Floor fight expected on revenue option

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Heading into the Senate Agriculture Committee's debate on the farm bill, the National Corn Growers Association was pleased with the state-based revenue assurance option included in the chairman's markup. But during committee debate, objections surfaced over fears of "unintended consequences" to the crop insurance industry as a result of implementation. An amendment made a fix, but the corn growers are unhappy with the changes.

Agriculture Committee Chairman Tom Harkin (D-Iowa) included a state-triggered, revenue countercyclical program — called the Average Crop Revenue (ACR) program — in the package he presented to the committee. Included in that package was a requirement to integrate crop insurance with the revenue program.  

But Sen. Pat Roberts, R-Kan., introduced an amendment in committee that stripped the crop insurance integration from the revenue package.

NCGA President Ron Litterer said removing the crop insurance component makes it a "much less attractive option to growers."

Sherrod Brown, D-Ohio, who introduced the bill, said he is still looking at ways of improving the bill when it reaches the floor this week. Senate floor debate is expected to begin Nov. 5 and could last as long as two weeks.

How it works

Farmers have a one-time only choice of two farm support program options. The current safety net is one option. Current base acres, base yields, and fruit and vegetable planting restriction is retained except for a processing tomato pilot project in Indiana.

Here is a summary:

  • Direct Payment rates: no change
  • PCCP: target price increased for barley, oats, soybean, and wheat.
  • Marketing Loan rates increased for barley, oats, and wheat.

The second option is Average Crop Revenue (ARC) program for covered commodities and peanuts planted in 2010-12. Planting flexibility allowed for processing, but not fresh, fruits and vegetables; it is limited to 10,000 acres/state in Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio, and Wisconsin. ARC consists of direct and state counter-cyclical revenue payments and recourse loans.

  • Direct payment equals (A) $15/acre times (B) farm's current total base acres times (C) 85%.
  • Counter-cyclical revenue payment for a crop equals {[(state revenue target minus state actual revenue) times (farm's base acres for crop) times (farm's actual production history divided by state trend yield) times 90%] times 85%}.
  • State revenue target equals [(state trend yield/planted acre) times (average of current and past 2 years revenue insurance pre-planting price)] times 90%. A 15% cap exists on the change in the average pre-planting price from year to year.
  • Actual state revenue equals [(state yield/planted acre) times (revenue insurance harvest price)]

Savings provide more nutrition funding

Under an agreement reached Nov. 1 between Harkin and other members of the ag committee, $1 billion savings found in the reworked ACR program will be devoted to boost nutrition funding.

The savings determined by Congressional Budget Office will not only strengthen nutrition, but also improve the ACR program by raising the fixed payment on base acres from 85% to 100%, a statement from Harkin said. The savings are from the reduced payment acres for the revenue portion and from the one-time signup, i.e., producers can enroll in either 2010, 2011 or 2012, but once a producer signs up, the producer has to stay in the ACR through the end of the farm bill.

Other savings occur because there is less participation in the direct and counter-cyclical payments, and loan benefits, and from the 2 percentage point reduction in administrative and operating expenses for crop insurance.

 "During the deliberations in the Agriculture Committee over the Roberts amendment, my goal was to improve ACR and, if possible, expand nutrition programs. Today's compromise goes beyond my initial expectations — it will feed the hungry by providing more people with more benefits while improving the ACR option for farmers," said Brown.

"The improved ACR program that was recently negotiated will save us an additional $1 billion while providing better protection for farmers by protecting revenue rather than merely price as the current system does," said Durbin. "The proposal included in Chairman Harkin's bill is a significant step forward and it will help us make our support programs work better for both producers and taxpayers."

Price elections more important

The National Sorghum Producers (NSP) stated if the ACR program passed in the Senate and negotiated as a part of the final farm bill, crop insurance price elections will have a profound impact on producers' choices of counter-cyclical coverage.

NSP has been working with the Risk Management Agency (RMA) over the last several years to set sorghum's crop insurance price elections equal to corn. In NSP's view, USDA's own data justifies the positive change needed for sorghum producers. Early this year, NSP staff met with RMA staff to urge upward adjustment to the elections.

Positive change was made, but more is needed, NSP stated. Congress has given RMA flexibility to set grain sorghum price elections, but this flexibility must be used in a way that is transparent and based on current market signals. NSP staff has continued to analyze the change in sorghum markets and basis and will present further justification to USDA next week.

NSP Director James Vorderstrasse of Hebron, Neb. was on the Hill last week continuing to the make the case for improving sorghum's price elections. "In areas where corn and grain sorghum compete for acres, producers will look at crop insurance elections while making their planting decisions. We want to make sure that not only producers but also ag bankers can see that grain sorghum will provide adequate crop insurance protection."

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