Keith Good Farm Policy: Risk Level in Farming a Growing Concern
Farm Bill Issues
Joanie Stiers reported yesterday at The Register-Mail Online (Galesburg, Ill.) that, “The No. 1 farm bill issue for David Serven’s family farm is crop insurance.
“‘The risk level that is there today that our grandfathers never saw before is immense,’ said Serven, a fourth-generation corn and soybean farmer in southern Knox County. ‘Crop insurance to me is the safety net we need to keep there.’
“The current farm bill expires at the end of this year, and the ongoing discussion about future U.S. farm policy comes at an interesting time. The agriculture economy is strong and the government faces a growing deficit that will prompt significant cuts. Meanwhile farmers contend with an unseen level of financial risk to produce Illinois’ major commodities: Record land values, historically high costs for everything from fertilizer to seed, and increased pressure to ‘pre-pay’ for those inputs one or two years ahead of a crop’s harvest. The crop market proves highly volatile, with large market swings in a shorter period of time.”
The article added that, “Hence the desire for a secure safety net in the next farm bill. Family farming operations in the 17th Congressional District echo Serven’s comments, according to Congressman Bobby Schilling, R-Colona.
“‘The number one thing I hear: ‘Take things we don’t need when we’re doing well, but make sure we have those safety nets there for times when we’re doing bad,’’ said Schilling, a member of the House Committee on Agriculture who is credited with bringing a farm bill hearing to Galesburg.”
Yesterday’s article noted that, “One of Schilling’s top priorities is to make sure crop insurance remains intact. Another is to pass a five-year farm bill, rather than a 12- or 18-month extension of the current one. Farmers need some certainty in a multi-year bill. Extensions only create uncertainty, Schilling said.”
“With the elimination of direct payments, Serven hopes that funding to help reduce crop insurance premiums is maintained. This would provide farmers revenue protection based on when a drop in either production or crop value warrants insurance payments,” The Register-Mail article said.
Robert Pore reported last week at the Grand Island Independent Online (Neb.) that, “With a lot riding on increased agricultural productivity each year, weather is the biggest uncertainty farmers and ranchers face — and the thing over which they have the least control. So those risk-management tools provided by the Farm Bill, such as crop insurance, become even more important. Without that income, an entire state’s economy can feel the impact of a failed crop or liquidated livestock herds.
“‘When you look at the effectiveness of crop insurance over the last few years with the current Farm Bill and you look at that participation being at record levels, we want to encourage more of that,’ [Rep. Adrian Smith (R., Neb.)] said.”
DTN Ag Policy Editor Chris Clayton reported on Friday (link requires subscription) that, “Crop insurers dismissed a study by the Environmental Working Group on Friday, noting the report comes just a day after so many farm organizations and others had called crop insurance ‘our top priority.’
“The Environmental Working Group came out with a report stating that 20 insurance companies globally had received $7.1 billion in U.S. taxpayer funds from 2007 to 2011 to sell American farmers crop insurance policies.”
Mr. Clayton explained that, “Environmental groups have become more critical of the role crop insurance is playing as they push to require conservation compliance provisions to be linked to crop-insurance eligibility. Farm groups have resisted tying compliance to crop insurance, arguing it would hurt farmers who may have suffered from a disaster.
“National Crop Insurance Services, which represents the insurance companies, noted that ‘the current crop insurance program is extremely popular with farmers, bankers and lawmakers alike, and it has been called ‘our top priority’ by leaders in the agricultural community.’
“Thus, the insurance group stated ‘it seems odd that the Environmental Working Group — in its continuing effort to discredit production agriculture and a farm safety net — has set its sights on a policy designed by Congress to minimize taxpayer risk exposure while speeding relief to farmers when they need it the most.’”
The DTN article pointed out that, “The National Crop Insurance Services statement acknowledges the foreign ownership, including international reinsurers. Most lines of property and casualty insurance in the United States involve foreign insurance and reinsurance companies, as global diversification is necessary in insurance to counter balance risks among industries and countries around the world, the insurance group said.”
With respect to crop insurance and specialty crops, Tom Karst reported on Friday at The Packer Online that, “Pushing Congress to pass a farm bill this year and taking a closer look at insurance in the specialty crop industry emerged as two hot topics at meetings of the Specialty Crop Farm Bill Alliance the week of March 12.
“‘We are working through what role crop insurance should play in the specialty crop industry,’ said Robert Guenther, senior vice president of public policy for the Washington, D.C.-based United Fresh Produce Association.”
