By Adam Goldstein

Commodity trade group leaders at a U.S. House Agriculture subcommittee hearing this week advocated for bolstered risk management programs and maintaining foreign market access as tools to support farmers amid volatile times.

The industry representatives said supply chain disruptions and increased production costs have tightened margins for large-scale farmers, and decreased the effectiveness of commodity and crop insurance programs in supporting them amid disasters. Such federal programs are intended to lessen the risk of farming for producers of major commodities like corn, wheat, soybeans and other crops.

The commodity group leaders emphasized the need to avoid any cuts to crop insurance and commodity programs in the farm bill, especially with a decline in projected farm income. They are considered to be the “most important” tool among producers to respond to natural disasters and challenges with overseas markets.

The farm bill’s commodity insurance programs include the Agriculture Risk Coverage and Price Loss Coverage programs, which protect farmers from poor growing seasons and low prices, respectively.

“As the risk challenges of farming continue to mount, I think it is safe to say that if you’re not farming today, you’re likely not going to be farming tomorrow,” said Republican Rep. Austin Scott of Georgia, chairman of the House Agriculture General Farm Commodities, Risk Management, and Credit Subcommittee.

“As we deliberate we must make sure we’re doing everything we can to help all beginning young and small farmers and taking care of future generations.”

The existing plans reimburse farmers at a rate linked to a market average price set in the 2014 farm bill, and a farmer’s base acreage of a certain crop or harvested yields for previous years.

The programs are available to a range of commodity farmers, and insurance payouts under the 2018 farm bill totaled $33 billion from 2018 to 2023.

Hearing sought for minority, disadvantaged farmers

Democratic committee members agreed on the need for a robust safety net for all producers.

Still, party leaders highlighted issues of an imbalance in payouts from crop insurance programs between large-scale and historically underserved farmers found by the government watchdog Government Accountability Office, and the absence of diverse voices among the witnesses.

“Our nation’s strength in agriculture and as a people is our diversity,” said Rep. Shontel Brown, an Ohio Democrat and ranking member on the subcommittee. “Mr. Chairman, I hope it is easy for you to agree that a critical component of writing a farm bill that works for all is ensuring that everyone is invited to sit at the table.”

Brown submitted a request into the record that a hearing be held for “minority and disadvantaged farmers and stakeholders on farm bill issues relating to this subcommittee.”

The farm bill is a multiyear omnibus law which authorizes an array of agricultural and food programs, including federal crop insurance, food stamp benefits and farm resource conservation.

The 2018 farm bill expires at the end of September 2023, was projected to cost $867 billion over 10 years when enacted, and has cost roughly $428 billion over the past five years. Baseline spending for the coming farm bill is projected at $1.5 trillion over the next 10 fiscal years, according to the Congressional Budget Office. 

Increasing reference prices

Commodity group leaders angled for legislators to keep cuts to commodity insurance and crop insurance programs off the table, while increasing what are called reference prices.

Title I is the commodity assistance title of the farm bill, which contains the commodity insurance programs, certain disaster relief programs for crops like sugar, and a fixed-rate loan program that uses commodity stocks as collateral.

Reference prices are the set average commodity market prices for goods that factor into insurance reimbursement rates, along with the previous year’s planted acreage or harvested crop yields. Those reference prices haven’t increased since 2012.

Tom Haag, president of the National Corn Growers Association, said surveys among his producers ranked crop insurance as the most important program and title of the farm bill. He suggested finding ways to make crop insurance cheaper for growers, and increase county-level payments so they can exceed 10% of the county’s benchmark farm revenue.

Haag added that the current statutory reference price for insuring corn is $3.70 per bushel, “well below the current market price” of roughly $6 per bushel. That means farmers could receive insurance payouts far below the market price, a problem with input costs remaining high in recent months.

“We strongly oppose any efforts to restrict producers’ access to crop insurance products and oppose harmful program cuts that would negatively impact crop insurance products, their delivery or the sound structure of the program,” he said.

Aaron Flansburg, chairman of the USA Dry Pea and Lentil Council, said that crop insurance must be preserved as a “central risk management system for farmers,” and, further, enables growers to get a line of credit on their farms. He suggested making it easier to transition between the ARC and PLC programs year over year by reducing paperwork.

Kirk Satterfield, chairman of USA Rice, said that the PLC program presents a “true safety net” for rice farmers amid trade distortions which violate the World Trade Organization guidelines. He suggested upping reference prices across the PLC program to better counter international trade violations.

House Agriculture Committee Chairman and Republican Pennsylvania Rep. Glenn “GT” Thompson asked the panelists about rumblings in Congress to “gut” insurance programs through adjusted gross income means testing and payment limits.

“That would mean a major disaster if something like that were to happen to us,” said Haag. “If we start having limitations, you might have less people involved in crop insurance. That’s going to make it more expensive for that younger farmer, then, to get going.”

Shawn Holladay, chairman of the National Cotton Council, said that his daughter is a full partner on his farm, and he would not have let that happen if he thought rules like those Thompson mentioned would be proposed.

“That is limiting something that we’re using as a true safety net, but it’s well below the cost,” he said.  “That’s how important it is to our family operation to not have those kinds of harmful things happen to insurance, because I don’t think they’re justifiable.”

Republican Rep. Brad Finstad of Minnesota asked Haag what he sees as the biggest challenge facing a corn grower right now.

“We have a lot of opposition that want to take a lot of the tools out of our toolbox,” Haag said. “Taking tools away from us would be our biggest hindrance.”

Fighting trade barriers 

Industry representatives also spoke to the need to better insulate domestic producers from harmful market manipulation occurring abroad.

Satterfield said that India, for example, has subsidized 90% of the cost of the rice production supply chain, and has flooded markets that U.S.-based exporters used to dominate.

“This is only one example of many predatory trade practices used by foreign competitors,” he said. “We continue to call for the U.S. to address these blatant WTO violations by India and others.”

Republican Rep. Rick Crawford of Arkansas asked how rice and wheat market manipulation practices by India are affecting producers on the ground.

“We are growing a great product, but they are getting the rice so much cheaper because of the over-subsidization of fertilizer and everything down the line from India,” Satterfield said. “It’s a very unlevel playing field for us for sure.”

Flansburg suggested a renewed focus on free trade agreements to legislators, in light of an ongoing agricultural tariff battle with India. He described the impacts as “disastrous” for domestic chickpea growers, who saw returns decrease from 40 cents per pound to 13 cents per pound, which did not cover the cost of production.

“I feel we as American farmers can compete with anybody in the world, and deliver a superior product,” he said. “So having those trade agreements in place, and free trade, we’re all for it.”