BY KATHERINE GLOVER, Medill News Service
Times of Northwest Indiana
The clock is ticking already on the 2007 Farm Bill, which will govern federal farm policy and subsidies for the subsequent five years. The details of this complex, multi-section bill, which also covers topics like conservation and food stamps, must be worked out before the current bill expires in September 2007.
A proposed new approach to subsidizing farmers would get around World Trade Organization restrictions on subsidizing exports.
The National Corn Growers Association is pushing for a program of "farm revenue insurance" in place of existing subsidies. The idea is not new, but the NCGA in October released one of the first detailed revenue insurance proposals.
"I think this is a proposal we should really look at," said Kevin Johnson, agricultural liaison for U.S. Rep. Tim Johnson, R-Ill., a member of the House agriculture committee. He said the proposal seems to be WTO-compliant, "and anything that's going to be WTO-compliant, people are going to look at very seriously."
In 2004, the World Trade Organization ruled U.S. cotton subsidies were illegal after Brazil complained the subsidies were keeping the price of U.S. cotton artificially low. Other subsidies in the United States' $16 billion- to $20 billion-a-year farm package could be vulnerable to similar lawsuits, so compliance is a major issue in negotiations on the 2007 Farm Bill.
NCGA President Ken McCauley said currently it's up to the individual to buy crop insurance. "The new way would be across the board," he said, "so it would basically replace or come close to replacing ... disaster aid."
Revenue insurance would be based on average earnings rather than prices.
Currently, grain farmers get one type of compensation for their crops based on the difference between actual commodity prices and a minimum price set by the government. Farmers can choose the day they apply for their subsidy, so the lower the price is on that day, the more the farmer gets per bushel, even though the farmer may sell the crop for a higher price at a future date.
However, if a farmer's crop is damaged by drought or other disasters, the subsidy does not cover the destroyed crop, because the amount of money is calculated based on bushels produced.
Revenue insurance, which might be operated by crop insurance companies, would replace this payment with a subsidy based solely on earnings. If a farmer's net income fell more than 30 percent below the average income from the middle three of the previous five years, the farmer would receive an insurance payment.
Another, second payment under the NCGA plan would be based on average county revenues.
The American Corn Growers Association -- which split off from the National Corn Growers Association in the late '80s -- opposes the revenue insurance plan. President Larry Mitchell said he doesn't like the possibility that Farm Bill money might go to the crop insurance industry instead of to farmers.
"If we start redirecting it to private companies, the farmer will get less," Mitchell said. "Privatization of the safety net is not the way we need to go."
The Illinois Farm Bureau has a task force that has been working on its own revenue insurance plans and is studying the NCGA plan.
The Illinois Corn Growers Association won't take a formal position on the NCGA proposal until its policy meeting later this month, but Steve Ruh, chairman of the association's farm bill task force, said he is "fully in agreement with what the National Corn Growers policy team has come up with."
Kevin Johnson said most corn growers and soybean growers support the idea of revenue insurance, whereas cotton and sugar growers are more cautious.
"They are looking at it very hard," he said, "trying to figure out if this will work for them."