Senate Ag. Comm.- Markup Complete
Yesterday, the Senate Agriculture Committee completed the markup of their 2007 Farm Bill proposal.
Congressional Quarterly reported yesterday that, “The Senate Agriculture Committee approved a five-year farm bill Thursday that
includes a new subsidy proposal advocated by Chairman Tom Harkin, D-Iowa.
“The massive $283 billion reauthorization of farm payments, conservation programs and nutrition supports was approved by voice vote
after a two-day markup.
“It includes a new Average Crop Revenue program, an optional subsidy that would tie some payments to farmers to state crop revenue
targets, while trimming others. Harkin and co-author Sherrod Brown, D-Ohio, said the program would offer farmers in some regions
better protection against the risks inherent in farming, resulting in lower crop insurance premiums. That would mean an overall
savings to the government, which partially subsidizes those premiums, they argued.”
The CQ item added that, “To mollify the opposition, the committee adopted an amendment by Pat Roberts, R-Kan., to require farmers opting into
the new program to continue participating for the life of the farm bill. The amendment also would reduce the number of acres on which farmers could
collect payments and keep insurance premium rates where they are today, meaning crop insurers would preserve their bottom line.”
As Philip Brasher reported in yesterday’s Des Moines Register, where he discussed Ag Committee activity from Wednesday, “A Senate agreement to set
up a new subsidy program sought by Iowa corn growers was threatening to unravel amid opposition from the crop insurance industry.
“The program, which would reduce crop insurance premiums for farmers who enroll in it, is a key feature of a draft farm bill that the
Senate Agriculture started debating Wednesday. Failure of the deal would be a setback for the panel's chairman, Sen. Tom Harkin, D-Ia.
“But several senators, led by Sen. Pat Roberts, R-Kan., said the program could hurt the federally subsidized insurance system and
increase premiums for farmers who stick with traditional subsidy programs. The new program could cost the insurance industry an
estimated $2.3 billion over five years.
“Roberts proposed changes that would gut key provisions of the plan, rendering it unattractive to farmers, said Ron Litterer, a Greene,
Ia., farmer who is president of the National Corn Growers Association.
“The committee put off a vote on Roberts' proposals until [Thursday].”
Indeed, a press release issued yesterday by the National Corn Growers Association reflected the concerns about the Roberts amendment that were
expressed in yesterday’s Des Moines Register article: “The National Corn Growers Association (NCGA) is pleased the Senate Agriculture Committee
included a revenue option in the 2007 farm bill, but is disappointed by the committee’s action to strip a key component of the optional revenue-based
countercyclical program, the integration with federal crop insurance. It is a missed opportunity to provide a better risk management tool in the new farm
bill, said NCGA President Ron Litterer.”
The release stated that, “An amendment accepted by the committee on a voice vote stripped the crop insurance integration from the
revenue package. Corn growers support an optional revenue program starting in 2010.
“Litterer—on Capitol Hill for the markup—sees the progression of events as a first step in a revenue option to improve the farm bill
package. ‘While we are pleased a revenue package is in the final bill reported out of committee, NCGA is deeply disappointed with this
setback,’ he said. ‘The amendment makes the revenue proposal a much less attractive option to growers.’
“NCGA has received assurances from Senate Agriculture Committee Chairman Tom Harkin, Majority Whip Richard Durbin (D-IL), and
Sherrod Brown (D-Ohio) that they will work toward a revenue package that is a viable option for corn producers.
“The bill is expected to be on the Senate floor the week of Nov. 5.”
DTN writer Chris Clayton indicated yesterday that, “Initially, Ag Committee Chairman Tom Harkin, D-Iowa, also had in his draft language
that would require USDA to use a farmer's ACR payment to first pay back any crop insurance indemnity the producer may have received
before paying the farmer any funds left over. That was a sticking point for some senators from states where farmers are more prone
to receive crop insurance payouts.
“Sen. Pat Roberts' (R-Kan.) amendment also took away that language, making farmers eligible to receive an ACR payment on top of
crop insurance. Such a change is likely to make the ACR more attractive to farmers like Great Plains wheat growers.
“Language struck in the bill also would change the $15-per-acre fixed payment in the ACR. Initially, the proposal would allow a farmer to
update base acres and get $15 per acre for the full 100 percent of acres planted. Under the Roberts' amendment, that $15 payment
would be attached to 85 percent of a farmer's current base acres. Potentially, that 85 percent base could change for ACR enrollees
depending on how the Congressional Budget Office projects costs.
“Farmers who enroll in the ACR also would lose the chance for marketing loan
gains. Those producers could still take out a marketing loan, but it
would be a recourse loan, meaning if the farmer's crop fell below
the loan level, the farmer would have to make up the difference.”
