Kokomo Tribune; Kokomo, Indiana

March 28, 2014

Where will the farm bill take us?

Farmers unhappy about the end of direct payments

By Scott Smith Kokomo Tribune
Pharos-Tribune

---- — Robin Roberts farms 1,000 acres in Marshall County, and the past five years have been good ones financially.

But Thursday, Roberts was contemplating the end of direct federal payments to farmers, and the impact it’s going to have on his Plymouth farm.

“How’s anybody supposed to survive on these prices?” Roberts asked a group of Farm Bureau economists at a Farm Bill seminar in Rochester. “Anybody trying to farm at these prices is going to be bankrupt in five years.”

Farmers are facing the reality that direct payments – a part of successive farm bills since 1995 – are now a thing of the past.

As a result, farmers say, food prices will increase, and the food supply is going to become less stable.

“What it means is that the price of food is going to stay high,” Roberts said. “If you don’t keep a [financial] cushion, food prices are going to go up and down.”

The Farm Bureau, which was deeply involved in the three-year effort to pass a new farm bill, supported the end of direct payments, which weren’t tied to prices, and which went to farmers whether they planted anything or not.

In place of the politically unpopular direct payments, the Agriculture Act of 2014 offers expanded crop insurance, which pays out if crop prices fall too far, or if farm revenue falls below certain benchmarks.

Talk to farmers like Roberts, and it is clear there are concerns about where the new farm bill – which provides up to $89.8 billion for crop insurance over the next 10 years – is headed with price supports.

Under one of the new programs, Price Loss Coverage, corn farmers would start to receive payments if the U.S. average market price falls below the reference price. For instance, the “reference price” for corn is $3.70 a bushel.

The reference prices are actually higher in the new bill, but many farmers still aren’t happy with the Farm Bureau for supporting the end of direct payments, as politically untenable as the payments might have been.

“Basically, unless the wheels fall off, we’re not going to get anywhere near what the direct payments were,” said Kevin Haney, a Fulton County dairy farmer, said Thursday. “At this point, they’re talking about a Band-Aid for a slit throat.”

The other new program is called Agricultural Risk Coverage, which makes up a certain percentage of farm revenues if they fall below historic benchmarks, either for an individual farm operation, or for all the farms in a county. The program is meant to cover shallow losses – up to 10 percent – which wouldn’t normally be covered by crop insurance.

Taxpayers are expected to save about $16.6 billion over the next 10 years from the switch away from direct payments, a factor which weighed heavily the final passage of the bill.

Matt Erickson, an America Farm Bureau Federation economist, said the reference prices were negotiated, as part of the overall farm bill package.

“This was probably done with [Congressional Budget Office] constraints in place,” Erickson said, adding that every bill now has to be “scored,” to indicate what impact it will have on the national deficit.

“We have over $17.3 trillion in debt, and the budget impacts are real,” Erickson said. “This was a very difficult farm bill to get done.”

Farmers will have most of this year to decide which program — ARC or PLC — they’ll choose. The purpose of Thursday’s meetings, held in Rochester and Indianapolis, with a third meeting for southern Indiana farmers Friday, was to give farmers more information on the new programs.

Once a farmer chooses a program, he or she will be locked in for at least the next five years, adding a bit of pressure to the decision.

John Anderson, deputy chief economist with the Farm Bureau Federation, said the ARC program will probably be preferable for most farmers in this part of the state.

How closely an individual farm’s revenues mirror farm revenues across that farm’s home county will probably determine whether a farmer should choose the ARC program with county-wide benchmarks, Anderson added.

Roberts said he’s so unsatisfied with the new programs, he’s considering whether or not he’ll even sign up.

“It’s a huge sacrifice farmers are making to reduce the national debt,” Roberts said. “Even though the ag economy is really good, all of these programs are beating it down … it’s not a good scenario, going into the next five years.”

Scott Smith is on Twitter, @JasonSSmith1, and can be emailed at scott.smith@kokomotribune.com