Hard Market Strategy Bundle! 📦 Cyber Monday Deal Get the Bundle

Senate Committee Votes to End Direct Farm Subsidies, Backs New Insurance Plan

By | April 27, 2012

U.S. farmers will get a new crop-subsidy program that protects them from ruinous declines in revenue, the biggest threat to survival with today’s high and volatile prices, a Senate committee decided on Thursday.

The Agriculture Committee approved the new path for the U.S. farm program by a 16-5 vote. The package would erase almost all traditional farm supports, especially the $5 billion a year “direct payment” subsidy paid regardless of cost, and save $23 billion over 10 years.

Instead, an insurance-like program would compensate grain and soybean growers when revenue from a crop was 11-21 percent below the five-year average with a maximum payment of $50,000. The federally subsidized crop insurance system would cover deeper losses. Cotton growers would use a separate, but similar, program.

“The era of direct payments is over,” said Agriculture chairwoman Debbie Stabenow of Michigan. “We are moving to risk management with additional support to farmers who need it.”

Added Pat Roberts of Kansas, the Republican leader on the committee: “This is truly a reform bill.” The five-year farm bill would cost around $480 billion, with public nutrition programs accounting for three-fourths of the spending.

Stabenow said the bill could be called for Senate debate in a few weeks and she aimed for enacting a new farm law before the current one expires on Sept. 30.

The House of Representatives wants much bigger cuts — $180 billion. Analysts say budget and election-year pressures may delay the new law until a post-election session or even 2013.

Revenue protection would be more comprehensive by responding to low market prices and poor yields than the current farm program, which responds to low prices only. The only hold-over from the current system would be so-called marketing loans that assure a minimum return on crops.

Farmers would be required to practice land, water and wildlife stewardship to qualify for payments under the new program, called Agriculture Risk Coverage. U.S. farm groups generally support the switch to revenue protection but rice and peanut growers say they will be short-changed by the Senate bill.

“There is no safety net,” objected Saxby Chambliss of Georgia, a peanut state. Chambliss and the three other Southerners on the committee voted against the bill, as did Kirsten Gillibrand of New York, who objected to cuts in food stamps and a new dairy support program.

Farm-subsidy reformers saluted the bill for the strictest limits yet on farm subsidies. People with an average adjusted gross income above $750,000 will not be eligible for crop subsidies, down from the current $1.25 million. And only one person per farm can claim eligibility for payments, closing a loophole that let payments flow to people whose only connection to agriculture might be an occasional phone call.

While revenue program payments would be capped at $50,000, there is no limit on income from price supports. The 2008 farm law allows $105,000 in subsidies and also has no limit on price support payments.

The government pays 60 percent of the cost to farmers to buy crop insurance, which is sky-rocketing in cost. The committee-passed bill would not limit the premium subsidy or indemnity payments. Reformers say big farmers will benefit the most.

Most of the farm bill savings would come from crop subsidies, down by $13 billion or 19 percent, while conservation programs are cut by $6.4 billion or 10 percent and nutrition is cut by $4 billion.

“A farm bill that cuts programs for the hungry and the environment to help finance a new entitlement program and unlimited insurance subsidies for the largest and most profitable farm operations should not be called a reform bill,” said Craig Cox of the Environmental Working Group, which wants more money for conservation.

The committee added about $1 billion to the revenue program on Thursday by allowing payments on a larger share of land planted to crops. It also guaranteed $800 million for bio-energy programs.

(Editing by Dale Hudson.)

Topics USA Profit Loss Agribusiness Politics

Was this article valuable?

Here are more articles you may enjoy.