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Wichita, KS, August 25 – After experiencing both devastating floods and severe drought in different regions of the state, the need for a strong federal safety net, coupled with investments in conservation and research, were on the top of Kansas farmers’ “wish lists” at the Senate Agriculture Committee’s field hearing today.
“Certainly, farmers here in Kansas know the importance of a strong farm safety net,” said Chairwoman Debbie Stabenow, D-Mich. “Suffice it to say, if we ever needed a reminder about the risks farmers face, we got it this year. And that is the top principle I’m focused on as we get started with the new Farm Bill.”
Ranking Member Pat Roberts, R-Kan., said some folks question the need for a Farm Bill with commodity prices where they are today.
“I don’t have to tell this crowd that prices can fall much more quickly than they rise. Without an adequate safety net, many producers will struggle to secure operating loans and lines of credit to cover input and equipment costs.”
Roberts also used the hearing to drive home his concerns about the Obama administration’s focus on everything from “fugitive dust” to the proposed Grain Inspection, Packers and Stockyards Administration (GIPSA) rule on livestock marketing where he said “USDA went outside the specific intent of Congress, trying to accomplish their own agenda.”
“So often I hear from producers that the heavy hand of government intervention impacts them more than any program,” Roberts noted.
Time and time again during the three-hour hearing, participants mentioned the importance of crop insurance as the key component of the farm safety net, although support was also offered for direct payments, “modified” versions of the the Supplemental Revenue Assistance (SURE) program and the Average Crop Revenue Election (ACRE) program and continuation of the marketing loan. In general, producers argued for simplifying programs and making them more workable to reflect the diversity of conditions on the ground.
“Direct payments provide a stabilizing force which, in some cases, allow producers to remain on the farm until better times arrive,” noted Kansas Farm Bureau President Steve Baucus in his written testimony. However, “if priorities must be declared, than a strong and viable crop insurance program will top our list.”
Both Stabenow and Ranking Member Pat Roberts, R-Kan., emphasized that farm program spending will likely be trimmed, but the exact amount has yet to be determined. As part of a deficit reduction deal finalized shortly before lawmakers headed home for the August recess, a bipartisan Joint Select Committee on Deficit Reduction, composed of what Roberts described as the new “Gang of 12” is tasked with recommending a package of cuts to Congress before Nov. 23, with final passage by Dec. 23. The House and Senate Agriculture Committees can make recommendations on how those cuts should be made before Oct. 14.
“We know that our programs face budget pressure…and they should,” emphasized Roberts. The federal debt and deficit are out of control. All USDA programs should be under consideration in a budget review and the agriculture committees with the best experience and knowledge of those programs should lead in that effort.”
Exactly how the Agriculture Committees will weigh in on the deficit reduction process seems to be a “work in progress” —in part because the deficit reduction committee has not yet officially met or provided details to the authorizing committees. As one committee staff member pointed out, it’s hard to hit a target that has does not yet exist.
If the Congress does not approve the deficit committee’s recommendations, cuts totalling $1.2 trillion will kick in and automatic spending cuts across almost all other areas of the federal government will be required. Stabenow said her staff is looking at the level of agricultural cuts that would be required to meet that $1.2 trillion sequestration goal and will proceed from there.
“That’s a fair place to start,” Stabenow emphasized. “We are going to work with members of our committtee to go figure out how we can streamline and consolidate and stretch dollars farther. What we don’t want is people who are not deeply involved in agriculture making recommendations on what ought to happen.”
Roberts pointed out that their current committee includes four members who have been past chairmen, as well as former Secretary of Agriculture Mike Johanns.
“You are not going to see this committee making decisions that are contrary to best interests of agriculture to the degree we have something to work with,” Roberts explained. “We know who the 12 members are and we are going to be talking to them and determine the best way forward.
Stabenow said there were several similarities between the first farm bill hearing she held in Michigan and this second meeting, despite the fact that “we have been fortunate in Michigan not to have weather extemes here in Kansas.
“We hear all the time that crop insurance is the number one risk management tool,” said Stabenow. “We heard that again today. Also we heard great concerns about conservation. Frankly, the reason we don’t have one big dust bowl from Kansas all the way down to Texas is because the effectiveness of conservation programs.” Stabenow says there may be ways to streamline and consolidate conservation programs and “save us some dollars that we might put back into other programs.”
One of the key differences between the Michigan and Kansas hearings is that several witnesses provided more insight about how they would like to see current farm, conservation and feeding programs changed, although you had to read their written testimony to find the details.
With only four minutes to testify, most witnesses provided only brief overviews of their positions.
Here’s a brief overview of some of the written and oral testimony from farm and commodity organization leaders who were invited to testify:
Steve Baccus, Kansas Farm Bureau, Minneapolis, KS
Direct payments have been foundational in maintaining a strong safety net for American agriculture, also provide a mechanism to encourage a new generation of farmers to enter the industry. If priorities must be declared, then a strong and viable crop insurance program will top our list.
