Crop Insurance, Production Costs, ERP Among Key Topics at Senate Ag Farm Bill Hearing

USDA climate program efforts were raised by Sen. Grassley, who noted concern over USDA’s move to tap more than $3 billion from the Commodity Credit Corporation (CCC) to fund its Partnerships for Climate-Smart Commodities (PCSC).

A Senate Ag Committee hearing Thursday on the new farm bill raised a issue that is now evident: the Title 1 farm bill safety net can no longer deal with the current ag environment of rising production costs and relatively high prices for some commodities. USDA officials also faced criticism about its handling of Phase 2 payments via the Emergency Relief Program (ERP).

Other topics that have previously surfaced included Republican concerns about climate and conservation changes to crop insurance, while Democrats continued to urge expansion of the program to more producers.

Need for change

Senate Ag Chair Debbie Stabenow (D-Mich.) said the 2018 Farm Bill largely lived up to expectations, but she suggested its successor must deal with several challenges: increasingly damaging natural disasters and accelerated costs of production.

“There are still gaps in the farm safety net as farmers continue to face global market uncertainty and climate-fueled weather disasters,” she said. “While many commodity prices are at historic highs, which is good, we also know that land and fertilizer and input costs are also near record highs.”

Farm safety net gaps

Ranking Member John Boozman (R-Ark.) said a focus on boosting nutrition and climate programs has obscured the fact that farm safety net programs like Price Loss Coverage (PLC) are ill equipped to deal with the current situation.

“Prices for many of our major commodities would have to drop sharply before the current Title 1 Price Loss Coverage safety net would start to work,” Boozman said, noting corn prices would need to plummet 46% before PLC would provide enrolled farmers any assistance. “By the time corn prices fell that low, the significant damage would have already been done.”

Sen. Tommy Tuberville (R-Ala.) asked if USDA had looked at how the two safety net programs respond to inflation, such as adjusting reference prices — which trigger payments under the PLC program.

“I will tell you my legislative staff is always quick to tell me to emphasize that Congress writes the farm bill, and then that's going to be important here too, obviously those reference prices are in statute,” USDA Undersecretary for Farm Production and Conservation Robert Bonnie told Tuberville. “When we talk to producers, there's lots of concern about obviously rising input costs,” he added, but then emphasized USDA can only operate farm safety net programs as dictated by Congress.

USDA disaster aid implementation was both praised and criticized

Democrats and Republicans agreed with farmers who have complained about USDA’s methodology for payments under Phase 2 of the ERP, saying they do not adequately compensate farmers for their losses. “I appreciate USDA’s efforts through Phase 1 of ERP, which generally worked well in supporting producers with crop losses and [2020 and 2021],” said Sen John Thune (R-S.D.). “But the Phase 2 methodology… often does not accurately reflect crop losses that Congress meant to cover.”

Thune urged USDA consider reverting to the approach used in Phase 1 of the ERP effort for 2022 losses, a suggestion echoed by Sen. Amy Klobuchar (D-Minn.), who said farmers in her state “are grateful for the quick and effective approach taken during the implementation of ERP Phase 1,” but “a number of them have been less enthusiastic of the income tax-based approach taken during the rollout of ERP Phase 2.”

Bonnie said USDA’s approach on ERP Phase 2 focused on ensuring more producers had access to aid, but said if there are resources remaining after the effort the department may look at a shallow loss effort to address some of the concerns with Phase 2.

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Bonnie said ad hoc programs like ERP have helped farmers facing disaster-related losses, but he stressed that federal crop insurance remains a key risk management tool, and that USDA has worked to expand the program to cover more producers.

Crop insurance and climate intersect

Boozman again raised a concern voiced by many Republicans about any move to use crop insurance to incentivize climate or conservation practices — which GOP members contend could undermine the actuarial soundness of the program and move it away from its core focus as a risk management tool.

“Can you commit to making sure that any efforts to expand the crop insurance programs are science based, peer reviewed, and protect the integrity of the program,” he asked Bonnie, saying a “one-size fits all” approach that elevates certain practices like cover cropping could disadvantage farmers in areas where those practices are not practical.

Bonnie responded that “with respect to crop insurance, everything we have to do has to be actuarially sound as we've got to maintain the integrity of crop insurance.” He said recent incentives offered to farmers for cover cropping have taken the form of premium rebates — not changes to premiums or the overall premium subsidy paid by the government.

Stabenow praised federal crop insurance, calling it “the number one risk management tool for producers.” However, improvements are needed, she said, promising improvements to the program, “including specialty crop growers, organic producers, beginning and diversified farmers.”

Regarding prevent plant coverage

Sen. Ben Ray Lujan (D-N.M.) asked if USDA was looking at expanding prevented plant coverage under crop insurance, which pays farmers when they are unable to plant an insured crop due to extreme weathers. He noted eligibility currently hinges on a farmer being able to plant, insure and harvest crops in one of the four preceding crop years — known as the four-in-one rule — and some farmers in the West are at more risk of losing coverage due to prolonged drought conditions.

“One in four is very regionalized in a lot of cases,” acknowledged USDA Administrator Marcia Bunger. “So, for this coming year, we've made an exception for several western states to step outside of that one and four,” adding USDA would consult with stakeholders over the next year about a potential long-term solution to the issue.

USDA climate program efforts were raised by Sen. Chuck Grassley (R-Iowa), who noted concern over USDA’s move to tap more than $3 billion from the Commodity Credit Corporation (CCC) to fund its Partnerships for Climate-Smart Commodities (PCSC) effort that funds climate-smart ag pilot projects.

“Spending over $3 billion without input from Congress is a serious concern for everybody in the Congress,” Grassley stated.

Grassley then asked Bonnie if USDA had any plans to tap CCC for additional USDA programs. Bonnie reiterated what USDA Secretary Tom Vilsack has said — that PCSC falls within the CCC’s charter as it looks to expand and create new markets for ag commodities.

However, Bonnie ultimately said there were no plans for new CCC-backed programs under the Farm Production and Conservation (FPAC) mission area.