Revenue insurance is a promising option for farm aid
Fixing farm policy, which has been the single largest influence on the shape of agriculture in the U.S. since the Dust Bowl, is not easy. “Not easy” will seem a drastic understatement to anyone who has followed the endless debate on the Senate floor over the past two weeks, which has produced much hand-wringing and rhetoric about our “safe and abundant food supply,” but no actual Farm Bill.
Tom Philpott has argued in recent posts that farm subsidies are a symptom of the problems associated with modern agriculture rather than the cause, and that efforts to end subsidies are bad policy. In his view, overproduction is the true culprit, and unless farm bill reforms include a mechanism to control supply we will continue to have problems.
It’s easy to blame everything on overproduction, but it is just not accurate. Prices for corn, soybeans, and many other commodity crops are higher than they’ve ever been right now. Prices don’t rise when there’s too much of a commodity, they rise when demand exceeds supply.
I do agree with Mr. Philpott on one point: simply ending farm subsidies is not going to immediately end all of the environmental problems caused or aggravated by agricultural production.
But farm subsidy reform advocates are not talking about ending subsidies. We don’t want to pull the rug out from underneath farmers. Instead, we want to exchange the wall-to-wall shag carpet for something more modest — a safety net for farmers that is less market-distorting and costs less than $9 billion a year. A better safety net will do far less to amplify problems caused by agricultural production than current farm policy does, and will also free up funds that can be used to address these problems.
The current structure of farm subsidies sends a message to farmers: no matter what happens with the weather or the market, you will continue to get a check from Uncle Sam. Regardless of whether there’s a bumper crop and the market is flooded, or there has been hail or drought or floods and there’s practically nothing in the field to harvest, you will get these checks.
Prices are high right now — it’s not at all accurate to say that subsidies are causing overproduction. But if the ethanol boom tanks, which could easily happen in the near future, the current structure of farm subsidies would insulate farmers from market signals telling them to plant less. At that point, subsidies would continue to prop up production levels, and thus would contribute to overproduction.
As I explained in a recent post, Senators Richard Lugar (R-Ind.) and Frank Lautenberg (D-N.J.) have an amendment to the Senate Agriculture Committee’s Farm Bill that is a promising — and much less expensive — alternative to the current subsidy system. It would replace the current system with a county-based revenue insurance program. Revenue insurance would cost much less than the current subsidy system, and the savings generated would be reinvested in a wide array of programs, many of which help address the ills that Philpott blames on overproduction. The amendment would spend an additional:
- $1.2 billion on conservation programs for working farm, ranch, and forestland;
- $200 million for the Seniors Farmers’ Market Nutrition Program;
- $200 million for the WIC Farmers’ Market Nutrition Program;
- $20 million for the Farmers Market Promotion Program;
- $75 million for socially disadvantaged farmers and ranchers;
- $70 million for research and marketing development for fruits and vegetables.
The insurance program would be available to all types of farmers, not just producers of a few commodity crops, and as Philpott himself points out, payouts would be based on revenues, which are largely tied to the size of a farm. Counties with more agricultural production would still get more money than counties with less agricultural production when revenues fall, because more farmers from the first group of counties would make claims. But this is a far better alternative than the way funds are distributed under current policies, which heavily favor the largest producers of just a few types of row crops.
Farmers in the urban periphery or other areas where people are trying to revive local food systems would be equally eligible to participate in this insurance program — something that isn’t a realistic option for most of them now unless they’re growing one of the major commodity crops. As agricultural revenues in these counties grow, these farms would be eligible for more support from the federal government. And in the meantime, they would benefit from increased funding for farmers markets, conservation, and specialty crops provided by the Lugar-Lautenberg amendment.
The environmental problems tied to agriculture are going to take a long time to solve, no matter what. But the Lugar-Lautenberg amendment would bring us a lot closer to our goal. It would eliminate extra incentives for producers to plant more crops when prices are low, increase funding for the conservation programs that help farmers reverse the environmental damage of agriculture, and create incentives for farmers to be better stewards of their land. It would be a vast improvement over the current system, and it deserves the support of Congress and the American public.