HASTINGS — As Congress begins preparations to write a new farm bill, lawmakers will face questions on topics such as commodity prices, crop insurance, conservation and nutrition programs.
But those questions will be impacted by low commodity prices, risk management tools such as crop insurance, the future of America’s Renewable Fuels Policy, trade and politics.
Farm bill issues were discussed Wednesday in Hastings by Art Barnaby from Kansas State University and Brad Lubben from the University of Nebraska-Lincoln. They updated about 30 farmers and ag officials on the process.
A big topic concerning the new farm bill will be the future of the crop insurance program.
“At this point, crop insurance, for the first time, is not being talked about in terms of how do we improve it and getting more participation,” Barnaby said. “This time around, we are talking about cuts to crop insurance and less participation.”
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Barnaby is a national expert on crop insurance.
Proposals could include means testing, which he said would be a first.
“They also want to limit the subsidy to $40,000,” Barnaby said.
The idea of limiting the amount of federally-paid crop insurance premiums on a per farm basis to $40,000 was proposed during debate on the last farm bill and in the 2016 Trump budget proposal.
Another proposal would reduce the subsidy on the Harvest Price Option (HPO) or eliminate it.
HPO is an add-on to the standard revenue insurance policy that allows a farmer the option to have the policy’s revenue guarantee be based on the price of the crop at harvest or the projected price set before the season begins, whichever is higher.
“If you do that, the bottom line is that it would end up leaving a doughnut hole in the coverage in years like 2012 when you had a short crop and the price increases,” Barnaby said.
Crop insurance is a safety net for farmers, and provides loan collateral, he said.
“Some of the biggest supporters of crop insurance are lenders,” Barnaby said.
If those crop insurance proposals are enacted, he said, that safety net will be diminished or disappear altogether for a lot of farmers.
“Even if they are paid, it would be a much lower indemnity payment,” Barnaby said. “I’m not sure if it would be sufficient to prevent another ad hoc disaster program, which is not cheap either.”
He said if there were a lot of uninsured farmers or farmers who did not get adequate protection, there would be “great pressure to come up with some disaster program.”
Last year, hurricanes in Florida and Texas did extensive crop damage. Many farmers there did not have insured crops.
In Nebraska, where natural disasters are always a threat, farmers are heavily insured, he said.
Depending on the type of coverage, the government pays 60 percent of the farmer’s cost for crop insurance, along with the cost of administering the policy.
Sen. Pat Roberts, R-Kan., is chairman of the Senate Agriculture Committee. Barnaby said the farm bill will probably clear the committee without cuts to the crop insurance program. However, when the bill gets to the House floor, there will likely be attempts to make financial cuts to the program.
The recent tax cut passed by Congress may make it necessary to cut farm bill programs. Without budget cuts, the tax cut increases the national debt.
Barnaby said there are other concerns facing farmers, such as trade limitations.
“That would be a bigger concern to farmers than the farm bill,” he said.
Another concern, Barnaby said, would be the elimination of government support for biofuels.
“We put two Iowa corn crops in your gas tank,” he said. “If you put those two corn crops on the market, along with restrictive trade with Mexico and other locations where we ship corn and beans, we would see corn at the loan rate. I really believe that is possible.”
Barnaby said he doesn’t expect a trade war at this point because of strong political opposition to President Trump’s proposed tariffs on steel and aluminum. There are fears those tariffs could precipitate a trade war.
The Associated Press reported Wednesday that the White House said Mexico and Canada and other countries might be spared from the proposed tariffs.
The U.S., Mexico, and Canada form the North American Free Trade Agreement (NAFTA), which is under renegotiation. Mexico and Canada are America’s and Nebraska’s largest trade partners.
What’s at the core of the farm bill debate was highlighted by a recent USDA Economic Research Service study that showed, between 1948 and 2015, total on-farm productivity increased by 152 percent, while real agricultural output price declined by nearly 65 percent.
In Kansas, Barnaby said, there are more feed grains planted than wheat.
“That was the first time this year that has happened,” he said. “It is a clear shift to feed grains, and the yields are trending up much faster than they are on wheat. Science is moving us on, and we will consume whatever we produce.”
In Nebraska, fall wheat seedings were at 1 million acres, the smallest total on record.
Lubben said the next farm bill would be the first one since 2002 that is written for low commodity prices.
“The last two farm bills were written in periods of high prices and opportunities for reform and changes to programs,” he said. “This one will be written in a period where we would like to strengthen programs or at least maintain support. In 2002, we had $70 billion new baselines that we could add to the bill to strengthen safety nets. We don’t have that money around this time.”
Lubben is a noted expert on agricultural policy.
The big question, he said, is “How do you write a farm bill for a down economy with no new budget?”
Lubben said the Conservation Reserve Program also faces an uncertain.
“It is a smaller program than it was. It’s maxed out at its current cap at 24 million acres,” he said. “With the low prices, there is interest to get more land back in, but no room under the cap.”
Lubben said expanding the cap, finding a way to pay for it or reducing rental rates on CRP to save money, along with mediating concerns about competition between farmers and government, will be issues as well.
He said it is critical, especially with the uncertainty farmers are facing today about low prices, trade and biofuel cutbacks, that there’s stability and a farm income safety net in the next farm bill.
“That combination of commodity programs and crop insurance programs is critical for producers,” Lubben said. “It is critical to know what they will be there, so farmers can make good decisions.”
If there are shocks to the demand side of the agricultural picture regarding biofuels and trade disruptions, he said, “All of our calculations on what the farm bill will cost and how much it needs to support will have to be re-calculated. That would have a substantial impact.
“It is really an uncertain time,” Lubben said. “We know we have to adjust to this new equilibrium and determine the path ahead, but we would also like to have some confidence in what that path is. Productivity has outpaced population and demand growth in the United States over the last 60 years. We are now more dependent than ever on new uses and new markets.”