Farmers would have a 90 percent crop-revenue guarantee under a farm bill proposal by Senate Budget Chairman Kent Conrad, D-N.D. It would replace the Average Crop Revenue Election program and direct payments. It essentially builds on the "shallow loss" program developed by Sens. Sherrod Brown, D-Ohio, John Thune, R-S.D., and others we reported on last fall.

The program would include a payment limitation of $105,000 for all commodity program payments and an adjusted gross income limit of $999,000.

Other elements of proposal:

  • The marketing loan program would be extended and the national average price (to figure revenue insurance) could not be less than the commodity marketing loan rate for each commodity in each county.
  • The national average price would be adjusted for average quality loss discounts as determined by the state Farm Service Agency committee.
  • To this revenue figure would be added any marketing loan benefits, crop insurance indemnities net of the producer paid premium, countercyclical payments or disaster payments.
  • The countercyclical program would also be extended with target prices frozen at 2012 levels.
  • The payment acreage percentage would be reduced from 85 percent of base acres to 75 percent. Payments would be based on the average price received for the first four months of the marketing year for the eligible crop instead of the full 12 months under current rules.
  • It would not cover specialty crops. If a farmer chose to plant a non-program crop, he would not lose base acreage.
  • Total eligible acres could not exceed 100 percent of the sum of all eligible historical program crop base acres as determined for the counter-cyclical payment program.

Direct payments are termed “the worst of the giveaways” in the Bloomberg News editorial cited on page one. Why? Because the roughly $5 billion in direct payments made under the last farm bill went, in the Bloomberg editors’ words, “to a small slice of the largest growers for just a few favored crops, and regardless of yields or prices (need).”

Anticipating such argument, earlier this month, the American Farm Bureau Federation said it would drop its opposition to ending direct payments. But in exchange, AFBF wants crop insurance subsidies broadened to cover “shallow” yield losses described in the Conrad proposal above.

New farm bill proposals dismissed as “bait and switch” political tactics? An alternative proposal to insuring smaller crop losses would retain current loss thresholds of 15 percent to 25 percent before coverage kicks in, but subsidize a larger share of the farmer’s premium. The Bloomberg editors dismissed both as “simply diverting promised savings from ending direct payments to yet another revenue stream for well-off farmers.”

Their basis for such a charge? “Crop insurance has now become one of the fastest-growing benefits for agriculture, with subsidies for insurance premiums rising to more than $7 billion in 2011 from a little more than a $1 billion in 2000.”

USDA wants to study/eliminate “overlap” in farm programs. While the Government Accountability Office (GAO) has found little systematic evidence of “fraud” in overlapping farm programs due to program overlap, USDA’s Economic Research Service (ERS) agrees there’s growing public perception that needless, excessive overlap exists and proposes a major study that begins with a key issue: Defining “overlap.” They came up with two broad categories:

  •  Type I - Multiple types of support that together provide coverage above levels intended by any of the individual programs.
  • Type II - Patterns of participation in multiple programs that may offer coverage of the same commodity and/or risk so that, even though coverage does not exceed intended levels for any individual program, total support still “exceeds levels necessary to meet farm safety net goals.”