Crop insurance - safety net or $9 billion boondoggle?

One of the toughest things about the 1,080 page Farm Bill is to write about it in a way that's accessible to readers, since the policy touches everything from agriculture to food stamps. Rather than cover the whole thing, the Food & Environment Reporting Network, where I serve as editor, decided to focus on one element: crop insurance.

The piece by Stett Holbrook, running on msnbc.com, begins:

Here’s a deal few businesses would refuse: Buy an insurance policy to protect against losses – even falling prices -- and the government will foot most of the bill.

That’s how crop insurance works.

The program doesn’t just help out farmers, however. The federal government also subsidizes the insurance companies that write the policies. If their losses grow too big, taxpayers will help cover those costs.

In the farm bill now making its way through the Senate, crop insurance will cost taxpayers an estimated $9 billion a year.

Never heard of it? This isn't your mother's car insurance, nor the home policy you have to cover disasters. No, this is a program that insures that farmers make the revenue they expect from crop sales. It's hard to imagine anything else like it in the business world, which is why one fund manager who buys farmland in the U.S. was quoted as saying in the Financial Times:

"I don’t know of any other business where you can insure 90 per cent of your P and L (profit and loss),” said an adviser to large farmland investors. “There’s a lot more understanding in the institutional world about this than you might think”.

In other words, investors are buying up farmland in part because the government makes sure they won't lose money. For details on how the program works -- and how crop insurance companies make money even when disasters strike -- read the rest of the article on msnbc.

A Tight Fist on Farm Money

Keep the money flowing to king corn - that's the clear implication of comments by Collin Peterson, chairman of the House Agricultural Committee.

He told the Financial Times that organic produce and grass-fed beef producers for local consumers need little federal help. "It is growing, and it has nothing to do with the government, and that is good," he told the FT. "For whatever reason, people are willing to pay two or three times as much for something that says ‘organic’ or ‘local’. Far be it from me to understand what that’s about, but that’s reality. And if people are dumb enough to pay that much then hallelujah."

Which means that Peterson wants to keep the billions of subsidies flowing to conventional farm interests, preventing any serious programs for organic or smaller local farmers. (Via Ethicurean and FarmPolicy.com)

More on the policy at Gristmill Blog's post on "Local Food for All."

How Organic Fared in House Farm Bill

Organic agriculture won backing in the House version of the food and farm bill, though not at the level the organic lobby was pushing for. I'd call it a solid double rather than a home run. Here's the break down, as reported by the Organic Farming Research Foundation:

• The organic research and extension initiative got $5 million a year, plus $25 million in discretionary funding (that portion will only appear if money can be found). The money will fund much-needed research on organic methods and USDA extension agents who can advise farmers on organic agriculture. OFRF comment: "While the mandatory funding is an increase of $2 million per year from the 2002 Farm Bill, it falls short of the $15 million per year in mandatory funding which OFRF recommends."
• An organic data initiative to collect information on production and marketing got $3 million over five years.
• The Organic Conversion Assistance Program was allocated $50 million, providing technical and educational assistance to farmers who are transitioning to organic production, a three-year process. Transitioning farmers can receive up to $10,000 per farmer per year for three years. OFRF comment: This was "significantly less than the $50 million per year in mandatory funding recommended by OFRF." But it would be the first time money was set aside to help farmers through the financially difficult transition period.
• The National Organic Certification Cost Share Program, which helps defray the cost of organic certification, was reauthorized with mandatory funding of $22 million, up $5 million from the 2002 farm bill. Under the program, farmers can receive up to 75 percent of their certification costs, to a maximum of $750. This was less than the $25 million that OFRF had sought.

The action will now switch to the Senate, which writes its own version of the bill. The differences eventually will be resolved in conference. For more on the ins-and-outs of the farm bill action last week, especially on farm payment limits (or lack thereof), check out Mulchblog, Blog for Rural America and FarmPolicy.com.

- Samuel Fromartz

Organic Call To Action on Farm Bill

By Samuel Fromartz

Every so often, the broad coalition of organic food supporters – which include food companies, retailers, farmers, advocacy groups, and of course consumers – coalesce around one crucial issue.

