WASHINGTON (DTN) -- Farmers representing commodity groups called on lawmakers to improve the safety net in the next farm bill as the House of Representatives kicked off debate early Wednesday afternoon with a bill to cut spending on federal programs.
The amount of money that will be available to write the next farm bill remains an open question, though the House Agriculture Committee earlier this spring unanimously voted to support a letter to budget writers asking for more funds for the legislation. At the same time, House Speaker Kevin McCarthy, R-Calif., pushed his debt-limit bill to the floor, a plan that would cut projected spending for federal departments such as USDA as much 14% over the next decade.
In a subcommittee hearing Wednesday, lawmakers heard from leaders from 10 commodity organizations, most of whom suggested the next farm bill needs to raise reference prices for the Agricultural Risk Coverage and Price Loss Coverage programs (ARC and PLC), make crop insurance more affordable, allow adjustments to cross over programs more easily and increase payment limits.
Rep. Glenn "GT" Thompson, R-Pa., chairman of the House Ag Committee, spoke briefly about listening sessions he's held around the country and prior hearings in the committee over various grassroots policies formed by farm groups. "These improvements won't come without a price tag," Thompson said.
The debate about commodity programs and the safety net is skewed by the $93 billion that has gone to producers in ad-hoc assistance since the 2018 farm bill passed, reflecting significant holes in the safety net.
Tom Haag, a Minnesota farmer and president of the National Corn Growers Association (NCGA), told lawmakers that corn growers "strongly oppose any cuts" to crop insurance programs. He also told lawmakers one area where crop insurance could be improved is the cost of policies. Haag pointed to the $6.55 billion producers paid in crop insurance premiums in 2022, a 75% increase from 2020. While commodity prices rose in that span, inflation soared as well, he pointed out.
"The higher costs for coverage have added pressure on growers already facing difficult decisions about managing rising costs," he said.
Haag also talked about increasing the 115% "accelerator" on the PLC reference price that is expected to kick in for corn producers in 2024. While the corn reference price right now is $3.70 a bushel, Haag told lawmakers the break-even price right now is closer to $5 a bushel, depending on land rent and other factors.
Shawn Holladay, a cotton farmer from Lubbock, Texas, and president of the National Cotton Council, said the general structure of the 2018 farm bill has supported producers but also fallen short. Total production costs average between 90 cents to $1 a pound, which is above futures prices now in the mid-80 cents per pound. Meanwhile, the loan rate on cotton has remained at 52 cents since 2002.
The current seed cotton price is 36.7 cents a pound, while production costs are closer to 48 cents a pound, Holladay said.
The farm bill also prohibits cotton producers from simultaneously enrolling cottonseed acreage in ARC/PLC and buying a crop insurance policy add-on for cotton, the Stacked Income Production Program (STAX). Holladay said STAX has become more attractive to buy as a policy in the past couple of years, but the restrictions limit producer risk-management options. He called on Congress to lift those restrictions.
Holladay also told lawmakers that the National Cotton Council opposes any further tightening of payment limits and program eligibility requirements. Disaster assistance has allowed higher payment limits for producers who receive a majority of their income from farming. Holladay said that same provision should apply to commodity programs.
Rep. Rick Crawford, R-Ark., said people often ask why producers can't simply switch crops. He asked Holladay about the practicality of that in southwest Texas.
"We grow cotton out there for a reason. It's a very arid environment ... it takes less water for that crop, so cotton is very specific to that region."
Aaron Flansburg, a farmer from Palouse, Washington, representing the Dry Pea and Lentil Council, talked about pulse crops and pitched the idea that the crop insurance Supplemental Coverage Option (SCO) should apply for both the PLC and ARC programs. Flansburg also said farmers who rent ground should be allowed to switch between ARC and PLC without having each landowner sign off on those changes in enrollment. He said the problem is more of a burden for producers with a lot of individual landlords.
"Sometimes the hassle of choosing between them is not worth the benefit of trying to predict what the market will do," Flansburg said.
Flansburg also called for a voluntary update of base acres.
Kirk Satterfield, chairman of USA Rice and a farmer from Benoit, Mississippi, noted rice producers did not see a run-up in prices that other commodities saw, though Satterfield said rice producers are increasingly subject to "predatory trade practices of foreign countries." Rice prices remain essentially tied to the reference price that was created in 2012, which Satterfield said is unworkable now for rice producers.
"The current cost of production is nowhere near the 2012 levels," Satterfield said.
A strengthened safety net would eventually be more cost effective for taxpayers and help producers rather than continued reliance on ad-hoc disaster programs, Satterfield said.
The rice reference price is about $14 per hundredweight (cwt), but the breakeven price is closer to $17-$18 per cwt. Satterfield said a Texas A&M study showed the rising input prices translated into roughly an average loss of $880,000 per rice farm in 2022.
"I can tell you that's a pretty accurate number because there are some people out there hurting in the rice business," Satterfield said.
Satterfield also called for increasing the caps on payment limitations "to reflect the growing risks undertaken by family farms."
Andrew Moore, president of the U.S. Canola Association, and a farmer from Dalton, Georgia, talked about the growth of canola production, noting it now accounts for an average of more than 2 million acres.
Moore said the "other oilseeds" reference price for canola of $20.15 per cwt has been effective and keeps canola and other minor oilseeds competitive with soybeans. If reference prices are increased, it's important to ensure the new levels reflect market values and that parity is maintained.
Daryl Cates, president of the American Soybean Association, pointed out in written testimony that soybean farmers "experienced firsthand the challenges of an ineffective safety net" during the 2018-19 trade war with China when prices fell but not enough to reach the PLC reference price. Cates said USDA had to step in with ad-hoc assistance through the Market Facilitation Program (MFP).
In calling for a voluntary update to base acres, Cates also said another challenge in accessing the safety net is the "significant disparity" in planted soybean acres compared to base acres. While there were 87.5 million soybean acres planted in 2022, more than 30 million acres were not part of ARC or PLC for soybeans. A lot of those acres might be covered with wheat or corn base, but Cates' written testimony added, "Some beginning farmers have little base on their farms, and greater adoption of no-till conservation practices have enabled farmers to cultivate row crops in new areas that have no base."
IMPORTANCE OF CROP INSURANCE
Thompson also pointed to a Democratic amendment -- one that failed in committee -- in the debt-limit bill that would have capped crop insurance. Halladay said that kind of change to the safety net would affect his ability to bring his daughter back to the farm.
"I would advise her not to farm if those would be implemented because that is something that we are using as a true safety net," Holladay said.
Responding to the same question, Flansburg said, "It's entirely critical to our farm operation to have strong crop insurance." He added, "If you are coming in without access to finance, insurance is critical."
Holladay later added, "The investments we make on an annual basis are all based on your safety net because you're not going to make future investments if you don't have some security."
Also see: "Debt-Limit Bill Would Repeal Biofuel and Renewable Energy Tax Credits," https://www.dtnpf.com/…
Chris Clayton can be reached at Chris.Clayton@dtn.com
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