Time to circle the wagons on commodity program ideas?

By Sara Wyant

© Copyright Agri-Pulse Communications, Inc.

WASHINGTON, February 15, 2012 -The push is on to get the 2012 farm bill done ‑ and get it done this early this year. That means it's time to focus on bridging the often contentious differences between various proposals for the commodity title.

That was the thrust of the message delivered by Jonathan Coppess, chief counsel for the Senate Agriculture Committee, when he spoke to representatives of key farm organizations and members attending the Crop Insurance Industry annual convention in Scottsdale, AZ this week.

But the path forward is anything but clear, as producers and lobbyists promoted a wide variety of farm bill plans, ranging from deep loss to shallow loss, baseline protection, and all parts in between.

American Farm Bureau Federation lobbyist Mary Kay Thatcher said that “no one group has an idea that can pass the House and Senate Ag committees and gain approval on the House floor.” She suggested that all of the major players may have to make adjustments or come up with some type of new idea.

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AFBF is pushing for a program that provides protection for deep, systemic losses and ultimately allows for lower priced crop insurance premiums. Although the proposal has yet to be scored, “We believe we can provide 75% coverage for a CAT type program,” she said. At the same time, Thatcher says the nation's largest farm organization has “serious concerns about some of the shallow loss proposals and also the high target prices.” If you look at Congressional Budget Office numbers with the target or reference prices, “they will pay out 10 years out of next 10 for rice and peanuts. That's not going to fly,” she said.

National Cotton Council CEO Mark Lange made the case for a cotton specific program, dubbed the Stacked Income Protection Plan or STAX, that he says can address budget concerns and meet the “unique challenges” resulting from the World Trade Organization case raised by Brazil.

“The policy developed by the NCC can be operated with a 30% reduction in the CBO baseline for upland cotton,” Lange stated. “The STAX program is an extension of current area-wide revenue based crop insurance products and allows reasonably priced coverage for losses that are not currently available.” It would be administered by the Risk Management Agency, and not subject to payment limits.

Designed to cover shallow revenue losses, STAX is similar to a GRIP type of program that would be triggered on the county level. If realized income is below the selected coverage level of the reference income, based on $0.65/lb., then an indemnity is triggered. Producers would pay 20% of the total premium and not have to demonstrate a loss to trigger payments.

Some farm leaders privately took their shots at the concept. They warned that it could lead to “planting for the program” and an increase in cotton acres. STAX will become a target that will result in all crop insurance policies being covered by payment limits, they fear.

But Lange emphasized that there should not be any fear about STAX influencing cotton plantings. “The futures market will send the signals regarding plantings,” he emphasized. And in a not too thinly disguised stab at the corn growers, he suggested that cotton acre shifts, could occur as soon as there is a renewable clothing standard mandating consumer purchases of clothing using US cotton.”

Missouri producer Blake Gerard, who serves on the USA Rice Producers Farm Policy Task Force, said the fall farm bill package had some positives and negatives. “One of the negatives was that we felt we took unnecessary heat on 13.98/cwt. reference prices and were criticized for how it would cause acreage to increase. When you take $13.98 x 85% payment rate using base yields, it translates to $9.00, which is below our cost of production.  So a $13.98 price is not going to increase rice acres,” he noted.

The National Farmers Union's Mike Stranz said his members “would like to expand crop insurance to underserved crops and regions, specialty crops, emerging methods of production. He also noted a lot of pressure is brewing to link crop insurance to conservation compliance.

Adding to the support for crop insurance as the bedrock of the farm safety net were National Association of Wheat Growers CEO Dana Peterson and the American Soybean Association's Bev Paul. However, Paul shared results from a United Soybean Board survey which indicated the challenges associated with convincing growers outside of the Midwest to purchase crop insurance and provide higher levels of risk protection.

Growers in many southern states who did not purchase buy-up coverage say there are no changes that would encourage them to buy up, according to the survey. Paul said it points to a “big educational challenge” to explain options to restore or improve yields that are available to them.

Ken Barbic, Western Growers Association, acknowledged that “We did pretty well in the super committee process with the strong specialty crop interest that Sen. Stabenow has.” For the specialty crop industry, crop insurance is viewed with some skepticism.

The citrus industry in California has a pilot program they are very happy with, but on the vegetable side, there is a lot of concern about how programs would be developed,” he said. “There was a watermelon pilot program that left a bad taste in peoples' mouths. It was a regionally based program that encouraged producers to get into the program for the first time and created a huge glut.”


Original story printed in February 15, 2012 Agri-Pulse Newsletter.

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