Mikkel Pates, Forum Communications Co., Published April 15 2012
North Dakota senators promote benefits of RLAP
Sen. Kent Conrad, D-N.D., hosted a discussion on April 4 with about 50 farm leaders on the farm bill commodity title initiative in Bismarck. He’s pushing it in concert with Sen. John Hoeven, R-N.D., and Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, the other primary sponsor.
“Kicking this can down the road would be a huge mistake,” Conrad told the roundtable participants, of the political urgency. “Time is not on our side. From a budget perspective this noose is only going to tighten.”
Conrad wants the Senate to pass a bill with $23 billion in budget cuts calculated over a 10-year period, which is the same level of cuts as a House/Senate committee level budget proposed last December but not passed into law. If it can be passed in the Senate Agriculture Committee in the next several weeks, that would “build momentum” and perhaps get it accepted in the House, where others have proposed much higher cuts.
Hoeven is perhaps the Republican bipartisan linchpin in the deal.
North Dakota’s former governor and soon-to-be senior senator invited farmers representing groups affiliated with national commodity and policy organizations to “reach out to some of our colleagues on this,” he said. “We need a big vote out of the Senate Agriculture Committee” he said, saying he’d like to have a strong bipartisan vote – maybe unanimous – out of the committee.
“Let’s set our goals high,” Hoeven said.
U.S. Rep. Rick Berg, R-N.D., the Republican nominee to replace Conrad when he retires this year, said he’ll push the Senate bill as “critical” in the House. He says that’s not inconsistent with his support of the so-called “Ryan budget” proposal, which cuts farm programs twice as much. The plan is named for Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee.
Crop insurance central
The Conrad-Hoeven-Baucus farm proposal plan keeps crop insurance as the primary economic safety net for farmers. It also protects against multiple-year (shallow) losses. Insurance guarantees are subject to short-term price variability. It is called the Revenue Loss Assistance and Crop Insurance Enhancement Act of 2012 and was introduced March 29.
“I think we have a real opportunity here because it’s a bipartisan bill,” Hoeven said. “It’s cost-effective. I think it provides strong support for our farmers and ranchers.”
Hoeven noted that a rival bipartisan Senate bill offers benefits for corn production in the “I states” (Illinois, Iowa, Indiana) but said the Conrad-Hoeven-Baucus plan offers more for farmers in the Northern Plains. He noted the program continues the “no-cost” sugar program.
“One of our biggest challenges still is connecting with the Southern growers,” Hoeven says. “Rice producers want a program that guarantees them close to 100 percent of the cost of production while wheat is down at the 60 percent level, and canola, dry edible beans are lower than wheat.” Cotton “really takes the cake” because it “always pays” and is vulnerable to legal challenges by Brazil in the World Trade Organization.
How the farm program works is a high-stakes financial issue. In 2011, the farm program and insurance payments totaled about $2 billion in North Dakota.
RLAP retains a marketing loan program and eliminates direct payments. It replaces the Supplemental Revenue Assistance (SURE) Program and Average Crop Revenue Election programs from the 2008 farm bill. (It extends SURE through 2012, which the 2008 bill did not do.)
It offers a crop-by-crop revenue protection calculation on top of the crop insurance program. A key difference for farmers between RLAP and the existing SURE and ACRE is that the timing will be much quicker. It triggers at a 12 percent revenue loss, offering coverage of 75 to 88 percent of historic revenue.
Historic revenue is figured by a combination of two factors.
E Yield: The highest of a producer’s average actual production history (APH), or five-year Olympic yield average or “counter-cyclical” yield.
E Historic commodity price: The five-year Olympic average of national prices. The price cannot exceed the full economic cost of production.
“Look, we’re not devising a program here that guarantees profits,” Conrad said. “We’re not devising a program here that has moral hazard. That would not be defensible and we don’t think it could pass. We’re trying to get very serious about getting money to where it’s needed. We’re not going to double pay. We’re not going to pay people who don’t have losses.”
Mikkel Pates is a writer for Agweek