The industry officials said federal crop insurance and the Department of Agriculture’s Price Loss Coverage and Agriculture Risk Coverage programs are not serving as a “true safety net” for farmers, and reference prices for crops must be increased to counter declining farm income and high input costs.

A reference price is the estimated cost of an agricultural product set in the farm bill, used for crop insurance and commodity risk management program reimbursement purposes. The last update to reference prices came in the 2014 farm bill.

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

Rob Larew, president of the National Farmers Union, said in the hearing that while the 2018 farm bill provided a strong financial safety net for farmers, it is “being tested in new and unprecedented ways.”

“Whatever we can do to build on those successes in Title I, making sure that we update the price triggers and the reference prices, making sure that we broaden and strengthen the success of crop insurance, I think will go a long way towards providing that certainty,” he said.

Commodity risk management program payouts under the 2018 farm bill totaled $33 billion from 2018 to 2023, and crop insurance indemnities totaled roughly $27 billion over 2021 and 2022. These totals also do not account for the roughly $90 billion in ad-hoc disaster aid distributed over that same time period, mostly during the COVID-19 pandemic.

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.

Zippy Duvall, president of the American Farm Bureau Federation, told the committee on Tuesday that what he hears most often from farmers about the farm bill is the need to strengthen and expand federal crop insurance programs.

Federal crop insurance plans can be purchased for both specialty and commodity crops by acres planted, and generally cover up to 85% of a given year’s market price for the good.

Caleb Ragland, a witness and row crop farmer from Kentucky, said federal crop insurance is one of the main tools he uses on his farm to stay viable. He said that protecting the programs from cuts and “harmful amendments” should be a top priority for legislators in the coming farm bill.

“Without crop insurance, the risks would be more than many farmers and lenders could handle,” he said. “It certainly would be for me and my family.”

Arkansas Republican Sen. John Boozman asked Duvall about the benefits of the current safety net, in light of talk in Congress of tying eligibility to climate practices, and mandatory payment limits.

“Our farmers go to those risk management products to be able to protect their farm, for enough revenue to be able to get to the next crop in the wake of a disaster,” he said. “Those are real threats. We need not dilute the program. We need to make it better, not more challenging.”

Committee Chair Debbie Stabenow (D) of Michigan, asked Larew and Duvall how to better provide crop insurance options for specialty crop farmers in the coming farm bill.

Duvall said that the most important thing is to make sure that the crop insurance program is funded correctly, and is easy for farmers to use.

Larew suggested more actively applying a provision of the Federal Crop Insurance Act to encourage adoption and continued use of climate-smart agricultural practices by developing new specialty crop insurance policies.

Larew said the National Farmers Union supports provisions that limit payments to those who are truly invested in management and labor, and would be willing to work with Congress to find ways to ensure that those rules are being met.

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.

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Farmers who could not plant a crop this year because of flooding, too much moisture, or other non-drought related reasons will receive extra assistance from the federal crop insurance program. Growers will automatically get a “top-up” on their so-called prevented planting claims of either 10 or 15 percent, depending on their insurance policy. There’s no sign-up period, and checks start going out in mid-October.

“It was a challenging planting season for many of our farmers,” said Bill Northey, USDA’s undersecretary for farm production and conservation. “We are doing everything we can to ensure producers receive the help they need.”

University of Illinois economist Scott Irwin said that the payment “is more generous than even I expected.”

Irwin, in an analysis posted on Twitter, estimated the top-up payment means that farmers who decided to file an insurance claim instead of planting, will get the same amount of federal aid as a farmer who planted and therefore qualifies for the administration’s trade relief package.

Based on Irwin’s calculations, there will be Illinois farmers, for example, who could gross more than $500, or even $600, per acre this year on corn they didn’t plant.

Irwin said that if he were a farmer who planted corn “in the mud” after June 5, rather than going the prevent plant route, “I think I would have a right to be upset about the muddled communication regarding having to plant to get the (market facilitation program) payment coming out of the USDA in late May/early June.”

Theoretically, a farmer who didn’t plant a crop this year could collect money from several different federal programs: crop insurance and the extra top-up, disaster aid authorized by Congress, and trade aid for any cover crops.

Source: Politico