Senate Bill Would Revamp Federal Crop Insurance Program

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U.S. farm subsidies would get a 21st Century make-over to protect grower revenue from ruinous losses, the biggest threat to their operations from today’s high and volatile market prices, under a bill unveiled by Senate Agriculture Committee leaders on Friday.

Their plan would eliminate the $5 billion-a-year “direct payment” subsidy that is paid regardless of need and is a target of reformers. Overall, the Senate bill would cut spending by $23 billion over 10 years, mostly in crop subsidies.

Committee members were scheduled to meet Wednesday to discuss amendments. They were expected to approve the five-year bill, costing about $480 billion, by the end of the week. The 2008 farm law expires on Sept 30. Analysts say budget and election-year pressures may prevent speedy passage of a new law.

The Senate bill would create an insurance-like program to compensate grain and soybean growers when crop revenue is 11 percent to 21 percent below the five-year average with a maximum payment of $50,000, Senate staff workers said. Revenue protection would be more comprehensive by responding to low prices and poor yields than the current program, which is triggered only by low prices.

Farmers would be required to practice land, water and wildlife stewardship to qualify for payments under the new program, called Agriculture Risk Coverage.

Several major U.S. farm groups favor a switch to a revenue protection system although they disagree on details. The Senate bill would give cotton its own revenue plan as part of the federally subsidized crop insurance program, in a step to resolve a World Trade Organization ruling against U.S. cotton subsidies.

Critics such as the Environmental Working Group, which wants more money for conservation programs, said the Senate bill fails to control the rising cost of crop insurance, now the thickest strand in the farm safety net and expected to cost $9 billion a year.

“Replacing direct payments with a revenue guarantee program is a cynical game of bait-and-switch that should be rejected by Congress,” said Craig Cox of EWG, because it would give growers most of the money they get in direct payments.

The Senate bill would cut conservation by 10 percent and crop subsidy outlays by 19 percent and shave public nutrition programs by $4 billion. Together, it would be the largest farm-bill cuts in a generation.

The bill would deny farm subsidies to people earning more than $900,000 adjusted gross income, a lower limit than the $1.25 million now allowed for combined on-farm and off-farm income. A small-farm activist said the new limit could open the door to investors and absentee landlords, who now are limited to $500,000 in off-farm income before losing access to payments.

Earlier this week, a congressional watchdog agency said $1 billion a year could be saved by limiting the premium subsidy on crop insurance. The government pays 60 percent of the premium now and there is no limit on how much growers collect from insurance. The Government Accountability Office said money could be saved by limiting the premium subsidy to $40,000 per farmer or by lowering the subsidy by 10 percentage points.

Oxfam America, an international development advocate, said the Senate bill took two important steps on food aid — it encourages local purchase of food aid and constrains the U.S. practice of giving food to charities who sell it in targeted countries to raise money for aid projects.

(Reporting By Charles Abbott; Editing by Leslie Gevirtz)