2012 Farm Bill: Is It Finally Time?
I have written in other posts on my thoughts regarding the Farm Bill. Once again, we have the opportunity to make changes that could turn a program into a true safety net…meaning it would send producers back up, after falling, not catch them and not let go, or worse yet, promote a state of long-term dependence.
Being from California, I suspect I have a slightly different perspective on the issue of crop insurance. However, I also believe that there are others, particularly in Florida and Michigan, to name a few, who have some similar thoughts. I mention this because of our tremendous diversity in crops grown, many of which do not even qualify for support from the current or past Farm Bills.
Historically, direct payments served a valuable purpose, however, times have changed and these payments have resulted in long-term impacts on crop production practices that I do not think are beneficial any longer. In fact, in some cases, direct payments have negatively impacted the free market and have encouraged production practices that have, at times, artificially inflated prices.
It is time to implement a crop and livestock insurance program that all producers who choose to participate in may and can, without regard to what they grow or raise. It is time that the lettuce, strawberry, carrot, tomato, orange, almond, apricot, sheep, cattle, corn and rice producers have equal opportunity to insure their farms and ranches for protection from losses.
The insurance program should be set up so that if a grower does not pay in, they do not receive a payout. It should have options or levels of insurance available including protection for: drought, flood, fire, pest (bacterial, fungal, viral, insect and terrestrial), and predation losses. Growers would have the option of determining which, if any protections, they desired and also have the ability to decline to insure.
Discounts would be made available to growers who implement preventative measures; maintain a fire buffer around flammable crops, utilize approved pest prevention practices, implement predator control measures, etc.
Losses would be verified by county Farm Service Agency (FSA) personnel or designated county Agriculture Commission staff.
Payments back to producers would be based on average yields for that grower during the five most recent years (not including years of catastrophic loss) and at the prices for that grower’s region, when the commodity would have been sold (determined at time of purchasing insurance).
If a grower sustains more than 50% loss, an authorized agent will verify and the remains would be eligible to be turned under to the next crop. Growers would no longer make “self-determinations” and turn the crop under without authorized verification. If that grower was able to harvest or is able to salvage the remaining crop, that value would be subtracted from the payment.
If a grower sustains less than 50% loss, they would harvest the remaining crop and sell it. The revenue from the sale would be subtracted from the return payment.
In the case of livestock, producers would have the ability to insure both market and breeding animals, at any age. Values of the insured animals, as well as expected weights and sale dates, would be determined at the time of purchasing the insurance.
An insurance program that was open to all growers and truly served as a safety net would create several benefits.
First, banks and other lending institutions would be more likely to extend loans to farmers and ranchers, knowing that the commodity being grown could be insured for losses. This would benefit not only seasoned farmers, but also those just starting out. It would also aid in risk management for all production practices; conventional, organic, natural, etc. Further, it would reduce the need and perhaps even phase out, federal farm loan programs.
Second, it would offer all growers the opportunity to better manage risk. It could also lead to more stability, not only in farm ownership, but in food, fiber and fuel production and prices. One of the biggest challenges for new and young farmers is being able to keep a farm after incurring a crop loss early on in their endeavor. Additionally, decisions on what and how much to plant, would become based on more accurate projection over time, as the incentive to grow particular crops due to guaranteed subsidies would disappear. Thus, the extreme fluctuations in both yields and prices would potentially become less extreme.
Third, in order to receive a payment, a grower would have to pay-in first. It would end the era of growers receiving payments when they were not necessary, for acres that “qualified” even though they are not producing the “qualified” commodity and for acres that are not even in production. The days of getting paid to not grow a crop must come to an end. We must find our way back to growing what and how much the consumer demands.
Fourth, an insurance program could potentially pay for itself, with minimal need for subsidized tax dollars and a potential reduction of government employees to oversee the program, as it could be implemented regionally and locally, with existing staff.
I am certain that some who read this may feel blood come to their frontal lobes, or find their fists begin to clench…that is fine…really. I encourage you to leave your thoughts on why an insurance program, as described above, would not work to address the risks you face.
Likewise, I also encourage those who may support moving to an insurance program to comment on what additions or modifications could be made to make it even more effective.
Finally, for those who do not believe that there should be any type of support for farmers and ranchers, please, feel free to share your thoughts and reasoning.
It is my firm belief that all farmers and ranchers should have the ability to insure what they grow or raise, in order to reduce risk, and move away from what I view as a growing dependency upon the Federal government and towards a healthier, more efficient safety net.