MINNEAPOLIS (AP) — Farm subsidies that have guided
agriculture through record profits in recent years are going away in the
five-year farm bill that could become law in the coming week. But new
subsidies in the legislation could be just as generous, and farmers
aren’t complaining.
Gone are direct payments, a politically
untenable system in which landowners got fixed amounts per acre, whether
crop prices were high or low — or even if they didn’t plant at all.
Those will be replaced by a choice of one of two different subsidy
approaches that require producers to suffer losses before they can get
payouts. The bill also contains a new insurance-based program for cotton
farmers.
"We loved the old farm bill," said Woody Anderson, who
grows 3,500 acres of cotton in west-central Texas near Colorado City.
But farmers knew political support for direct payments was fading, he
said.
"We felt like this insurance type program was innovative. It
was reform, if you will, and it was the best we could get in the time
that we’re trying to operate in and get a new farm bill," he said.
The
farm bill’s authors tout the changes as reform, particularly the
elimination of direct payments, which cost $4.5 billion annually. The
legislation also caps how much money an individual farmer can receive —
$125,000 annually for all payments and loans. But that maximum is more
generous than versions that passed the House and Senate earlier.
"We
don’t pay people unless there’s actually a reason, because we’ve got a
price loss or a crop loss," said U.S. Rep. Collin Peterson, a Minnesota
Democrat who was instrumental in crafting the final package. "Under the
direct payments you got payments whether you needed them or not."
But
most of the savings are redirected into the new insurance-based
subsides — one for losses not covered by crop insurance, another that
kicks in if crop prices fall below certain thresholds. There’s also more
money for expanding traditional crop insurance.
Critics say the
bill misses a chance for real reform. Rep. Ron Kind, a Wisconsin
Democrat, said it "maintains huge taxpayer subsidies that go to a few
… very large agribusinesses at the expense of our family farmers
around the country."
The changes come as farm country has enjoyed
record profits recently. Projected net farm income for 2013 is $131
billion, a 15 percent jump over the previous year, the USDA said in
November. Prices have come down from their highs, however.
One of
the new programs, called Agriculture Risk Coverage, will cover farmers’
"shallow losses" — what they lose before their regular crop insurance
kicks in. For example, if a producer’s crop insurance carries a 25
percent deductible, but the farm suffers only a 15 percent loss, ARC
could help cover the gap. The program might kick in sooner than
previously thought because some crop prices have dropped in recent
months.
The other program, Price Loss Coverage, looks more like
the soon-to-end traditional price support programs. Farmers will get
payments if crop prices fall below certain targets, such as $3.70 per
bushel for corn, $8.40 for soybeans and $5.50 for wheat. The bill would
raise the floor price for all 14 crops it covers, almost doubling some,
so the subsidies would kick in much sooner than current law if prices
drop enough.
One reason the final bill included both ARC and PLC
was the need to find solutions that worked for all crops and all parts
of the country.
Losing direct payments will be hard for Southern
rice farmers, said Dow Brantley, who helps run a family farm that grows
rice, corn, cotton and soybeans on about 8,500 acres in central Arkansas
near England. He said the price-loss coverage won’t offer nearly as
much profit protection.
"It’s not going to be the same but we do
have something in place to back us up if the world came apart," Brantley
said. "It’s just not the safety net that we all would hope to have."
It
won’t be easy for farmers to decide which program is right for them,
Ohio State University agricultural economist Carl Zulauf said. They’ll
need to think five years out about how much risk they can assume, what
they think will happen with prices and whether they expect their debt
loads — and thus their risks — to increase.
Many farmers are just glad Congress finally broke an impasse that lasted more than two years.
"There’s
a lot of relief that they finally have passed a farm bill and it gives
some stability." said Jerry Main, who plants corn and soybeans on about
500 acres in southeast Iowa near Fairfield. "It helps farmers know where
they’re at for the next four to five years as far as insurance
possibilities and a safety net in case we get into real bad weather
again."
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Jalonick reported from Washington. Associated Press reporter David Pitt in Des Moines, Iowa, also
contributed.
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