The American Soybean Association (ASA) testified today before the House Subcommittee on General Farm Commodities and Risk Management Committee on Agriculture. In the current budget environment, with farm programs a target for interests that either oppose them in principle or want to fund other priorities, ASA is looking for ways to make farm programs more efficient, effective, and defensible.

"ASA believes farm programs play an important role in underpinning the strength of the farm economy which, in turn, has supported the overall U.S. economy during the current recession," said ASA President Rob Joslin, a soybean farmer from Sidney, Ohio. "The importance of an effective safety net for farm income has grown as the rising cost of farm inputs has increasingly pressured farm profitability."

With regard to the Average Crop Revenue Election (ACRE) program, projections indicate it may be a better choice for producers in the largest soybean-growing states than the traditional farm program.

"While we have experienced only one year since sign-up for 2009 crops, ASA believes the revenue guarantee provided under ACRE can be strengthened and modified to make it more attractive in regions of the country where participation is low," Joslin said. "And we believe ACRE can be made to work in tandem with a modified crop insurance program to provide a more effective safety net for all soybean producers."

Among the modifications needed, ASA recommends that the Committee consider changing the state loss trigger to a trigger closer to the producer level. This is particularly important to producers in states with higher variability in yields between growing areas within the state, and would functionally improve producer risk management. A related question is whether to maintain the farm loss trigger if the decision is made to move the program from a state to a more local loss threshold.

A second significant concern is that sign-up under ACRE requires participation for the duration of the 2008 Farm Bill. This requirement discourages participation by producers who rent their land on an annual basis, and cannot make a multi-year commitment.

A third issue is the 30 percent reduction in marketing loan rates required under ACRE. The loan program is a critical marketing tool for soybean producers in southern states who also grow cotton. The 30 percent reduction in loan rates undercuts this marketing function, making ACRE a non-starter for southern soybean producers who also grow cotton.

"ASA also supports simplifying the ACRE program to make it more understandable and accessible to producers," Joslin added. "The amount of paperwork required to participate in ACRE is excessive, and needs to be reduced if participation rates are to increase."

Preliminary reports from ASA members in some states indicate that the Supplemental Revenue Assistance Program (SURE) program will provide substantive relief for losses incurred during the 2008 crop year that were not covered through crop insurance indemnities. At the same time, SURE does not provide adequate disaster relief to producers in regions where participation in crop insurance is low, or is at low levels.

Crop insurance has become an increasingly important part of the farm income safety net for soybean producers in recent years. ASA does not support including crop insurance reform and reauthorization in the next farm bill. To do so would risk skewing coverage between commodities, similar to the inequitable price and income support levels currently provided under the traditional farm programs. In addition, ASA opposes cuts in the crop insurance baseline. Any reallocation of spending under the program should be used to pay for reforms needed to make it more effective on a nationwide basis.

"ASA is concerned by the possibility that income support provided under ACRE, SURE, and crop insurance may overlap, which would make these programs less defensible as Congress looks for ways to reduce the overall cost of farm programs," Joslin added. "ASA encourages the Committee to determine whether and how modifications should be made so that each of these programs plays an appropriate role in supporting farm income when prices and yields decline."

ASA has long supported adjusting target prices and marketing loan rates to make them equitable among commodities. Counter-cyclical income support should be based on the relative value of each commodity. Loan rates must also be equitable, or planting decisions will be distorted in years when prices are expected to be near or below loan levels.

"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," Joslin said. "Because market prices have been above these levels in recent years, the disparities in support levels have not disadvantaged soybean production under the 2008 Farm Bill. In order to provide meaningful income support, soybean loan rates and target prices need to be significantly increased."