This happened in 1997, when the first draft of organic regulations were released by the USDA and included such anti-organic practices as irradiation, genetically modified crops and sewage sludge fertilizer. The community sent an unprecedented number of comments to the USDA opposing the so-called "Big Three" and they were struck down in the final version of regulations.

In 2003, when a Georgia Congressman inserted a rider onto a bill in the dead of night and won passage for the right to use non-organic animal feed (sought by one of his chicken processors), the community rose up again. Led by opponents in Congress, the measure was rescinded in a subsequent bill.

Now, arguably, it's time again for the organic community to rise up again, spreading the word through advocacy groups, in email, on blogs and most potently, at the check-out counters of natural food stores and co-ops.

What's the issue this time around?

  The Farm Bill. Organic supporters have been pushing very hard in Congress to win a few crucial programs for organic farmers but the buzz is at a low level in Washington. Organic doesn't even win a mention as a worthwhile alternative (evident in this recent Washington Post editorial),  when the talk comes to reforming the farm bill.

What are supporters of organic farming seeking?

• Basic research funds. Currently organic farming research and education gets about $13 million from a patchwork of USDA programs. But only $3 million of those funds is specifically dedicated for organic farming. Supporters want to increase those targeted funds to $15 million annually in mandatory funding - this, out of a USDA research budget of about $2 billion.
• Certification cost share. Farmers can get up to $500 annually to offset up to 75 percent of the costs of organic certification. (This is the only "subsidy" specifically targeted to organic farmers and is meant for smaller farmers). But many states have run out of money and they won’t get any more until the new farm bill is approved. Supporters are looking to increase the cost share to $750 through $25 million in funding over five years.
• Crop insurance. Organic farmers must pay a 5 percent premium to receive crop insurance but their crop losses are compensated at the same rate as conventional growers (even though the organic crop is worth more). They want the USDA to correct this unfair practice.
• Transition Support. Transitioning farmers must follow organic methods for three years before they can sell their crops under the organic label. That means their costs are usually higher but they are still getting paid conventional prices for their crops. The lobby is looking for $50 million per year to help with the transition process, with the funds split between technical and financial assistance.
• Data Collection. Right now there is little reliable data on organic products, on the amount and sources of organic food imports, on the prices farmers get for their crops or the usual information available to conventional farmers. That discourages investment, skews crop insurance decisions and undermines the market. So supporters wants some dedicated funds for this type of research.  (For more detail on  these issues, see this PDF from the Organic Farming Research Foundation).

Although the House Agriculture Committee nodded in the direction of organic farming in the mark up of the farm bill, much of the funding under consideration would be discretionary – not mandatory. The programs will only get funded if money can be found, which is highly unlikely in this tight fiscal climate.

Why does organic farming need these funds?

Demand for organic food now exceeds supply, but US farmers are not converting fast enough to fill the gap. The costs of transition, the lack of knowledge about organic methods, and uncertainty about the market all play a role in inhibiting conventional farmers from making the switch. With American farmers lagging, production is increasingly shifting overseas – meaning U.S. farmers will lose out on a lucrative market. Consumers will see more organic products from Mexico, China, Chile, Brazil, India, Australia, Italy and Turkey, including fresh and frozen produce, soybeans, grass-fed meat, grains and beans. That's not a bad thing, in terms of agricultural practices and opportunities in those countries, but it won't do anything for farming in the US.

So what can we do?

The Environmental Working Group has launched a worthwhile site to generate 30,000 signatures to lawmakers by July 15. But for mass action, retailers and co-ops with direct access to consumers need to step up to the plate. They need to publicize this issue at the check-out counter, since most people don't even know about it. The message: Support organic farmers in the 2007 Farm Bill.

The point is to win baseline funding for organic agriculture, so that it can be increased in the next farm bill. If the baseline is near zero, it isn't going to move at all – not in the next bill, or the one after that and farmers will continue to sit on the sidelines.

