Cotton backs ‘STAX’ program, rice against ‘one size fits all’ approach
|By David Bennett|
|Penton Business Media|
Regional differences on how best to construct a farm safety net arose during Thursday morning’s
One thing that most witnesses and legislators agreed on – besides the finish of direct payments -- was a dislike of the Supplemental Revenue Assistance Payments (SURE) program which can require farmers wait 18 months for payments following a disaster.
For hearing testimony, see here.
In a statement following the hearing, the NCC stated it “believes a revenue insurance program that supplements existing insurance products would provide an important and affordable tool -- especially given the weather uncertainties and risks that farmers face.”
The NCC says effective risk management would come with the adoption of the Stacked Income Protection Plan (STAX).
“The STAX plan is designed to address revenue losses on an area-wide basis, with a county being the designated area of coverage. In counties lacking sufficient data, larger geographical areas such as county groupings may be necessary in order to preserve the integrity of the program. The ‘stacked’ feature of the program implies that the coverage would sit on top of the producer’s individual crop insurance product. While designed to complement an individual’s buy-up coverage, a producer would not be required to purchase an individual buy-up policy in order to be eligible to purchase a
For more on the NCC proposal, see here.
“We have to have access to crop insurance, risk management tools and even emergency assistance programs to survive and recover from these natural disasters,” said Coley. He added that “the availability of effective risk management tools like crop insurance is important even in so-called normal years because cotton producers need to recover a portion of lost revenues if their crop is damaged after they have invested in the inputs, technology and equipment necessary to produce and market a crop. In those areas where cotton growers have not had access to adequate coverage, we want to continue to work with
For more on the WTO case, see here.
Coley replied that the WTO Brazil case was in two parts: the export credit guarantee program and the upland cotton program. “Our proposal –
As part of the WTO case, “Brazil challenged the insurance program for cotton. But the WTO panel did not find any fault with insurance programs in terms of distorting production, trade or price.”
“Provisions of (
“We understand the framework agreement between
Coley: “The revenue products offered will not work for cotton … due to the fact that we have extreme prices, yields and variations in the calculated years.”
“There is a great diversity in agriculture in this country,” Satterfield testified. “We have different crops, different farming practices, different rainfall seasons. I think it is very, very difficult to have one program that fits everybody…
“We need a program that is financially meaningful to producers. The best way to do that is have (each commodity) craft a program that best fits their needs.”
Satterfield was asked why crop insurance doesn’t work for rice as well as it does for other crops. “The first component I think in protection from crop insurance is yield. We do not have variability in yield that you have in other crops. As an irrigated crop, our yield is fairly constant.
“So, our main support from crop insurance would have to be a revenue-type program. It wouldn’t be so much a yield protectant but (be concerned with) a price component. That’s why we’ve grappled with trying to find a crop insurance program that would fit in a rice situation where there is a pretty standard yield. Variability in price is a big factor.”
The big problem, answered Satterfield “is, basically, in
“In order to craft a revenue program, you need a constant price – a situation you don’t have in long-grain rice like you do in medium-grain. So, even though it’s the same commodity, it’s (composed) of different types and there are different marketing situations. That’s why we have some differences of opinion in the rice industry.”
Farm Bureau and EWG
AFBF concerns are “on several levels,” said Stallman. “One is at the level which the top layer is set. The devil is always in the details. We’re concerned that if you set the level of coverage too high – and there have been some proposals of 90 and 95 percent coverage levels – that you’re taking too much risk from the producer.”
For more on AFBF’s “deep loss” proposal, see here.
Going that route would mean “the law of unintended consequences kicks in,” claimed Stallman. “You have farmers that are willing to leverage their equity a whole lot more than they would otherwise. You have the bidding up of cash rents and land prices and the normal things that occur purely from an agricultural economics perspective. We believe that would make it more difficult for young farmers and ranchers.
“We also want to be sure we do this on an area basis … as opposed to a farm-level trigger. We’re very concerned that with farm-level triggers at that high a level of coverage there’s a risk of moral hazard. And, obviously, the costs go up when you use a farm trigger as opposed to an area-wide trigger.”
The AFBF is “willing to look at some of these proposals,” continued Stallman. “If the parameters are right, maybe we can come to a consensus. We still fundamentally believe that flipping it around and letting the government take the deep loss and giving the producers the responsibility of crafting their own risk management with existing crop insurance tools at a lower premium presents a better option. (That would mean) producers have more skin in the game as opposed to the government taking the top layer of losses and producers taking lower levels.”
The day after so many endorsements of ramping up federal crop insurance, the
“More and more tax dollars are flowing to foreign insurance companies and away from farmers, working families and the environment,”
For more on the EWG report, see here.
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