Mr. Karst noted that, “Some members of Congress want to help the specialty crop industry with risk-management tools from the USDA, Guenther said.
“‘The theme around this is what we don’t want this discussion to unintentionally lead to products that could be market distorting,’ he said. ‘On the other hand, we do want to make sure there are opportunities to create new worthy products and expand current products that are working for specialty crop growers.’”
As a side note on specialty crops, the AP reported on Saturday that, “The U.S. Department of Agriculture says the value of New York’s tree fruit and grape production last year was more than $99 million, up 5 percent from 2010.
“The USDA says that total includes cherries, peaches and pears. The value for apples will be released in July. New York is the nation’s second largest apple producer, behind Washington.”
And, in more specific news regarding the Farm Bill and conservation issues, an article posted on Friday at the Aberdeen American News Online (S.D.) reported that, “The U.S. Department of Agriculture’s offer to pay farmers and landowners more money to stop farming their land to create additional wetlands and grasslands may not be enough incentive to get more growers to forgo planting crops that have fetched record prices in recent months, an Ohio State University expert said.
“In a move to get farmers to enroll up to 1 million new acres of land into the federal Conservation Reserve Program, the USDA last week said it would increase a one-time signing bonus for the program to $150 per acre from $100. The increase will be available only to owners of approved land that features wetlands and benefits duck nesting habitat and certain animal species, including upland birds, the USDA said.
“The offer comes as 6.5 million acres of land are set to expire from conservation programs this fall. That land could return to tillage at a time when high crop and land prices are enticing more farmers to put the land into production, according to Agriculture Secretary Tom Vilsack.”
Also, a news release Friday from American Farmland Trust (AFT) stated that, “[AFT] yesterday urged Congress to consider the environmental impacts of farm safety-net reform and reiterated key AFT policy positions in support of a strong and equitable farm support system.
“The group’s comments came in response to yesterday’s Senate Agriculture Committee hearing, ‘Risk Management and Commodities in the 2012 Farm Bill.’ Yesterday’s hearing underscored the consensus that crop insurance is positioned to become the primary risk management tool for farmers, while reform of other farm programs is still evolving.
“‘Conservation compliance measures should be reattached to the federal crop insurance program – the new farm safety net – in order to protect the long term productivity of vulnerable land,’ said AFT President Jon Scholl. Scholl’s comment was triggered by a comment during the hearing which asserted that tying conservation compliance measures to crop insurance would discourage participation in the federal crop insurance program. Scholl noted, ‘Conservation compliance didn’t discourage participation in farm programs; it won’t in crop insurance either.’”
The release added that, “‘We support a strong farm safety net in order to keep farmers on the land producing food for our country. However, a safety net is not complete if it creates long-term threats to farm productivity by incentivizing farming practices that jeopardize our soil and water,’ Scholl continued. AFT believes the facts clearly show that managing risk with crop insurance has the same impact on our soil and water resources as managing risk with farm programs of the past.”
With respect to dairy, a news release from Thursday by the International Dairy Foods Association [IDFA] indicated that, “Connie Tipton, president and CEO of the [IDFA] has submitted a statement for the record to the Senate Agriculture Committee, which is holding a hearing today, urging the committee to reject supply management proposals.
“‘Better risk management tools, including margin or other insurance products, for dairy farmers is the correct path forward for our industry,’ Tipton wrote, ‘not direct government intrusion into dairy markets and increased regulatory burdens on food manufacturing businesses.’”
Meanwhile, the AP reported on Friday that, “Sen. Saxby Chambliss warned Georgia growers Friday to brace for major cuts in crop subsidy programs as lawmakers fight to pass a new five-year farm bill through a Congress focused on shedding debt.
“Addressing about 50 farmers at a forum in southeast Georgia, Chambliss predicted the Senate will pass a farm bill this summer that cuts about $23 billion in agriculture and food programs over the next decade. He predicted those cuts may not be deep enough to satisfy the House, which will have its own version.
“‘This is going to be by far the most difficult one to write and the process is not going to be pretty,’ said Chambliss, a Republican member of the Senate Agriculture Committee. ‘We’re going to see major changes, and these are going to be changes that are not going to be as welcome as some in the past.’”
In other farm policy related news, The Modesto Bee (Calif.) editorial board indicated last week that, “Two former antagonists have come together to push for a national standard for the humane treatment of chickens raised for their eggs.