Baccus offered strong support for working lands conservation programs, especially the Environmental Quality Incentives Program (EQIP), but questioned whole-farm programs like the Conservation Stewardship Program (CSP). Suggested several changes to the Conservation Reserve Program, including limited whole-field enrollment to fewer acres and reforming the Environmental Benefit Index to assure erosion is given higher priortiy than wildlife.
Baccus, whose organization has been active with many rural development initiatives in Kansas, was the only witness to offer strong support for rural development programs in the farm bill, but called for streamlining USDA’s economic development program and focusing federal incentives on regional cooperation.
Baccus Testimony
Karl Esping, Kansas Sunflower Commission, Lindsborg, KS
“Full funding for the crop insurance program is the highest priority for sunflower growers and I suspect that it is the case for all commodities. Both production and revenue protection insurance products are important options for producers.”
Direct payments and market loan programs are also an important piece of the Farm Bill for minor oil seed producers. Direct payments provide the financial security needed for producers to remain in business when markets are low and/or crops fail or have decreased yields. Market loan programs serve an equally important role in sustaining producers; these loans allow debt repayment while still being sensitive to market trends.
Certain conservation programs in the Farm Bill have been an important part of sunflowers maintaining acres and in some States even gaining acres. Sunflowers are generally part of a robust no-till rotation, a practice that has gained wider acceptance and implementation through EQIP funding.
Kent Goyen, Kansas Cotton Association, Cunningham, KS
“The WTO-Brazil case puts cotton’s marketing loan and counter-cyclical programs under special scrutiny. It is imperative that the Framework Agreement negotiated by the respective governments remain in effect until the 2012 Farm Bill is enacted and the dispute resolved.
“We support the 2008 Farm Bill’s approach to the cotton program and all of its components, from the marketing loan to direct and counter-cyclical payments. The centerpiece of the upland cotton program has been the effective marketing loan program.
“Direct payments are an integral part of the current farm program safety net. It is critical to preserve as much baseline spending authority as possible for this primary piece of the safety net.
“Crop insurance is an essential risk management tool for cotton producers. Our industry continues to examine concepts that improve the various cotton crop insurance products. Revenue coverage, enterprise policy rates and group risk products are examples of improved products that can provide a menu of risk options for growers.”
Ken Grecian, Kansas Livestock Association, Palco, KS
Grecian focused most of his oral testimony on opposition to the proposed regulations issued by USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) on livestock marketing.
“Producers throughout Kansas and the United States are concerned that the proposed regulations would greatly expand the role of government in marketing livestock and eliminate producers’ rights and ability to market livestock to capture the benefits of their efforts to improve the quality of their livestock.”
He also offered strong support for the Environmental Quality Incentive Program (EQIP) which he said is “ improving habitat for grassland-nesting birds under consideration for listing as threatened or endangered species, enhancing the health of grazing lands, improving water quality near lakes used for public drinking water, improving air and soil quality, conserving groundwater and reducing soil erosion.”
“Farm and Ranchland Protection Program (FRPP) and Grassland Reserve Program (GRP) conservation easements are in strong demand by our state’s agricultural landowners who desire to sell their development rights to protect their lands for future generations of farmers and ranchers. In many instances, selling a conservation easement has been a helpful tool for estate and succession planning as today’s landowners prepare for the next generation of farmers and ranchers.
The FRPP and GRP programs are especially important to protecting and preserving Kansas’ native rangelands. The Flint Hills, Red Hills and Smoky Hills areas comprise some of the most important grasslands in the country.”
KLA recommended a specific change to the Livestock Indemnity Program. “Some KLA members have been deemed ineligible for the program because they do not have a USDA farm number. We do not believe it necessary for a producer to participate in farm programs to be eligible for a livestock disaster program.”
Asked if he supported a livestock title in the next farm bill, Grecian said: “No, thank you.” The livestock title reminds me too much of the old idiom, “We’re from the government and we’re here to help.”
Bob Henry, Kansas Soybean Association, Robinson, KS
KSA and ASA (American Soybean Association) believe crop insurance might need to be modified to reflect the lower return per acre and higher input costs for soybean producers in regions that do not participate at meaningful levels.
While noting that ASA supported including ACRE in the 2008 Farm Bill as an option to the traditional “three- legged stool” of farm program support – marketing loans, target prices, and direct payments. We believe the revenue guarantee provided under ACRE can be strengthened and modified to make it more attractive in regions of the country where participation is low.
KSA and ASA will examine replacing the state loss trigger with crop reporting districts, changing the sign-up requirement (currently set for the life of the farm bill), and the reduction in marketing loan rates.
“The 30 percent reduction makes ACRE a non-starter for many southern soybean farmers.”
KSA and ASA also support simplifying the ACRE program to make it more understandable and accessible to producers. The amount of paperwork required to participate in ACRE is excessive, and needs to be reduced if participation rates are to increase.
