The Farm Bill

 

What agriculture needs from government is infrastructure development, reasonable target prices, sensible regulation, reasonable trade policies, and, yes, crop insurance.

No caps on crop insurance subsidies

The farm bill does not cap crop insurance subsidies.  Crop insurance premium subsidies should be capped somewhere around $50,000 per farm operator.  This is about a 3,000 acre corn/soybean operation (assuming Harvest Price Exclusion).  Why should a large farmer’s premium on his 10,000th acre be subsidized at the same level as a beginning farmer’s 500th acre?  We have state and federal programs to help beginning farmers enter capital intensive production agriculture.  However, unlimited crop insurance premium subsidies work at cross purposes with these programs.  One partly cancels out the other.

Unlimited premium subsidies make large farm operations more feasible since large operations are often narrower margin operations.  Part of those subsidies get capitalized into cash rents and farmland values (i.e. market distorting).  We live in “free enterprise”  America.  If a person wants to grow and expand, “Go for it!”  But beyond a certain level, pencil in the full cost of crop insurance in your calculations.  A more equitable program would give every grower access to a limited level of insurance subsidies.  (This is how the Milk Income Loss program worked for dairy farmers.  A farmer had a price floor on up to 4 million pounds of milk production.  Above that, he was subject to the prevailing market price.)

The criticism of this reform is that it jeopardizes crop insurance for everyone by making crop insurance a less attractive purchase and thereby potentially shrinking the risk pool.  To be sure, the more participants you have, the more actuarially stable an insurer’s predictions can be.  But we are not talking about a couple million acres of apples or peppermint.  Last year farmers insured 134 million acres of corn and soybeans.  How many acres does the RMA believe we need for a robust crop insurance program?

Ineffective payment caps

Why did Senator Grassley vote against the 2014 farm bill?

Both the House and Senate bills had reforms to limit the number of farmers who can receive payments from one farm.  These reforms more narrowly defined “actively engaged”.  (We have all seen the Environmental Working Group’s maps with dots throughout Chicago and Washington D.C. indicating the residences of farm subsidy recipients.)  These “hard cap” reforms were nullified in the conference committee.  In 2018 Senator Grassley is again leading the effort to work for reasonable caps for farm program payments and narrower guidelines for “actively engaged” rules.

I echo the sentiments a Minnesota farmer voiced in the recent “listening sessions” conducted by the House Ag Committee. “The next Farm Bill should result in more people on the land, not less.”