“The plan is a reasonable compromise and we hope they are successful in getting it through Congress — a place where too many people don’t seem too interested in finding common ground these days.”
The opinion item noted that, “HR 3798 was introduced in January and is pending before the House Subcommittee on Livestock, Dairy and Poultry. It was introduced by two Democrats and two Republicans, including Rep. Jeff Denham, R-Turlock.
“It has 43 sponsors, which suggests growing support. But the challenge is that it apparently will be wrapped into the 2012 farm bill, which will be controversial and which may not get passed in the partisan feuding that occurs in an election year.”
Concluding, last week’s editorial stated that, “The uniform national standard will be fair to egg producers across the country and will provide multiple choices for consumers.
“Two adversaries came together to achieve a good compromise; we urge Congress to make it the law.”
Meanwhile, Kate Galbraith reported yesterday in an article that was posted at The New York Times Online that, “J. O. Dawdy, who has been a farmer for 36 years, is so worried about getting enough groundwater that he is considering a lawsuit to protect his right to it.
“As sleet pounded his West Texas farmhouse one recent afternoon, Mr. Dawdy and three other farmers said that new regulations — which limit the amount of water they can withdraw from the Ogallala Aquifer and require that new wells have meters to measure use — could have crippling effects on their livelihoods.
“‘We view it as a real property-rights violation,’ said Mr. Dawdy, who grows cotton. If the restrictions had been in place last year during the drought, he said, his land would not have produced a crop.”
Rosalind S. Helderman reported in today’s Washington Post that, “Congress is preparing to renew its bitter fight over government spending, as both parties eagerly await the arrival Tuesday of a new budget plan authored by Republican Rep. Paul Ryan (Wis.).
“A year ago, embracing Ryan’s budget with its deep spending cuts and a proposal to privatize Medicare, became a badge of loyalty for conservatives. Democrats, meanwhile, used the plan as a political cudgel, accusing the GOP of working to end the retiree health program.”
The Post article pointed out that, “On Thursday, Ryan circulated a snazzy Web trailer for the plan, featuring ominous music as the Wisconsin lawmaker walked the halls of Congress and discussed the need to control spending.
“‘This coming debt crisis is the most predictable crisis we’ve ever had in this country,’ he says in the video. ‘This is why we’re acting. This is why we’re leading. This is why we’re proposing and passing from the House a budget to fix this problem.’”
Reuters writer Timothy Gardner reported on Friday that, “Gasoline containing a higher-blend of ethanol may soon be more widely available to motorists after U.S. environmental regulators approved an industry plan to aid retailers in selling the fuel, the ethanol industry said.
“Service stations have been slow to offer the fuel, which has 15 percent ethanol, amid worries about liabilities and costs associated with changing equipment. The industry plan is designed to address those concerns.
“The Environmental Protection Agency sent a letter to the Renewable Fuels Association on Thursday saying it approved a plan submitted by the industry group that includes a handbook for retailers on how to make sure owners of older cars do not use the fuel, which is 15 percent ethanol and known as E15.”
Ben Protess and Azam Ahmed reported in Friday’s New York Times that, “MF Global employees at the center of a federal investigation are expected to appear before a Congressional panel this month to shed light on the brokerage firm’s misuse of roughly $1 billion in customer money, according to people briefed on the matter.
“One notable employee, Edith O’Brien, is expected to invoke her constitutional right against compelled self-incrimination, one of the people said. Ms. O’Brien has also declined to cooperate with federal prosecutors without first receiving immunity from criminal charges.”
The article stated that, “The oversight panel of the House Financial Services Committee, which is planning to hold the hearing on March 28, has also contacted lawyers for Christine Serwinski and Christy Vavra, MF Global employees in Chicago who worked in the firm’s treasury operations. It is unclear whether they will appear at the public hearing or simply agree to private interviews with the committee’s staff members.”
And Reuters writer Roberta Rampton reported on Friday that, “A group of Democratic lawmakers in the House of Representatives is again urging President Barack Obama to aggressively use the threat of releasing oil from emergency reserves to rain on speculators driving up oil prices.
“The three lawmakers are gathering signatures from others in Congress for a letter to Obama to press him to wield the 696 million barrels of oil that the government stores in salt caverns as a weapon against ‘rapid price escalations resulting from speculation in the oil markets.’”
The ICE Dec and Mar contracts gave back 160 and 87 points on the week, respectively, as last week’s inversion between the two contracts gave way to partial carry. Well,