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Finalizing the Farm Bill

April 14, 2008 - by Donny Shaw

For months, Congress has been trying to reach some kind of agreement on what should be included in the Farm Bill and how it should be payed for. The bill, which is designed to extend all kinds of agricultural programs at a cost of $286 billion over five years, is about 6 months behind schedule. But a bipartisan group of senators and representatives is meeting this week to iron out the issues that have stalled the bill, and they hope to have an agreement by Friday. The negotiations have boiled down to disagreement over a proposed permanent disaster relief program for farmers suffering from weather-related crop damages.

Right now disaster relief for farmers is approved by Congress on an ad hoc basis, meaning that sometimes the money doesn’t get to the farmers until two or three years after the lost their crops. Lawmakers from states that have received a lot of farm-related disaster money in the past few years – Montana, the Dakotas, Texas – are pushing for this year’s Farm Bill to put in place a permanent disaster relief fund that could get money to suffering farmer quickly and efficiently. But others don’t want the permanent program (and the accompanying tax measures that would be needed to pay for it), insisting that the money could be better spent elsewhere.

Critics of the permanent disaster program argue that it would make major recipients of disaster aid more reliant on federal money and encourage the production of crops in bad locations:

>Close inspection of ad hoc disaster payments to farmers over the past two decades reveals that between 1985 and 2005, five Great Plains states – Texas, North Dakota, Minnesota, South Dakota and Kansas – received nearly 40 percent of total disaster spending, according to USDA data compiled by the Environmental Working Group. Moreover, 1 percent of the total number of disaster relief recipients – 21,000 recipients – received disaster payments in at least 11 of the 21 years and collected nearly 10 percent of the overall disaster funding from 1985 to 2005. About two-thirds of farmers (66 percent) for whom disaster assistance is routine live in just four states: Texas, South Dakota, North Dakota and Oklahoma.
>Worse, a report last year by the Government Accountability Office suggests that areas in these states with the highest rates of conversion of grassland to intensive crop production tend to be the biggest recipients of disaster payments. If these lands were consistently profitable to grow crops on, then they would have been cultivated long ago. Routine disaster payments on top of other commodity subsidy payments remove the risk from growing crops on marginal, environmentally sensitive lands, creating an incentive to plow up what little is left of our native prairies. Moreover, these payments create a vicious cycle that wastes taxpayer dollars. Risky production decisions result in crop failures that are rewarded with federal payouts that lead farmers to bring more marginal land into production, resulting in more crop failures.

But supporters of the new program point to a mechanism in it that would increase participation in crop insurance programs, thus reducing the need for emergency aid:

>The proposed new program would supplement the current crop insurance program, and would require a farmer to carry at least the catastrophic level of coverage as a prerequisite for a payment.
>According to CBO, the program would cost $5.1 billion over five years (FY 2008-12). CBO estimates that $2.9 billion of that amount would go directly to crop and livestock producers in the form of direct disaster payments and the other $2.2 billion would cover increased crop insurance costs associated with the crop insurance purchase requirement. Most of the cost would be funded through a mandated transfer of 3.34 percent of annual customs receipts from the U.S. Treasury to the new trust fund.
>Under the proposed program, an eligible farmer in a disaster-declared county would receive 52 percent of the difference between an established guaranteed level of revenue and actual total farm revenue. The target level of revenue would be based on the level of crop insurance coverage selected by the farmer, thus increasing if a farmer opts for higher levels of coverage.
>The proposal also allows the trust fund to be tapped for indemnity payments to livestock producers and orchardists to compensate for significant mortality losses caused by a natural disaster. Up to $35 million annually from the fund also could be used for livestock, honey bee, and farm-raised fish losses caused by adverse weather or other environmental conditions.

The map above shows the distribution of disaster dollars from 1985-2006.

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