De Moines Register
09-02-07
Brasher: Alternate farm plan finer deal for Iowans
Corn, soybean and wheat farmers would get higher payments without a major
jump in overall spending.
WASHINGTON FARM REPORT
By PHILIP BRASHER
REGISTER WASHINGTON BUREAU
Washington, D.C. - No wonder corn growers want to change farm policy.
Under an alternative subsidy program they're pushing in Congress, corn growers
could get up to $20 an acre more in annual payments than they'll get under the
current program.
Farmers who grow soybeans and wheat also would be better off, according to an
economic analysis of the plan.
The plan does all this without a major increase in overall government spending.
Oh yes, the cost of buying crop insurance also will go down.
So, who could be opposed to it? Two influential groups - cotton growers and crop
insurance companies - that would lose money were it to become law. Five Iowa
companies are authorized to sell federally subsidized crop insurance.
Under the current farm program, there are two types of subsidies, both pegged to
fluctuations in commodity prices, countercyclical and loan deficiency payments.
The alternative plan would replace those payments with one type of subsidy that
would be triggered when crop revenue falls below a statewide target. Revenue
would be determined by both the commodity price and statewide crop yield.
Advocates of the plan say it would better help farmers when they most need
government help - those years when their crops suffer drought or storm damage.
As it stands now, grain and soybean growers are likely to get little in the way of
countercyclical or loan deficiency payments for the foreseeable future because of
the ethanol-driven increases in market prices.
Under the current farm program, Iowa farmers would expect to get about 81
cents an acre in countercyclical and loan deficiency payments on their corn crop
each year, while subsidies under the revenue plan would average $14.33 per
year, according to the economic analysis done by Iowa State economists.
Farmers in other states could do even better. In Maryland, for example, corn
growers would get an estimated $20.13 an acre more.
Two Democratic senators, Richard Durbin of Illinois and Sherrod Brown of Ohio,
have introduced the plan in Congress. But getting other senators to support the
plan won't be easy for the same reason that the plan would cost taxpayers
relatively little: It takes money away from cotton growers and insurance
companies.
As Tom Buis, president of the National Farmers Union, puts it: "It is pretty tough
to take away something from someone who is already getting it."
Congressional budget analysts say that implementing the revenue-based
payment system would cost about $100 million. That's because spending on crop
insurance would drop, because the revenue-based payments would provide
some of the protection farmers are now getting from insurance, and subsidies to
cotton growers would fall, said Bruce Babcock, an Iowa State economist.
Babcock advised the National Corn Growers Association in their development of
the original revenue plan on which the Durbin-Brown plan is based.
Cotton farmers are more likely to draw payments under the existing price-based
system than one based on revenue, he said.
The House-passed farm bill takes a small step in the direction of a revenue plan
by giving farmers the option of basing their countercyclical payments on either
commodity prices or changes in national-level revenue. The chairman of the
Senate Agriculture Committee, Sen. Tom Harkin, D-Ia., is considering going a
step further and switching the countercyclical program to a national revenue
basis.
But neither approach goes far enough for advocates of the revenue plan.
Payments are much less likely to be triggered if they are based on changes in
nationwide yields rather than on statewide or countywide yields. National yield
figures won't reflect a localized drought.
The Senate gets down to work on its version of the farm bill this month.
It's no understatement when Ken McCauley, the president of the corn growers
association, says, "We've got a lot of work to do."
Reporter Philip Brasher can be reached at (202) 906-8138 or
pbrasher@dmreg.com