What is in this article?:
- Devil is in the details in new farm policy discussions
- Does present complications
• The devil is in the details in discussions to shift farm policy from a traditional target price/direct payment program to revenue insurance for shallow losses.
• Areas of possible conflict or concern include disparities in shallow losses between regions and commodities, financing complications as seen by lenders and creditors and the need for commodity producers to better manage more types of risk.
• Shallow losses focus on paying producers for shallow losses of between 5 percent to 30 percent of expected revenue.
As Congress and commodity organizations discuss moving farm policy from target price/direct payments toward some type of revenue insurance, the devil most certainly will be in the details, says Darren Hudson, agricultural economist at Texas Tech University, speaking at the Ag Market Network’s November conference call.
Areas of possible conflict or concern include disparities in shallow losses between regions and commodities, financing complications as seen by lenders and creditors and the need for commodity producers to better manage more types of risk.
Several proposals on the table at the time of this writing focus on paying producers for shallow losses of between 5 percent to 30 percent of expected revenue. “On the surface, (the proposals) seem to make sense,” Hudson said. “But the devil is in the details. There are some things we’re going to change, and it could reshape the system as we move forward.”
Hudson noted that the National Cotton Council’s shallow loss proposal (STAX) “caught a lot in the industry off guard. People had been discussing these types of revenue products for a while, but the cotton group had always been staunchly in favor of direct payment and counter-cyclical type programs.”
In the STAX proposal, the shallow loss plan can be “stacked” with existing traditional crop insurance. The latter would cover greater losses, Hudson noted. “What we don’t want is one of the plans crowding out the existing decisions being made by the producer. The STAX proposal is designed where it’s probably not going to offset a lot of that.”
Hudson says that most of the proposals on the table, “except for the Farm Bureau proposal, eliminate direct payments or reduce them significantly. This says whatever program we end up choosing is likely going to eliminate or significantly reduce the size of direct payments. It’s a pretty dramatic shift in thinking and has gotten a lot of people nervous. I think it’s safe to say we’re moving in that direction.”