Secretary of Agriculture Tom Vilsack testifies on the Farm Bill in front of the U.S. Senate Committee on Agriculture, Nutrition and Forestry on Capitol Hill in May 2011. (USDAgov/Flickr)
Here’s where we’re at with the Farm Bill.
The reauthorization of the five-year legislation expires Sept. 30. And the discussion about what it should include is heating up. Again.
We went through lots of talk about food and farm concerns last year as the Congressional Joint Select Committee on Deficit Reduction – the “super committee” -- put the farm bill on a fast track. That didn’t pan out, of course, and the debate is back on, even in an election year.
Secretary of Agriculture Tom Vilsack has said if Congress can act by August, the Farm Bill stands a chance of passage this year. But if not, it will probably become the 2013 Farm Bill.
Reading the Farm Bill tea leaves is tricky, but it did seem like legislators last year had come to something of a consensus on expanding crop insurance and limiting direct payments.
Today, the House Agriculture Committee held its final Farm Bill field hearing (they say), this one in Dodge City, Kan., and the support for crop insurance -- and insistence on "no harm" -- was a common refrain from those who testified.
“Washington should keep it simple,” said Dee Vaughan, a farmer from Dumas, Texas. “We rely on crop insurance for what it does best, protect against production risk. We need an equally effective policy that provides protection against low prices over a sustained period of times such as was experienced in the late 1990s through the mid-2000s. While shallow losses can be devastating if they are repetitive, the risk producers fear most is a drop in commodity prices to below cost of production that lasts for several years.”
Simple? No, it’s getting more complicated.
The Government Accountability Office (GAO) recently released a report suggesting crop insurance program supports should be limited for farmers.
And this week: Respected economist Bruce Babcock has a new study out, sponsored by the Environmental Working Group, which argues that the U.S. government would spend billions of dollars less than we do now if we just gave away a simplified version of crop insurance for free.
If you're like me, you're scratching your head at this point, wondering how this could be true. Why would providing crop insurance for free be cheaper than the current system, in which farmers pay for private insurance and the government covers just part — about 60 percent — of the cost?
Here's why, according to Babcock. Government subsidies have encouraged private insurance companies to offer increasingly gold-plated forms of crop insurance. The policies don't just cover the risk of bad weather anymore. They guarantee a farmer's income, covering all kinds of risks, including the risk that corn prices might fall.
Subsidies make these policies artificially cheap, so farmers have been buying more and more of them. As Babcock puts it, "it is fundamental tenet in economics that people have an insatiable appetite for products they can buy with someone else's money."
In addition, according to Babcock, crop insurance companies have managed to negotiate sweetheart terms for themselves, allowing them to pocket exorbitant fees. (According to Babcock, these companies spend one dollar for every dollar that they pay out to farmers.) The result: A program that the Congressional Budget Office predicts will cost taxpayers $90 billion over the next ten years. That's more than projected spending on all other traditional farm subsidies.
Babcock's alternative is a basic crop insurance program that would only cover the risk of a poor harvest. If a farmer's harvest fell below 70 percent of the average yield for that area, the government would pay the farmer the full market price of any additional loss. Babcock calculates that the cost of providing this coverage for free would be $5.7 billion to $18.5 billion less than the current program, depending on how many farmers participate
Is it enough of an argument to hold back the crop insurance steamroller?
The Senate Agriculture Committee says it will mark up the Farm Bill on Wednesday and is expected to be done by the end of the week with a strong majority of the committee voting for it. Chairwoman Sen. Debbie Stabenow stated there is “a tremendous amount of consensus on the majority of the bill.”
In the meantime, we’ve got more hearings to check out.
Six U.S. House subcommittees will hold the hearings throughout April and May to hear from "national agricultural stakeholders advocating for policy priorities."
The many voices are important. But it may make it tough to keep in mind this plea from Nebraska farmer Zachary Nunnicutt, who testified in Dodge City Friday.
"It is imperative that this (Farm Bill) policy be easily explained and defended to the public," Nunnicutt said. "Agriculture is on display and under the microscope like never before, and there will be much public scrutiny of any government spending in this arena."
Renewed scrutiny for the Farm Bill? We'll keep you posted.