Representatives of Texas’ major commodity organizations on hand at Monday’s Texas Ag Forum in Austin seemed to be grudgingly resigned to significant cuts in farm program funding but offered suggestions they hope Congress will consider before a final bill is drafted.
The National Cotton Council offers STAX, Stacked Income Protection Plan; the National Corn Growers Association prefers ADAP, Ag Disaster Assistance Program. Other commodities also offered recommendations for new programs.
Sam Willett, senior policy director, NCGA, said ADAP would be “a variation of the ACRE (Average Crop Revenue Election) program passed in the 2008 farm bill.
The guiding principles of ADAP include:
- Simplicity. Get rid of as many details as possible.
- Complement and not compete with crop insurance.
- Target multi-year and significant uninsured losses (95 percent coverage level, 10 percent maximum loss).
- Get payments closer to the farm (through crop reporting district yields).
- Provide multi-year protection (five-year Olympic average).
- Make payments faster (crop insurance price instead of seasonal average price).
Willett said crop insurance provides coverage for disasters and deep losses. “We need coverage for multi-year price declines or low yield over multiple years.” That requires a multi-year revenue benchmark, particularly for price declines and would require high coverage levels, he said.
He said since crop insurance is a disaster payment the program would need to limit the maximum payment.
Gary Adams, vice president, economics and policy analysis, NCC, said a sound farm policy is “essential to the economic viability of the cotton industry. The 2008 program has served the industry well, but looking ahead, the industry faced the challenge of designing the most effective safety net while addressing reduced budget resources and the Brazil WTO dispute.”
He said STAX will provide levels of income protection, similar to GRIP (group risk income protection) plans. “STAX is designed to complement insurance purchase decisions,” Adams said.
For the most part, the program would use county level yields, he said. “But some counties have too little cotton so some grouping will be necessary. The program will provide cotton farmers the opportunity to cover deep losses.
“STAX is on top of a producer’s individual crop insurance but there is no requirement to buy crop insurance coverage. Most will have CAT (catastrophic loss) policies.”
Adams said the program would make “enhancements to GRIP but incorporate what GRIP already offers.”
He said STAX is no “one-size-fits-all” program. “Producers have coverage options. The exact level of coverage is selected by each producer. The program will not pay every year, but an individual producer does not have to suffer a loss. Payment depends on county losses.”
Adams said producers would pay a percentage of the premium for STAX, “similar to existing enterprise unit policies.”
He said NCC is also looking at options to settle the Brazil WTO case, including changes in the marketing loan. “NCC proposes to allow the level of the marketing loan to change based on historical average world price,” he said.
The maximum loan rate would be no higher than 52 cents a pound and the minimum would be 47 cents a pound. “All other aspects of the marketing loan would remain the same. Brazil might push back and charge that it’s only a 5cents per pound adjustment and that the marketing loan is still in place.
“But we believe this meets the (WTO) panel’s definition of a ‘significant change.’ I believe NCC has addressed the budget and the Brazil case.”
Reece Langley, vice president, government affairs, USA Rice Federation, said the rice industry has several priorities in any new farm legislation.
“We want a bankable safety net,” he said. “Can we take the program to lenders and help secure operating loans? Price protection is critical for rice. We also need to maintain proportional rice baseline funding.”
Langley said any new legislation also should minimize the impact of future payment limits and adjusted gross income levels. “We also want to improve crop insurance coverage.”
The rice industry likes the direct payments included in the 2008 law. “We like the simplicity and the planting flexibility,” he said. The industry would like to see payments directed to planted acreage, rather than base. Paying base has resulted in lost acreage since payments can be made regardless of whether the crop is planted.
Langley also suggested that price support levels should more closely reflect the market price and the cost of production.
Wayne Cleveland, Texas Sorghum Producers, said crop insurance is “the number one thing,” that kept sorghum producers viable during the 2011 drought. “We have to have crop insurance,” he said.
He also noted that the renewable fuel standard (RFS) offers an opportunity to expand the sorghum base. “But we need an insurance program that covers sweet sorghum. That’s not currently available.”
He hopes the energy title included in the last farm law will continue. “That is beneficial to growers and encourages the use of sorghum for ethanol. Protecting the RFS is important for sorghum producers.”
Cleveland said using an Olympic average to adjust program payments could hurt producers who had a year with a zero yield in one of the five years. “That loss drops average yield by 33 percent,” he said.
Jeff Nunley, executive director, South Texas Cotton and Grain Association, said crop insurance is important to South Texas producers. “In 2009, yields in the Coastal Bend were close to zero; crop insurance kept us in business. We could see another 2009, or worse.”
Nunley criticized the Super Committee concept. “The folks in DC should be grown up enough to get the job done themselves,” he said. He’s concerned about the possibility that the Super Committee will design the farm bill. “We have a lot of experts in policy and farm groups,” he said.
Jim Sartwelle III, director of public policy for the Texas Farm Bureau, said the Super Committee could “be the best bet we have. If we had 15 months to discuss it, we might come up with a revenue-based program that most would find something positive in.”
He said farm organizations are more concerned about the folks inside Congress than they are about the general public. He’s also concerned that farm organizations have not “had time to get to know new legislators.”
He said that the Texas Farm Bureau likes the 2008 farm law. “We’d like more money but we know there’s less. Our members are worried about conservation funding. Also, our members have embraced multi-peril crop insurance. It is a significant portion of risk management programs.”
Members of the audience also expressed concerns over revenue-based programs, especially with concentration on shallow loss, which several pointed out could be all of net proceeds from a crop.
“Everything now is working because prices are up,” said Steve Verett, executive vice president, Plains Cotton Growers. “Crop insurance works well. But with just one year of low prices crop insurance will not work. That’s why we’re concerned about moving away from some kind of price protection.”
Some observers also noted that farm organizations and members of the House and Senate ag committees are looking at what they can get through Congress in a period of hard line budget reduction initiatives.
Sartwelle said farmers and ranchers need to hold legislators accountable for votes on the farm bill. “We can’t give them free rides on this issue,” he said.