The DTN article also noted that, “The ACR also includes a pilot program lifting the ban on commodity farmers from planting fruit and
vegetable crops on direct-payment acres as long as the final produce is going to a cannery. Under the plan, farmers in 2010 or after in
Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio and Wisconsin that enroll in the Average Crop Revenue program may be eligible to
plant fruit or vegetable crops. The caveat is each state would be capped at 10,000 acres a year under the program.”
Dan Morgan, writing in today’s Washington Post, reported that, “The proposed plan, known as Average Crop Revenue (ACR), attempts to
address concerns that existing farm programs often pay farmers in bumper years but fall short when revenues plunge because of bad
weather or other factors.
“Farmers now buy private crop insurance that covers them if overall incomes tumble due to crop failure. The federal government pays
part of the premiums, which have been rising.
“The ACR plan initially put forward by Agriculture Committee Chairman Tom Harkin (D-Iowa) would have allowed farmers to insure
part of their farm revenues directly through the government, costing private crop insurance companies an estimated $2.2 billion over
five years, according to the Congressional Budget Office.
“Along with an outcry from the industry, Harkin's plan ran into objections from Western senators who feared that insurance costs would
rise as corn growers in the rainy Midwest shifted to the government plan.
“‘The option . . . creates a potential battle within agriculture we can ill afford at this time,’ the American Farm Bureau Federation
president, Bob Stallman, warned Monday.
“The compromise leaves the crop insurance program essentially unchanged.”
For a more detailed look at crop insurance issues, see this article, “How to
Save Billions in Farm Spending,” by Bruce Babcock, which was
published in the latest edition of the Iowa Ag Review.
In part, Dr. Babcock stated that, “The most vexing problem facing Congress as it works toward completion of the farm bill is where to
find funding to make changes in farm legislation. High commodity prices have drastically reduced available funds that supporters of
change can tap to create new programs or expand existing programs. The agricultural committees have found only two significant
sources of funds under their control: direct payments and the crop insurance program. Reductions in either program could fund
increased nutrition and conservation programs or could be used to redesign commodity programs. The rationale for cutting direct
payments is that it is difficult to see why crop farmers should receive subsidy payments when farm income is at record levels. The
rationale for cutting crop insurance subsidies is that taxpayer support for the program has ballooned with the higher commodity
prices, far outstripping the costs of actually running the program.
“The House-passed farm bill kept direct payments in place but reduced crop insurance funding. About half of the House cuts to crop
insurance are real and about half are budget sleights of hand that involve moving payments from one fiscal year to the next.”
The article added that, “Understanding the implications of cuts in direct payments is simple because they are so transparent. However,
the crop insurance program is so complicated that few actually understand how the program works and what would happen if
program funding were cut.”
The Iowa Ag Review article went on to state that, “Figure 2 shows the ‘break-even’ percent subsidy for farmers in major corn- and wheat-
producing states. Presented are the levels of premium subsidy that if applied to recent premium rates would equate farmer-paid
premiums with expected indemnity payments for producers of corn, soybeans, wheat, rice, and grain sorghum in each state. Expected
indemnity payments are calculated for two periods: 1980 to 2005 and 1995 to 2005. The longer period is more indicative of expected
indemnities if patterns of crop losses in the 1980s and early 1990s are possible in the future.
“The break-even premium subsidy for Iowa is 38 percent if future crop losses follow the 1980 to 2005 pattern or 53 percent if the more
recent past is indicative of future losses. This means that Iowa farmers have no profit motivation for buying crop insurance until the
premium subsidy gets substantial. The same result holds for Illinois, Nebraska, Minnesota, and Indiana. The negative break-even
premium subsidies in Ohio, Kansas, and the Dakotas indicate that farmers in these states do not need a premium subsidy to break
even because their premium rates are already low enough.
“The Figure 2 data indicate that Corn Belt farmers would not buy crop insurance if it were not heavily subsidized whereas farmers in important wheat
states would have a profit motive to buy crop insurance even without premium subsidizes. Given that corn and soybeans together represent about 60
percent of the entire crop insurance program, it is only a bit of an overstatement to say that the crop insurance industry is selling a product with so little
demand at its current price that without government price subsidies, there would be no viable market. This conclusion is reinforced by the fact that
unlike private insurance products, crop insurance premiums do not cover the cost of selling, servicing, and reinsuring the insurance policies. Instead, the
government provides direct support to insurance providers through A&O reimbursements and reinsurance. If premiums were set to cover these costs, the
break-even premium subsidies in Figure 2 would be much greater.
