Having pledged to find $23 billion in spending cuts over the next decade, House and Senate Agriculture Committees are scurrying to find the perfect reinvention of the “income safety net” by embracing some form of revenue-based federal insurance for farmers and ranchers. While the process looked to be moving forward, it has come to a halt over regional differences, a new wave of “save-the-program” voices and growing criticism the process is creating a “secret farm bill.”

The rewrite of direct farm program payments, including direct payments, countercyclical payments, ACRE, loans, etc., is part of negotiations among the top four members of the respective ag committees: Senate Ag Committee Chair Debbie Stabenow (D-Mich.); ranking member, Sen. Pat Roberts (R-Kan.); House Ag Committee Chair Frank Lucas (R-Okla.); and ranking member, Rep. Collin Peterson (D-Minn.). The challenge is to cut a proposed $23 billion from ag spending over the next decade, as part of a collective commitment to the Joint Special Committee on Deficit Reduction.

Stabenow and Lucas right now look favorably on “shallow loss” federal revenue insurance. Under this program, a farmer absorbs only the first 5%-10% of income loss, with the federal government picking up the next 20%-25% of the loss before federal revenue insurance kicks in. Critics, including the American Farm Bureau Federation, say this could entice farmers to take greater risks than they might otherwise. Others contend the base “income” figures that would be used to set the bar on payments would likely be based on 2010-2011 net on-farm income, the highest since 1974, when adjusted for inflation, which would essentially negate any savings over 10 years. The use of base acres to determine payments would be ended, but using actual acres as part of the payment formula is still a question. No requirement for federal crop insurance is included in the program design. For certain crop producers, including rice and peanuts, who traditionally have not been insurance buyers, it’s likely the new program would include a modified countercyclical payment program.

New approaches to maintaining the so-called income safety net, almost all of which are tied to some form of new federal revenue protection insurance, proposed by national commodity groups are being sidelined for now.

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However, Rep. Peterson tried to simplify the revenue insurance approach by saying, “If you have a good year and a good crop, you get no government payment.” He added that his favored approach pays farmers when prices go down or crops are bad. House Agriculture Committee Chair Lucas said the challenge is “how to make it work for all regions and all crops” and “meet the expectations of Congress and outside the body” from those who don’t understand crop production or farm programs.

There will likely be two “Farm Bills.” The first will likely be written as part of the deficit reduction package and will concentrate on direct farm program payments, but not effective until the 2008 Farm Bill expires on September 30, 2012, along with rewrites of conservation and crop insurance titles. The second Farm Bill will be written in 2012 and will incorporate at least the framework of whatever’s agreed to in the deficit reduction package, but “refining” the income safety net alternative, tracking the needs of individual commodities and regions, as well as fixing the mistakes made in the first reinvention. The rest of the Farm Bill titles, such as research, disaster assistance, export and energy, will be written in 2012 and within the budget confines of the deficit reduction agreement.

Steve Kopperud, executive vice president of Policy Directions Inc., is the American Feed Industry Association’s government affairs consultant. He can be reached at skopperud@poldir.com.