Farm Bill: Farewell to Direct Payments?

Farm Bill: Farewell to Direct Payments?

National Corn Growers Association president Garry Niemeyer says the new farm bill may look radically different than the old one

Garry Niemeyer was installed as the National Corn Growers Association president Oct. 1. Niemeyer, who farms near Auburn, Ill., has the unsavory job of pushing forward with the 2012 Farm Bill. Unsavory because budget-cutting fever dominates the discussion on Capitol Hill these days.

The mainstream media continues to print articles that highlight farm subsidies in conjunction with record profits for corn and soybean farmers. In light of the nation’s current fiscal situation, Niemeyer says many farm groups, NCGA included, are ready to transition away from direct and countercyclical payments.

Garry Niemeyer, the new president of the National Corn Growers Association, is taking on the farm bill battle at a time when farm spending is under greater scrutiny than ever before.

However, he says risk management tools such as crop insurance are an absolutely critical safety net for family farmers.

“We have to have crop insurance, period,” Niemeyer adds.

Building on ACRE concept

With Congress poised to cut spending in nearly all sectors, most commodity groups have said they are willing to part with direct payments. However, nearly all maintain that a safety net of some sort is necessary.

The 2008 Farm Bill included the Average Crop Revenue Election (ACRE) program as an alternative to direct and countercyclical payments. However, farmers enrolled in ACRE could still receive direct payments, albeit at a 20% reduced rate.

This time around, NCGA hopes to build on the ACRE concept. The NCGA’s proposal is called Agriculture Disaster Assistance Payments, or ADAP. Shortly after proposing ADAP, Senators Sherrod Brown, D-OH, John Thune, R-SD, Dick Durbin, D-IL and Dick Lugar, R-IN, introduced legislation to create the Aggregate Risk and Revenue Management program, or ARRM.

ARRM is very similar to NCGA’s proposed ADAP program. As a result, NCGA fully supports the ARRM legislation. Rather than simply reducing direct and countercyclical payments, ARRM will take their place.

According to NCGA, direct payments have cost about $50 billion over the past 10 years. The ARRM legislation proposes to take 60% of that money to fund ARRM, with the remainder going toward deficit reduction.

ARRM differs from ACRE

While ARRM is similar to ACRE, there are some key differences. First, rather than being tied to state averages, ARRM payments would be calculated based on a five-year Olympic average revenue based on crop reporting districts. In an Olympic average, the top and bottom numbers are removed; the remaining three are averaged.

With ACRE, payments were based on a two year running season average price and a five-year Olympic average crop yields. ARRM will base payments on averages based on five years’ worth of October prices. Niemeyer says the goal is to get the money to farmers on a timelier basis.

“We’re trying to cut the time period that you have to wait to receive a payment after a disaster,” Niemeyer notes. “With ACRE, you could have had to wait almost 15 months for a payment. With ARRM, payments should be only four months away.”

Though farmers will sign up annually, the landowner’s signature is not required. Again, this is different from ACRE.

Bundled with crop insurance, farmers can obtain a 90% coverage level with ARRM. The ARRM election alone comes with a maximum payment of up to 15%. ACRE had a max payment of 25%. Crop insurance is not a prerequisite for making the ARRM election.

Boiled down, Niemeyer says it amounts to creating a program that helps only the farmers who need assistance because of things that are outside of their control, such as weather. “Basically, we want to create a revenue based payment to fill the gap left by crop insurance,” he adds.

Farm bill timing

The current farm bill, officially known as the Food, Conservation, and Energy Act of 2008, was passed in June of 2008. As most remember, it was delayed significantly before the five-year, $288-billion piece of legislation became law.

Niemeyer hopes things will be different this time around. Many of the legislators he’s spoken to are eager to get things rolling.

Lastly, Niemeyer says agriculture is ready to do its proportional share to reduce the budget in a financially difficult time. However, he stresses that risk management tools such as crop insurance and ARRM are absolutely essential to the future of farming.

-Flint is editor of Prairie Farmer, a sister publication to Farm Futures.

 

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