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New Federal Farm Program Takes Shape

posted on November 10, 2011


As the Congressional budget ax continues to hang above federal farm programs, a new piece of America’s agricultural safety net could take its place.  Policymakers have begun crafting a so-called “shallow loss” insurance program for the nation’s farmers and ranchers. 

Defenders of the potential new farm program say it would cover minor crop losses and could begin paying farm owners after revenue falls by 5 to 10 percent.  The “shallow loss” insurance would supplant federal direct payments to farmers – long the bane of non-farm lawmakers and currently under fire from all corners of a suddenly budget-conscious Congress.

But reaction in farm country is mixed due to the potential upheaval of traditional farm payments.  The American Farm Bureau Federation cautions that “shallow loss” insurance could encourage farmers to make riskier planting decisions and further skyrocket land prices.   Farm Bureau President Bob Stallman wrote to agricultural committees this week, saying: “…shallow losses do not typically jeopardize the survival of a farm operation.”

Congressional leaders argue much of the existing structure for federally subsidized crop insurance, with premiums paid by farmers, would remain alongside “shallow loss”.

But a Midwestern economist released a report this month calling the potential new program a “boondoggle.”    Bruce Babcock, an agricultural economist at Iowa State University, said this week:

“The only rationale for a new federal revenue guarantee program on top of existing revenue insurance programs is that is seems politically easier to defend than direct payments.”

Babcock’s study was commissioned by the Environmental Working Group, a long-time critic of federal direct payments.

Other organizations like the National Corn Growers Association support “shallow loss” as a cheaper, more stable government farm program.  Members of the House Agriculture committee defend the program as being superior to direct payments which pay out in both good and bad years on the farm.  “Shallow loss” would only trigger in the case of falling prices or when crops are damaged.

Much of the farm program upheaval stems from still uncertain debt negotiations amongst members of the congressional super committee.  While much of the financial parameters for the next farm bill may be decided largely by the super committee, agricultural leaders in the U.S. House and Senate will likely determine the fate of any new initiative.

 


Tags: agriculture news