“This lack of market for unsubsidized crop insurance means that substantial savings could accrue from a reduction in premium
subsidies. Direct savings would come about because farmers would be asked to pay more for their insurance.”
Meanwhile, in other coverage of yesterday’s Senate activity, Associated Press writer Mary Clare Jalonick reported that, “Opponents say the
bill helps wealthy farmers too much and should spend more on conservation programs, food aid for the poor or reducing the federal deficit.
“‘This committee could do much better on behalf of not just farmers, but all taxpayers,’ said Sen. Richard Lugar, R-Ind., a committee
member and former chairman of the panel who said he plans to challenge the bill in the full Senate. ‘Each passing year the policies
seem ever more misguided.’”
The AP article added that, “Acting Agriculture Secretary Chuck Conner told reporters Thursday that the Senate committee's bill ‘really
equates to no reform at all’ and may have less of an impact on limiting subsidies than the House bill. But he stopped short of saying
the president would veto it.
“Lugar did propose cutting $1.7 billion from direct payments --subsidies often criticized because they are not based on current crop
production or prices. His amendment would have shifted that money to nutrition programs, including food stamps and emergency food
assistance.
“It lost by a 17-4 vote.
“Sen. Kent Conrad, D-N.D., who negotiated the bill with the committee chairman, Sen. Tom Harkin, D-Iowa, said he hoped that any
additional savings achieved from the bill would go toward Lugar's nutrition proposal.”
In his tele-conference with reporters yesterday, Secretary Conner also stated that, “Additionally, I have to note the provisions that raise
loan rates and target prices for half a dozen crops. This is just simply bad policy. It paints a bull's-eye on the backs of the American
farmer, causes us enormous trouble internationally. It's just simply bad farm policy. No reform at all.”
Associated Press writer Frederic J. Frommer reported yesterday that, “The farm bill passed by the Senate Agriculture Committee
Thursday includes increased payments for both sugar growers and dairy farmers, and won the support of both Minnesota senators.”
The article stated that, “The bill calls for a one cent increase in the guaranteed government minimum price for sugar growers, or loan
rate. Minnesota is the leading producer of sugar beets in the nation.
“It also includes a renewal of the Milk Income Loss Contract program at higher rates. The program, known as MILC, pays dairy farmers
cash when milk prices fall below certain levels.”
Following are anecdotal excerpts regarding the passage of the Senate Ag Committee’s Farm Bill proposal:
* American Farmland Trust- “‘The 2007 Farm Bill passed by the Senate Agriculture Committee has some very good policies and programs, but clearly
could do much more to reform farm programs and help farmers meet contemporary challenges,’ says Ralph Grossi, President of American Farmland Trust
(AFT). ‘The new Average Crop Revenue (ACR) program is an innovative and forward looking proposal that fundamentally changes the way commodity
subsidies operate. The Committee also expanded important programs to provide healthy and local foods to children and adults.’
“While the Committee bill included additional funds for conservation programs, including the renamed Conservation Stewardship
Program (CSP), several important working lands programs did not receive additional funds.”
* Bob Stallman, President, American Farm Bureau Federation- “We remain concerned that when the budget numbers on the final Senate Agriculture
Committee bill are finalized, we will find that commodity title funding will have been reduced in order to increase funding for other priorities such as
conservation, nutrition and rural development.”
* National Farmers Union- “Because the 2002 Farm Bill saved money, the 2007 bill had to be created with a reduced budget baseline. [NFU President
Tom Buis] said that despite this obstacle, the Senators were able to write a good bill.
“A permanent disaster program is NFU’s number one priority for the 2007 Farm Bill and the bill’s $5 billion permanent disaster
assistance program will provide a helping hand to producers struck by devastating weather conditions.”
* American Soybean Association (ASA)- “Amendments adopted included one by Senator John Thune (R-SD) that restores a producer’s option to take a
Loan Deficiency Payment (LDP) in lieu of a marketing loan when prices are below loan level at the time of harvest. ASA had written a letter to the
Committee urging restoration of the LDP option, and was advised by Senator Thune’s office that the amendment was offered as a result of ASA’s
initiative…[ASA President John Hoffman, a soybean farmer from Waterloo, Iowa] stated that ‘ASA strongly opposes introduction of the recourse loan
under the proposed ACR program, and we will continue to work to eliminate it in Conference.’”
