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.

  1. January 30, 2012 at 6:52 AM

    Jeff,
    I have a friend from Minnesota who is working in the oil field in North Dakota running trucking company. He got there because he started farming in 2009 and his corn crop got nipped by frost and snowed in over the winter of 09-10. He refused to file bankruptcy. He was not able to cover expenses, so he negotiated with his lenders, and gave them all the crop insurance indemnity payments and crop proceeds. He is working to save up enough to repay his remaining balances and save up enough to farm again in 2013. Thankfully, interest rates are low so there is no compounding of interest on the balances. But the last farm bill and crop insurance scheme did not provide enough safety net to even get him back to zero. Crop insurance when you have to start out gives you low T yields until you get a proven track record. Not sure if this can be fixed by RMA without “compromising program integrity” All in all the crop insurance program works.

    • commonsenseagriculture
      January 30, 2012 at 6:59 AM

      Good point Paul, thank you. Would it work to utilize the average yield values for “new farmers” for the the region they are in and the years missing? For example, if someone is a first year farmer, their 5 year average would be for the region. If it were a third year farmers, use their yields for the first two years and the regional average for the remaining three?

      • January 30, 2012 at 7:21 AM

        Currently they use they average yields for the county from the National statistics service. I have never found these yeilds to be very accurate though as they are always about 30-40% lower than what us known for our area.

        • commonsenseagriculture
          January 30, 2012 at 7:26 AM

          They do that here too. We discovered that they were treating irrigated and non-irrigated as the same. It also fails to take into account the variance in growing seasons/climate difference in the county. Major differences for our county. Once a farmer has five years in production, under my idea, the regional yields would no longer impact the grower. Good point Mike. Thanks.

  2. January 30, 2012 at 7:47 AM

    Very informative as usual. Not being a farmer or rancher,I know little about the insurance end of things. I was glad you included the organic farmer. Hopefully the lady who blogged on that subject sees this. As far as farmers being paid to not farm, wasn’t that so we could keep the peace with foreign countries by importing their crops? I’m with you, we should buy american, put our farmers back to work, but will they?

  3. January 30, 2012 at 8:00 AM

    Excellent post Jeff, I agree with most all your points. In our specific environment, the 50% criteria would be high. 50% of a five year average corn or bean crop would be quite significant, and allowing someone to turn that under without harvest could create dis-incentives for production that was there and needed (ask the livestock/processing folks!) But that’s a technicality that would vary by region.

    I’m also suspicious that a crop insurance program could be put together that was a break-even proposition for the government. But I do not have a problem with crop insurance as a function of food security that the government is involved in, no different than their involvement in physical security, internet security, etc. I do strongly agree that insurance in agriculture should cover all sectors, writing that bill would be challenging, but important.

  4. January 30, 2012 at 2:42 PM

    Is this funded by the govt? Controlled and held by the gov? 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.

    That last paragraph anything the govt touches is NEVER efficient or cost effective
    would be far better for a private group of say strawberry growers to petition an private in surance company for a collective policy no support let the market bless and kill the loss of jobs is part of the cycle of life as is the creation of new ones

    Our current subsidies result in oversurplust that we send to poor countires for free or next to free that destroys the local market agriculture economy so that the local farmers cannon earn a living.. = govt in= [feces] out

  5. weldon melton
    February 1, 2012 at 12:47 PM

    Jeff for new farmers the current crop insurance program uses 100% of the t-yield for 4 years. Each year that yield is replace with actual yield. If it is available crop insurance uses 10 years of actual yields. In a county such as yours you can request a written agreement to try and get a different yield for irrigated and non-irrigated. I fear that the reason most rules and regulations have been written because some farmer has tried to “work the system” if you know what I mean. There is insurance available for cattle both in the feedlot and on the range. Most farmers that have dealt with FSA would rather not deal with FSA for crop insurance. They are great folks but have their boat loaded. Budget cuts are making their jobs even harder. Thanks for your blog.

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