Lawmakers mull over margin protection and permanent crop disaster program

Worried about rising production costs and the longevity of sky-high commodity prices, agricultural state lawmakers on Thursday proposed margin protection for agricultural producers and agricultural disaster relief programs for inclusion in the draft. farm bill of 2023. However, funding for the farm bill may be tight, which could limit Congress’s ability to add new features to the farm program.

The House and Senate agriculture committees are gathering ideas this summer for the new farm bill. Drafting of the legislation would begin next year, after midterm elections this fall decide congressional control. Republicans are expected to win seats at a minimum.

“At the end of the day, it’s not what you bring, it’s the headroom you have left, and I have huge concerns about where we’re headed right now,” he said. said Glenn Thompson of Pennsylvania, the senior Republican on the House Agriculture Committee. “It will only take some easing in prices before producers are underwater.”

During the hearing, Thompson, who is expected to chair the committee if Republicans win a majority in the House in the Nov. 8 election, asked how a row-crop margin protection plan, already used by dairy farmers , would compare to the current harvest. subsidy programs, triggered by low market prices. The dairy margin program issues payments when feed costs are too close to milk prices. There is a fee of $100 per year for the basic level of coverage. Farmers can purchase higher levels of protection.

“Well, clearly the advantage is that it would take into consideration both the cost side and the revenue side,” replied Joe Outlaw of the Texas A&M Agriculture and Food Policy Center. The dairy margin program needed repeated revisions, so it would be best to test the idea with a pilot project, he said. “On the cost side, fertilizers and clearly fuel and labor – and there are a lot of things that would matter for one set of crops that might not matter for another. set of cultures, so we have to be very careful to make sure we made it balanced. But it would be worth watching, for sure.

The government has sent tens of billions of dollars in trade war and pandemic aid to farmers and ranchers since 2018, including large disaster payments made this year. Rep. Al Lawson, a Florida Democrat, asked during the agriculture subcommittee hearing for suggestions to create a permanent disaster program. Outlaw and Joe Janzen of the University of Illinois said taxpayer-subsidized crop insurance is usually sufficient. “There are going to be natural disasters,” Outlaw said, and it would be helpful for farmers to “understand what kind of help they could get.”

Two decades ago, Congress increased funding for crop insurance in hopes of ending frequent calls — and unpredictable spending — for disaster relief. Groups such as the American Farm Bureau Federation and the American Soybean Association have called for higher benchmark prices, which are used to calculate subsidy rates. Proponents claim that benchmark prices are below the equilibrium cost of growing crops.

The 2018 farm bill included an escalation clause for benchmark prices, based on the Olympic five-year rolling average of a crop’s annual prices. The indexation would probably be felt from 2024, according to an analysis. Higher reference prices could result in higher subsidy costs when commodity prices return to traditional levels.

“Producer costs have risen significantly and current benchmark prices do not provide a meaningful level of protection,” said Outlaw, which also backed higher rates on so-called marketing loans in the Farm Bill. of 2023. Currently, farmers decide each year whether to enroll their crops in the Agricultural Risk Coverage or Price Loss Coverage subsidy programs. “Allow them to have the highest [payment] of the two” and eliminate the annual decision, Outlaw said. “It puts undue stress on them.” Rice farmers will need additional federal support this year, he said, due to high fertilizer prices.

“Most of my suggestions require additional resources that may be difficult to obtain but are necessary,” Outlaw said in written testimony.

When the 2018 Farm Bill went into effect, crop subsidies were expected to average $6.5 billion a year, crop insurance $7.8 billion a year, and conservation $6 billion. dollars per year.

The crop insurance “subsidy divide” has widened between white farmers, who tend to farm more acres, and black farmers with smaller farms, Professor Ronald Rainey of the University of Arkansas. “Because crop insurance subsidies are based on the value of a producer’s crop, the largest subsidy premiums go to producers with the highest sales. The vast majority of farmers who receive the highest subsidies are white.

Socially disadvantaged farmers and ranchers are often suspicious of the USDA, and some refuse to enter a USDA office “for fear – based on experiences – of disparate treatment, loss of land, or be foreclosed on a loan on less than fair terms”. said Rainy. The USDA has acknowledged the discriminatory treatment of black farmers in the so-called Pigford settlements of 1999 and 2011.

To view a video of the hearing, click here.

To read the written witness statements, click here.