The soybean industry is looking at the costs and implications of increasing loan rates and target prices to various percentages of historical five-year Olympic moving average prices. Several economists have noted that the cost of raising loan rates and target prices might be surprisingly small based on projected prices and that increasing current support levels might be an effective way to improve the safety net and protect producers in the event prices fall sharply in the future.
“Preliminary reports from some soybean farmers in some states indicate that the Supplemental Agricultural Disaster Assistance program, commonly known as SURE, will provide substantive relief for losses incurred during the 2008 crop year that were not covered through crop insurance indemnities. At the same time, SURE does not provide adequate disaster relief to producers in regions where participation in crop insurance is low or at low levels.”
ASA supports efforts to simplify and consolidate conservation programs to make them more accessible and useful for working lands.
“We support at least maintaining annual funding for the Foreign Market Development (FMD) program at the current level of $34.5 million and for the Market Access Program (MAP) at the current level of $200 million.
ASA will continue to urge increasing AFRI funding to the level authorized in the 2008 Farm Bill of $700 million.
Henry offered strong support for the Biobased Market Program, the Bioenergy Program for Advanced biofuels and the Biodiesel Fuel Education Program. KSA and ASA support the continuation of a relatively small investment of a minimum of $1 million annually for the Biodiesel Education Program in the 2012 Farm Bill.
Ken McCauley, Kansas Corn Growers, White Cloud, KS
McCauley, who farms in conjunction with his son, testitified that “we need to be looking at risk management that is more relevant to the exposure needs of the younger farmer. We have a lot of young farmers and we desperately need them to succeed in agriculture.”
“We strongly support crop insurance as an important part of a farmer’s safety net. Let’s also strengthen revenue-based risk management tools to fix the holes in the safety net, while maintaining a strong and viable federal crop insurance program.
By finding a way to get a revenue-based risk management tool, like ACRE, closer to the farm level, for example by Crop Reporting District, this type of program could provide more realistic coverage for growers.
“What works for the McCauley farm probably won’t for a farmer in western Kansas. When you look at things like multi-year losses, especially in a state like Kansas where the western half can experience extreme drought, while the eastern half can experience ample rainfall, statewide triggers don’t help much. We need to look at opportunities to strengthen the crop insurance program—conventional crop insurance and products like the revenue-based crop insurance.
David Schemm, Kansas Association of Wheat Growers, Sharon Springs, KS
Schemm focused on six programs in the current bill that Kansas wheat producers see as contributing to that safety net, without priortizing any: Direct payments, crop insurance, the marketing loan program, the counter-cyclical program, the SURE program, and the ACRE program. But he offered comments on each. For example:
“Crop insurance does have challenges though and that is why we are hesitant to rely solely on it as a safety net. It doesn't offer protection against large shifts in local market prices, which at times last summer were $2.00 off the price on the Kansas City Board of Trade. Revenue coverage can also deteriorate after multiple years of low prices or disasters. Nevertheless, crop insurance is an important component of the safety net.”
“The SURE program ….has been heavily criticized by farmers for the level of complexity and for its lack of timeliness in making payments. Those two items aside, SURE does have the ability to fill the gap that exists between crop insurance levels and lost income. I have also been told that the SURE program is one that will expire before the 2012 farm bill and therefore will have no baseline funding in the future. If the program could be reworked so that it provided the same coverage, in a simpler manner and without waiting for the marketing year to end for payments to be made, I think the program could prove beneficial.”
“The ACRE program is one that has garnered little participation from Kansas wheat producers, with less than 2% of wheat acres in 2009 enrolled in the program. This low participation rate among
Kansas producers can likely be attributed to multiple causes. Certainly, one of the major concerns for wheat producers in Kansas is the presence of a state-level trigger. In Kansas, where our annual rainfall ranges from above 45 inches in the southeast to under 15 in the southwest the necessity to trip a state-level loss trigger has proven to be too much of an unknown for a large number of our producers to commit to the program, which would require them to give up 20% of their direct payment.
“I hope that by highlighting the myriad of farm programs today and how they are viewed by wheat producers, you will understand that there isn't a "one-size-fits-all" farm program, Schemm said.
Gregory Shelor, Kansas Grain Sorghum Producers, Minneola, KS
Most of Shelor’s testimony focused on ethanol production and the value of distillers grains for the livestock sector. He mentioned the potential for the use of sweet sorghum and high biomass sorghum and the need to develop risk management tools for these crops.
“While most think of ethanol as a product made from corn, most Kansas ethanol plants use both feed grains to produce this renewable fuel. In fact, much of the ethanol produced in Kansas is made from grain sorghum. Having both grain sorghum and corn available allows ethanol plants more flexibility and better pricing opportunities. This ensures a strong and viable ethanol industry in our state, and also ensures a good value added market for sorghum producers.”
“We understand agriculture will see cuts in budget negotiations, but those cuts should be equitable and proportionate to cuts to other programs.”
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