For decades, farmers have been able to receive government money for not growing crops. The Senate agriculture committee on Friday began laying the groundwork to change that, as it worked on a half-trillion-dollar farm and food bill.
Currently, farmers who grow corn, wheat, soybeans, cotton and other crops receive about $5 billion annually in subsidies. The payments have become harder to justify as farm income has risen to historic levels. According to the Agriculture Department, net farm income was a record $101 billion last year. The price of farmland has reached record highs.
The bill now under consideration would replace direct subsidies with various insurance programs that would aid farmers in the event of bad weather or natural disasters.
One program, called the “shallow loss” program, would cover modest yields or declines in prices. For more catastrophic losses, farmers would receive crop insurance subsidies.
The government already helps farmers get some crop insurance through private companies, with the government paying about 62 percent of the premiums, plus administrative expenses. According to a recent report by the Government Accountability Office, the cost of that insurance was $7.3 billion last year; by comparison, in 2000, the cost was $951 million, or about $1.2 billion adjusted for inflation. A Congressional Budget Office study cited in the report estimates that the total cost of subsidizing the premiums from 2012 through 2016 will be about $39 billion — about $7.8 billion a year.
Some conservation groups are less than pleased with the proposed bill.
“Rather than simply ending the widely discredited direct payment program, the Senate Agriculture Committee has created an expensive new entitlement program that guarantees most of the income of farm businesses already enjoying record profits,” said Craig Cox, senior vice president for agriculture and natural resources at the environmental working group. “Replacing direct payments with a revenue guarantee program is a cynical game of bait-and-switch that should be rejected by Congress.”
In a letter to the agriculture committee, several farm groups said they support the proposed bill and its emphasis on insurance programs to protect farmers.
“Crop insurance is the core risk management tool used by our producers, and the current program should serve as the foundation for providing additional protection against loss,” said the groups, which include the American Farm Bureau Federation and the American Soybean Association.
The full committee is to vote next week on the bill, which also combines several conservation programs, stops lottery and gambling winners from getting nutritional assistance and helps family farmers sell locally by increasing support for farmers’ markets. The current five-year farm bill, passed in 2008, expires at the end of September.
The Senate proposal cuts about $23 billion from farm programs to aid in deficit reduction. The Obama administration, which has also called for ending direct payments, wants to cut $32 billion from farm programs. House Republicans want a $30 billion cut.