FARM POLICY BACKGROUNDER

ASA Position

ASA supports the role of farm programs in providing a safety net for farm income when prices and yields decline to unprofitable levels. ASA supported the 2008 Farm Bill, but believes the current soybean loan rate and target price do not provide adequate price and income support, and are not equitable with levels for other program crops. We also believe that provisions of the ACRE, SURE, and federal crop insurance programs discourage participation and restrict eligibility for soybean farmers on a nationwide basis. ASA will work to correct these inequities and restrictions in the 2012 Farm Bill. ASA opposes including crop insurance reform and reauthorization in the next farm bill.

Background

ASA’s Farm Bill Working Group approved the following positions, which were included in ASA’s testimony before the House Agriculture Subcommittee on General Farm Commodities and Risk Management on June 24, 2010: 

Marketing Loan and Target Price – ASA has long supported adjusting marketing loan rates and target prices to make them equitable among commodities. Loan rates must be equitable, or planting decisions will be distorted in years when prices are expected to be near or below loan levels. Counter-cyclical income support should be based on the relative value of each commodity. The current $5.00 per bushel soybean loan rate and $6.00 per bushel soybean target price are not equitable with support levels for other major commodities. As prices and input costs have risen in recent years, current soybean support levels provide an ineffective safety net against a decline in prices and yields. Based on CBO projections, significantly raising the soybean loan and target price levels in the 2012 Farm Bill would have a relatively moderate cost. 

Direct Payments – Direct payments represent a basic support for farm income when prices and yields fall sharply. This is particularly true for producers in regions where ACRE and crop insurance participation is low. Direct payments are also the only farm program considered non-trade distorting, or Green Box, under the WTO. However, direct payments drew significant criticism during debate on the 2008 Farm Bill as commodity prices rose and payments were made regardless of the need for income support.  In addition, direct payments can be factored into land rents, so they often pass through to the landlord rather than benefiting producers who do not own the land they farm, but accept the production risk.

ACRE – ASA supported including ACRE in the 2008 Farm Bill as an alternative to the traditional farm program. ACRE needs to be strengthened and modified to make it more attractive in regions of the country where participation is low:

·        The state loss trigger should be replaced with a trigger closer to the producer level. If this change is made, consideration should be given to eliminating the farm loss trigger.

·        The requirement that ACRE participants remain in the program for the duration of the 2008 Farm Bill discourages participation by producers who rent their land, and cannot make a multi-year commitment.

·        The 30 percent reduction in loan rates under ACRE undercuts use of the loan program as a marketing tool by soybean farmers who also grow cotton, making the program a non-starter for many southern soybean producers.

·        ACRE needs to be simplified to make it more understandable and accessible, and the amount of paperwork required needs to be reduced. 

SURE – Some soybean producers have received substantive disaster assistance under SURE, while others in regions where crop insurance participation is low, or at low levels, have not. This disparity needs to be addressed when SURE reauthorization and funding are considered prior to program expiration at the end of FY-2011.

Crop Insurance – Crop insurance has become an increasingly important part of the farm income safety net with soybean producers in recent years. ASA does not support including crop insurance reform and reauthorization in the 2012 Farm Bill. Any reallocation of spending under the program should be used to pay for reforms that make it more effective on a nationwide basis. Crop insurance should be modified to reflect the lower return per acre and higher input costs in soybean-producing regions that do not participate at meaningful levels. Low APHs and high rates make buy-up coverage unaffordable for many southern soybean farmers. Inadequate coverage then translates into reduced value from the SURE program.