* Specialty Crop Farm Bill Alliance- “Today's action in the Senate Agriculture Committee is an important step forward in recognizing the
importance of specialty crops in national farm policy. We appreciate the bipartisan support for our priorities that helped shape the bill
passed by the committee, and look forward to continuing to work together with Congressional allies to address specialty crop needs as
the bill is considered on the Senate floor and in conference. This legislation makes a strong commitment in improving nutrition and
obesity among children by expanding the USDA Fruit and Vegetable Snack Program to 5,000 schools and 4.5 million children.”
* Sen. Tom Harkin (Ag Committee Chairman- D-Iowa) – “This is a forward-looking farm bill with greatly strengthened initiatives to support renewable
energy, conservation, nutrition, rural development and to promote better diets and health for all Americans. It maintains a strong safety net for farm
producers, and strengthens programs that will help agricultural producers of all kinds across our nation.”
* Sen. Saxby Chambliss (Ag Committee Ranking Member- R-Georgia)- “The package we put together is notable in that it does not raise taxes to pay for
new programs or deny our farmers and ranchers a strong safety net.”
* Sen. Kent Conrad (D-ND)- “‘This bill builds on the success of the 2002 Farm Bill, but at the same time provides investments in new priorities, such
as making our nation more energy independent,’ Senator Conrad said. ‘This bill is really about making sure we have secure, domestic sources of food and
energy. It provides resources so we can find our energy in the Mid West, instead of the Mid East. We put more resources into nutrition, conservation, and
securing the safety net for our family farmers and ranchers.’”
* Sen. John Thune (R-SD)- “‘Every one of my amendments adopted by the Committee makes this farm bill better for all South Dakotans. The 2007 Farm
Bill is critically important to the future of South Dakota's family farms and South Dakota's agriculture-dependent economy,’ said Thune. ‘This bill builds
on the success of the 2002 Farm Bill I helped draft with serving on the House Agriculture Committee, and should continue to move South Dakota's food,
fiber and now fuel producers forward.’”
* Sen. Ben Nelson (D-Neb.) – “‘This is not a perfect bill, but it is a good bill that will secure a safe, abundant and affordable supply of domestically-
produced food while advancing our efforts to produce renewable energy and biofuels to help improve our national energy security,’ said Nelson. ‘I am
very pleased that Senator Harkin and the members of the Agriculture Committee agreed to accept so many of my suggestions in the legislation. These
provisions will improve existing programs while creating new incentives for rural development and biofuel production.’”
* Sen. Norm Coleman (R-Minn.)- “As a longtime champion of the sugar program, which operates at no net cost to the federal government, Coleman
worked hard to ensure the program’s extension. Additionally, Minnesota’s sugar beet farmers will receive a sugar loan rate increase of over one cent per
pound. The measure will also create a sugar ethanol program that will present new opportunities for sugar producers and diversify our biofuel
feedstocks. The sugar beet industry provides over $2 billion per year to Minnesota’s economy and sustains nearly 40,000 jobs.”
* Sen. Sherrod Brown (D-Ohio)- “U.S. Senators Sherrod Brown (D-OH) and Hillary Rodham Clinton (D-NY) today announced that a key Senate panel
has included provisions of their Food Outreach and Opportunities Development (FOOD) for a Healthy America Act in the 2007 Farm Bill. Brown, a
member of the Senate Agriculture Committee, was instrumental in securing the programs in the legislation. The Brown-Clinton measures, first introduced
in May, will help deliver fresh food from farms to underserved communities by increasing the supply and availability of locally produced foods.
Following today’s approval by the Senate Agriculture Committee, the farm bill will go to the full Senate for consideration in November.”
As the Farm Bill debate moves to the full Senate, Congressional Quarterly writer Catharine Richert reported yesterday that, “After a
relatively painless markup of the 2007 farm bill, Senate Agriculture panel members are bracing to defend their measure when it
moves to the floor as early as next week…[B]ut that spirit of cooperation could be lost once the bill hits the Senate floor. There,
conservationists, nutrition advocates, immigration activists and free traders looking to boost their priorities may try to add spending or
shift funding under the committee-passed bill.”
The CQ article added that, “Charles E. Grassley, R-Iowa, and Byron L. Dorgan, D-N.D., say they will offer an amendment to reduce — to
$250,000 from $360,000 — the total federal money that any farming operation can receive in a year. Their proposal is intended to
prevent agribusiness from getting too much government aid, Dorgan said.
“Under the committee bill, farmers making more than $750,000 a year in adjusted gross income will no longer get subsidies. Grassley
dismissed that approach as ‘window dressing.’
“Frank R. Lautenberg, D-N.J., and Richard G. Lugar, R-Ind., plan to press for deeper cuts in subsidies. They say their bill (S 2228) would
save $16 billion over five years by expanding crop insurance and trimming farm payments.”
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