejection of any provision linking conservation compliance with crop insurance.
  • Improvements to the crop insurance program whereby enterprise unit coverage will be able to be purchased separately for irrigated and non-irrigated acres, the Risk Management Agency will be allowed to collect data from other sources besides the National Agricultural Statistics Service, and the yield plug used in disaster years is increased from 60 percent to 70 percent.
  • Mandating that the Risk Management Agency develop a revenue insurance program that meets the needs of peanut producers by 2013.
  • Eliminating the dairy price support program and the Milk Income Loss Contract program and using the funds associated with those programs to offer a voluntary gross margin insurance program for dairy producers.
  • Maintenance of the current sugar program.
  • Inclusion of the Supplemental Coverage Option (SCO) whereby program crop producers, as well as producers of specialty crops, could purchase a county level revenue policy on top of their individual crop insurance coverage to cover all or part of a producer’s deductible portion of their individual insurance policy.
  • Restoring the critical non-program crop disaster programs, such as the Livestock Indemnity Program, Livestock Forage Program and the Tree Assistance Program, to provide those producers with some basic risk management tools to help address catastrophic losses.
  • Allowing for separate coverage for irrigated and non-irrigated crops for SCO, STAX and enterprise unit crop insurance.
  • Achieving the vast majority of necessary reductions in conservation funding from the land retirement programs rather than working land programs.
  • Consolidating conservation provisions under 13 programs, rather than 23, and focusing on administrative savings and simplicity in the remaining programs.
  • Expansion of the State Block Grants for Specialty Crops program and funding for research for specialty crops as well as technical assistance at USDA.
  • Authorization for a public/private foundation to solicit private donations to enhance research for meeting expanding global demand for food.

“While we sincerely appreciate your work on the new farm bill in a timely fashion, it is our hope that you will afford opportunities to make additional adjustments to the farm bill as more detailed analyses highlight areas that would benefit from further simplification and refinement. Again, the areas we believe would benefit from additional policy work include:

  • Improving the equity across all commodities.
  • Addressing the net effect of the “ARC Eligible Acres,” which appears to take us right back to a “base acres” approach.
  • Re-instituting current payment limitations and the Adjusted Gross Income provisions in current law.

“With these concerns and hopes for additional policy work noted, Farm Bureau sees many provisions in the committee’s draft farm bill that address our core principles for rational, acceptable farm policy. We urge the Senate Agriculture Committee to pass the bill as a vehicle to move the farm bill to the Senate floor in a timely manner.

“The importance of completing a farm bill cannot be overstated. Be assured that we will do everything we can to help improve this bill as it moves forward. Thank you for considering our views.”

(For more information on the American Farm Bureau Federation’s request to move the farm bill forward, see AFBF: Move the farm bill forward. To see a list of the farm groups requesting the ag committee delay mark-up, click here).

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