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RCCP: Disaster assistance with no wait?

Farmers unhappy that USDA took nearly six months to begin sign-up for the latest disaster program wouldn't have had to wait so long if they could access a revenue counter-cyclical program, the National Corn Growers Association said.

USDA recently announced sign-up for the 2005/2006/2007 crop disaster program would begin Oct. 15 or nearly six months after President Bush signed the Iraq War supplemental appropriations bill that included funding for disaster payments for those years.

NCGA leaders said the lag between producers suffering a loss and receiving disaster assistance could be largely eliminated if Congress includes a revenue counter-cyclical program in the 2007 farm bill. The RCCP could replace ad hoc disaster payments and expand crop federal insurance protection.

“The problem is with Congress and the administration taking so long to approve ad hoc disaster programs,” notes NCGA President Ken McCauley. “What should be a straightforward process too often turns into a political struggle.”

The NCGA has been lobbying for a revenue counter-cyclical program since 2005. The House-passed 2007 bill would give farmers the option of signing up for an RCCP; the Senate reportedly is considering substituting it for the current price-based counter-cyclical program.

An RCCP program would allow crop producers to file crop insurance claims for reduced yields soon after harvest losses became clear rather than having to wait for Congress to debate disaster relief. In the most recent case, Congress debated disaster legislation more than two years before passing it. Under the NCGA's RCCP proposal, insurance programs would work better by integrating private revenue insurance with federal revenue protection into a comprehensive risk management system, says McCauley.

The latter would make private revenue insurance more cost-effective and allow higher coverage levels for farmers at a lower cost. The RCCP would not cost taxpayers more because of the savings created by integration with crop insurance and the elimination of inefficient support payments.

Sens. Richard Durbin, D-Ill., and Sherrod Brown, D-Ohio, have introduced the Farm Safety Net Improvement Act of 2007, or S.1872, that incorporates much of NCGA's proposal. McCauley has been urging growers to call their senators while Congress was away from Washington for its August recess to ask them to support S. 1872.

USDA has also endorsed a revenue counter-cyclical program that would be based on a national input cost figures rather than the state-level approach cost-price calculations favored by the NCGA.

Agriculture Secretary Mike Johanns has cited numerous complaints from farmers that the current price-based RCCP does not help them when they lose yield due to droughts or other weather disasters.

Farmers speaking at USDA's Farm Bill Forums said that in situations when yields are low but prices high, current programs do not make payments even when farmers face real losses in revenue. When yields are high and prices below targets, they said, current programs often make unnecessary payments even though a farmer's overall revenue still might be high.

The Durbin-Brown bill provides a better safety net for farmers by replacing price-support programs with a two-tier revenue protection program called the Revenue Counter Cyclical Payment (RCCP), NCGA leaders say.

Under the RCCP approach, farmers rely on private revenue insurance at the individual level, while the government handles widespread losses at the state level where the private insurance market is less effective. Among the benefits:

  • Better protection for farmers by protecting revenue (price multiplied by yield) rather than merely price as the current system does. Revenue protection fixes many of the holes in the existing safety net. By protecting farmers' yields, this program also reduces the need for ad hoc disaster assistance.

  • Less production distortions by using a revenue target that adjusts with the market rather than politically set target prices and loan rates. This revenue protection program reduces the incentive to overproduce on marginal land and helps reduce production distortions.

  • More equitable treatment across crops resulting in planting decisions made based on market signals not the government program. All commodities are given protection based more on market risk rather than politically fixed target prices and marketing loan rates.

  • Private crop insurance works better by integrating private revenue insurance with federal revenue protection into a comprehensive risk management system — making private revenue insurance more cost-effective and allowing higher coverage levels for farmers at a lower cost.

  • No additional costs because of the savings created by integration with crop insurance and the elimination of inefficient support payments. Proponents of RCCP say the gaps in the current programs result in the need for almost yearly disaster payments that cost taxpayers $1.8 billion annually.

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