Farm Bill: Price Support or Insurance Protection For Crop Revenue

    U.S. farmers will have the choice of traditional price supports or insurance-like protection against a drop in crop revenue under the farm bill headed for a final vote in Congress.

    The bill, a compromise of House and Senate versions, was unveiled on Monday by Agriculture Committee leaders, who drafted the plan behind closed doors over the past six weeks. The House could vote on it on Wednesday with the Senate voting as early as next week whether to send the five-year, $500 billion bill to President Barack Obama for enactment.

    Overall, the bill was estimated to shave federal spending by $23 billion over 10 years compared to current law. It would cut crop subsidies by $8 billion, conservation by $7 billion and food stamps by $8 billion.

    The so-called shallow-loss revenue program and a $1-billion-a-year expansion of federally subsidized crop insurance are the bill’s salient reforms for producers. The cotton program, for example, would be converted largely to a revenue insurance plan called STAX.

    House Agriculture Committee chairman Frank Lucas, from wheat-growing Oklahoma, insisted during farm bill negotiations on giving row-crop farmers a choice in farm programs. There was no “one size fit all” plan, he repeatedly argued.

    Soybean and corn growers wanted a revenue protection plan to replace traditional supports. Rice and peanut growers preferred traditional supports. Each faction said the other tried to skew the farm bill toward its region.

    Lucas said with the new bill “you only get help in a weather failure or a market failure” because it ends the $5 billion a year direct-payment subsidy paid regardless of need. The payment, created in 1996, was a prime target for reformers.

    Under the bill, growers will make a one-time choice for their corn, soybeans, wheat and other program crops whether to enroll for revenue protection, based on yields and season-average prices, or a program similar to target prices that sets a minimum price.

    “Reference prices” used in the bill to trigger payments are up sharply from current law. They would be $5.50 a bushel for wheat, $3.70 for corn and $8.40 for soybeans vs. the 2008 law’s $4.17 for wheat, $2.63 for corn and $6 for soybeans.

    For farmers who choose revenue protection, payments would become available when crop revenue is less than 86% of the rolling five-year average. They would end when revenue falls below 76% of the average. Crop insurance would cover deeper losses.

    So-called Price Loss Coverage would operate similar to current law, with payments triggered when season-average prices are below the guaranteed price.

    Kansas Sen. Pat Roberts said he would vote against the farm bill because “it repeats a classic government subsidy mistake — setting high fixed target prices — which only guarantees overproduction.”

    Analysts say the shallow-loss program would be the first to respond when commodity prices, which ran at historically high levels for several years until this year’s harvest, fall but payments would taper off during a run of low prices.

    Besides the shallow-loss program, the farm bill would create an insurance program called Supplemental Coverage Option that would operate in a similar way but with fewer limits on payments. It would be available to growers who opt for Price Loss Coverage.

    “This bill establishes practical risk-management programs that will protect us in difficult times,” said Ray Gaesser president of the American Soybean Association, which supported the bill and praised it for “a flexible farm safety net.”

    A leading conservation group, the National Association of Conservation Districts, supported the bill.

    Meat industry groups said they opposed the farm bill because it does not satisfy their goal of repealing a law that requires packages of beef, pork, sheep and poultry meat to carry labels saying where the animals were raised and slaughtered.

    The bill also deleted House language sponsored by Rep. Steve King, R-Iowa, to override state laws, such as in California and Oregon, that set animal-welfare standards and block shipments from producers who do not follow their rules.

    Sen. Chuck Grassley, R-Iowa, said the farm bill, while setting a $125,000-a-person limit on farm subsidy payments per year, watered down his package of reforms “to the point they will likely have little to no effect.” Grassley wanted a “hard” cap on payments and to allow only one person per farm to qualify for payments for providing management. There is no limit now on how many people per farm can qualify as managers.

    The farm bill would repeal the current dairy program and replace it with a dairy margin program based on the difference between milk prices and feed costs. Producers would pay a premium based on the level of protection they want and the portion of their herd’s output that they want to cover.

    When the margin is less than $4 per 100 pounds of milk for two months in a row, the Agriculture Department would purchase dairy products, such as cheese and dry milk, for donation to anti-hunger programs. Purchases would end after three months or if other conditions are met, such as U.S. cheddar cheese prices being more than 5% above world prices.

    The donation program was an alternative to Senate language to discourage overproduction that dairy processors said amounted to unacceptable supply controls. House Speaker John Boehner, R-Ohio, strongly opposed the Senate language and a similar proposal by Rep. Collin Peterson, D-Minn., the lead Democrat on the Agriculture Committee.

    Boehner indicated satisfaction with the new language during a meeting with committee chairman, said Rep. Steve Southerland, R-Fla. “We believe the speaker is satisfied with the dairy.”

    Southerland was a leader among House conservatives who pressed for $39 billon, the largest cuts in a generation in food stamps for the poor. The farm bill would cut $8 billion by narrowing a loophole involving utility costs and create several pilot programs to help food stamp recipients find work or get job training.

    “Is it all I wanted? I’ve been married long enough to know you don’t get everything you want,” Southerland told reporters.

    Food stamps were the headline issue for many lawmakers when it came to the farm bill. Lucas told the House Rules Committee on Monday night that dairy was the most difficult issue to resolve.

    “If I expire in the next three days, I want a glass of milk carved on my tombstone because dairy has killed me,” said Lucas.


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