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Senate Ag farm bill could mean direct payment cuts
By TIM THORNBERRY
Kentucky Correspondent

FRANKFORT, Ky. — This is the year a new national farm bill is supposed to pass, but if history repeats itself, it’s a toss-up as to whether that will happen as talks heat up. Last week the U.S. Senate Committee on Agriculture, Nutrition and Forestry passed a proposal authored by Committee Chair Debbie Stabenow (D-Mich.) and Ranking Member Senator Pat Roberts (R-Kan.).

The Senate version, among other things, cuts direct payments to farmers and “will reduce the deficit by $23 billion by eliminating unnecessary subsidies, consolidating programs to end duplication and cracking down on food assistance abuse,” according to a press release from the committee.

This bill would mean, “Farmers will no longer be paid for crops they are not growing, will not be paid for acres that are not actually planted and will not receive support absent a drop in price or yields,” it noted. But farmers will argue the supports trying to be eliminated bring stability to the markets.

The measures contained in the proposed bill are similar to recommendations made last year when an attempt to pass a farm bill within the Congressional “Super Committee” died with the committee itself.

Jeff Harper, director of the Public Affairs division at Kentucky Farm Bureau (KFB), said there were no surprises in the recent action. “I don’t think the farming community was shocked with the bill that would eliminate direct payments,” he said.

Instead, the committee recommends propping up the crop insurance program and combining two existing programs to provide most of the necessary security.

Harper said ultimately, what will impact farmers across the country is where they end up concerning risk management specifics contained (or not) in the bill. He pointed out the freezing temperatures from a few weeks ago that will affect some producers, including peach and wheat growers, as an example of just what can happen.

“We’ve got to have some type of risk management that protects our farmers in that situation,” Harper said. “We had a moist March and it has been dry through April, and it might not rain until August, and I don’t know of a farmer that can make it rain.”

Harper added an argument could be made either way for certain parts of the bill, but farmers need security for events out of their control.

“I don’t think you can find a farmer anywhere that would argue that their corn, soybeans and wheat prices have not been good, but there is no guarantee that it will be that way this time next year,” he said. “Can you imagine if we went back to $2 corn? So we’ve got to have some kind of revenue assurance programs, as well, that protects (against) volatility in the market.”

While grain prices are good, input costs have skyrocketed, which would make profitability nearly impossible if a big dip in prices occurs.

“What we cannot lose sight of, in my opinion, is that food is a national security issue in this country,” Harper said. “I don’t think anybody in America, whether they live in the most rural part or the most urban, wants to ever become dependent on (imported) food like we are our oil. That is a decision Congress will have to make.”
John Mahan raises a variety of crops, including tobacco, alfalfa hay, corn, soybeans and wheat. He also runs a sod business along with beef cattle and equine boarding operations in northern Fayette County, Ky. Mahan said farmers can do without direct payments if the government can guarantee commodity prices will stay at today’s levels.

“Less than two years ago, we sold corn for $3.50. At today’s fertilizer prices, that does not compute,” he said. “We have got to be able to be profitable for the country to produce the food we need and other countries demand. Obviously that is what it all boils down to. If we don’t eat, everything else ceases.”

Mahan said it’s not just farmers who benefit from direct payments. It also helps people such as landowners, who rent their land to farmers.

“It’s a trickle-down effect,” he said. “The direct payment adds to the bottom line, but my concern is that trickle-down effect and the effect the lack of direct payments is going to have. I will have to change things in my operation because that part of my safety net will be gone. It’s going to felt where I shop, where I buy parts and equipment, where I spend money.”

Like some other farmers, Mahan has nearly completed planting his corn and spent the money to do so. In the event of a drought, for instance, some farmers may not have the available funds to plant next year’s crop, he said.

“Crop insurance will heal some of that wound, but you’re not going to have any profit,” he added. “We have been blessed with good prices and good yields, but just because we’ve had that doesn’t mean we need to remove our safety blanket. There are no guarantees on this crop. We play the hand that Mother Nature deals us and we could have a disaster as easily as we could have a home run.”

Mahan recalled a conversation he had with a friend recently that “really hits home” considering the price of gasoline: “If you think we like depending on foreign oil, imagine how much we will like depending on foreign food.”

He said getting the bill passed may be difficult considering all the misunderstanding and differences of opinion. The current farm bill will expire on Sept. 30 and with the presidential election looming, the 2012 farm bill could easily turn into the 2013 farm bill.
5/2/2012