Does the nation’s changing agriculture industry signal it’s time to advance farm policy programs? That question was posed by the National Corn Growers Association (NCGA) to members of the Senate Agriculture Committee during a hearing on farm programs and the 2007 farm bill Commodity Title.
“NCGA is taking a proactive role in suggesting reforms to this nation’s farm programs and NCGA’s farm bill proposal will change the way producers and taxpayers look at agriculture support programs,” said Ken McCauley, NCGA president during his testimony.
“Today’s farm safety net, while good for the time is was designed for, is simply not designed to meet producers’ long-term risk management needs, meet the needs of taxpayers and meet the needs of the markets given the dynamic changes under way in U.S. agriculture today.”
NCGA’s farm bill proposal, the National Farm Security Act (NFSA), includes a Revenue Counter-Cyclical Program (RCCP). Instead of targeting low prices, the RCCP compensates producers when a county’s actual crop revenue falls below its target level. Another component would include a change to recourse loan program from the non-recourse loan program. A recourse loan would continue to give producers harvest-time liquidity that increases their ability to market their crop at a more profitable time while increasing the market orientation of U.S farm policy.
According to McCauley’s testimony, in most years RCCP payments would be triggered by the same crop losses that lead to the great majority of crop insurance indemnity payments. The RCCP is then integrated with federal crop insurance to ensure a more targeted and cost efficient farm safety net.
McCauley also discussed the crop insurance segment of the NCGA proposal, telling the Committee that the integration of farm safety net core programs would reduce the price and widespread production risks now borne by private insurance companies.
“With private insurance companies only paying for losses not covered by the RCCP, the lower indemnities paid to farmers would significantly lower program costs,” McCauley said. “Analysis provided to NCGA indicates farmer paid premiums of buy-up revenue insurance would drop significantly.”
Highlighting other key advantages of NCGA’s proposal, McCauley pointed out that the NFSA would save almost $1.8 billion spent a year on ad-hoc disaster assistance. NCGA’s proposal includes a built-in disaster aid component that would deliver payments in counties that suffer low crop revenue.
McCauley closed by addressing the big question — how the farm bill proposal will fit into the tight budget Congress has to work with as they craft the farm bill. NCGA has stated the integration of RCCP with federal crop insurance secures substantial budget savings from a more efficient delivery of individual revenue insurance as well as spending offsets from replacing the non-recourse marketing loan and price based counter-cyclical program.
“Based on a 95 percent county target revenue coverage level and a two-year transition period, the annual cost of this new safety net is projected at approximately $500 million above the (Congressional Budget Office) March baseline,” said McCauley.
“At this level of protection, we are confident in our proposal’s potential for long-term savings and promise as a superior farm safety net.