With only days left before Congress is expected to finally come to terms on a possible 10-year farm bill, growers gathering for the annual Commodity Classic convention are increasingly uneasy that a final package will fall far short of helping them meet the risks of $200-plus cash rents and $700-per-ton fertilizer bills.
Corn input costs have more than doubled since passage of the 2002 farm bill and the expiring law's fixed target prices are becoming irrelevant to today's grain producers, numerous commodity leaders interviewed here said. What worries them most is that congressional leaders might pass a business-as-usual farm bill, leaving them little cushion to manage grain markets and costs that are both shattering records.
"The farm bill needs to recognize we are in a different dynamic than we were in 2002," said Tim Recker, president of the Iowa Corn Growers Association and an Arlington, Iowa, farmer. "We need to collectively look at the market conditions we could see over the next five years, and make sure farm policy is up to the task."
The National Corn Growers Association's "number one priority now" is pressing Congress to include the Senate's Average Crop Revenue (ACR) package in the compromise bill, said Ron Litterer, NCGA president and a Greene, Iowa, farmer. Members of the National Corn Growers are even willing to sacrifice "some" direct payments to help fund the revolutionary farm program concept, though Litterer wouldn't specify how much.
Senate Agriculture Committee Chairman Tom Harkin, D-Iowa, reiterated Thursday in Washington that he supports improving the farm safety net with the ACR to help producers, but Harkin senses there is not enough support for it throughout the Congress. Harkin has advocated cutting direct payments, which he said "have no relevance" to what is happening in the current agricultural landscape.
"I've always said I would rather have a better counter-cyclical program," Harkin told reporters.
With $5-per-bushel corn, the current federal crop-insurance program leaves growers like Litterer exposed to much higher per acre losses in the event of a weather disaster or price collapse.
"When corn was $2, a 70-percent level of insurance covered all but $90 of my $300-per-acre risk," Litterer said. "At $5 corn, I have $750 per acre at risk, but I've got a $225-per-acre deductible."
With ACR, the main premise is that price protection moves with the market but gives farmers coverage in the extreme situations when you face revenue loss, Litterer said. If in the final farm bill, growers who voluntarily elect the ACR option would forgo traditional loan deficiency payments and counter-cyclical payments.
"Why even look at LDPs and loan rates or payment limits in the farm bill? They are a non-issue today," Recker said "My cost of production to raise a bushel of corn is close to $4 a bushel now, and at that level, I'd get no LDPs."
In the remote chance prices would go below the loan rate again, "My losses would be devastating," Recker added. "Corn could fall from $6 to $3, cutting my revenue in half, and I wouldn't begin to collect any risk payment" under traditional farm programs.
Relying on ad hoc disaster programs to fund the gap between crop insurance coverage and farm program payments gives growers little comfort either. Those kind of packages are slow to pay and too easy to become political boondoggle. "If we could get an ACR program, especially if we could afford to upgrade it to a county-revenue trigger, cuts in direct payments would be a good bargain for most growers," Recker added.
Eighteen months ago, when NCGA first proposed a market-price based revenue program, few other commodity groups had seen their own prices break out of the doldrums. Litterer thinks recent surges in wheat and soybean prices should give those producers second thoughts about relying on a bygone era's target prices and loan rates. "With the realism of today's market, ACR starts to look more attractive," Litter said. "A lot of farmers had been underestimating the risk involved in agriculture."
A major hurdle, however, is that House farm-bill negotiators are not fans of the ACR package. The Bush administration and the House farm bill have proposed revenue-assurance plans that would be based on national yield averages and price triggers, meaning there would be less likelihood of a payment to farmers when prices and yields remain strong nationally.
Even other grower organizations have so far withheld support. The American Soybean Association, for example, remains hopeful that Congress will simply hike the soybean target price to $6.10, rather than tinker with a new support system.
Minnesota Corn Growers Association leaders also object on the grounds that "while ACR might work as a disaster relief program, it doesn't address the individual needs of a producer," said Steve Kramer, a Hector, Minn., producer and Minnesota board member. Even within a county, growers can experience extreme yield differences that might leave a disaster victim unable to collect because other parts of a county experienced bumper crops. A state-revenue trigger diminishes the value of the ACR even more, Kramer said.
ACR supporters admit the compromise plan isn't ideal, but still believe it is a huge improvement in farm policy that might plant the seeds for wide-scale reforms in the next farm law. What most worries Craig Floss, Iowa Corn Growers Association executive, is that Congress might miss a chance to try to adapt farm programs to a new era. "We'd leave farmers flying without a net if we put forward a remake of the 2002 bill that doesn't take these higher risks into account," Floss added.DTNAg