When you wonder why so many organic products are originating overseas, you will have your answer: the modest government incentives and research U.S. farmers needed to pursue organic farming weren’t available. So they didn't bother to switch.

Will Congress Close the Loophole?

"These are payments we can't afford, going to people who don't need them - and for what public purpose?"
- Senator Tom Harkin, chairman of the Senate Agriculture Committee, on subsidies to wealthy "farmers

But, in the House at least, no one's listening and it was the same-old, same-old, at the subsidy feed bin, EWG's Ken Cook tells us in this post on the dysfunctional farm bill.

Money Talks

The Environmental Working Group last week released its new farm subsidy database that shows you the money. In case you missed all the news reports - many by local reporters showing who got what in their county - the database lets you to search for subsidy recipients any which way, including by name. (The entry point is Ken Cook's Mulchblog.)

EWG also helpfully provided a breakdown of farm subsidies that flow to the districts of lawmakers on the House Ag Committee's Subcommittee on General Farm Commodities and Risk Management.

The 18 members on the Subcommittee (out of 435 members in the House, or 4 percent) received $10.013 billion in farm subsidies from 2003 through 2005. This constitutes 23.2 percent of total subsidies nationwide. Of the five programs targeted for payment limits, these 18 members receive $8.227 billion, 23.7 percent of the nationwide total for these programs.

As the saying goes, "money talks." It's something to consider when you're trying to change the Farm Bill. Speaking of which, if you want real inside-the-beltway reporting on the Farm Bill, look no further than the Blog for Rural America.

Farm Bill Reform in a Chokehold?

Ken Cook, the ag-wonk-meister over at Mulchblog, has an insightful post on the political dynamics of the farm bill in the House of Representatives. Now wait! Before you finish that yawn, consider that the way the endgame is being played out may mean that the unprecedented attempt to break the farm bill monopoly may falter. And what would that mean? No change in the subsidies, little new money for nutrition instead of king corn, and all those sustainable agriculture initiatives - as they used to say where I grew up - fugetaboutit!

Cook reports that House Agriculture Committee chairman Colin  Peterson - a reasonable, open-minded Democrat - has heard a wide spectrum of views. "All this openness doesn't amount to much, of course, if the committee fails to act on any of the ideas proposed, and the committee's word is the last word on final legislation, with no views to the contrary entertained on the House floor," he writes. The committee has historically represented special ag interests rather than the newcomers at the door who want reform.

So, despite the open hearings and warm welcome given to these new voices, it looks like it's the same-old, same-old at the Capitol. And I thought the Dems would be able to break the hammer-lock of these entrenched farm interests. Silly me.

Farm Bill Insider

Keith Good, editor at FarmPolicy.com, is a farm bill insider - trolling the media for any and all reports, pulling choice quotes from dispatches, and even posting audio from Congressional hearings and from his own interviews. It's wonky but fascinating.

I was especially interested in this comment Good highlighted from a Senate Ag Committee hearing. North Dakota Senator Kent Conrad, who also chairs the Senate BudgetCommittee, complained bitterly about a series of Washington Post articles entitled ‘Harvesting Cash’ that have painted a highly critical picture of federal farm programs. (We've blogged on WaPo's reports, including one on how USDA loan payments are paying for resort town improvements, and highly recommend it).

“‘You know, one of the things that struck me about these articles - you don’t see much reference to the cost of food in this country - the lowest cost of food in this country of any country in the history of mankind,’ Conrad railed. ‘You don’t see much reference to a plentiful and healthy supply of food - you don’t see much reference to that. You don’t see much reference to the health of the agricultural sector in this country. You don’t see much reference to the fact that we are a major exporter for this nation - you don’t see much reference to that,’ he continued. ‘You don’t see much reference to what is the true status of most farm families, at least as I know it in my state.’”

Sen. Conrad's obviously not reading the same stuff we're reading about e. coli outbreaks, contaminated peanut butter, subsidies that enrich the richest farmers, including those who reside in Washington, D.C., the continued demise of smaller farmers, the depopulation of rural areas, the high rates of obesity linked to cheap processed food - the list goes on and on - much of it the result of subsidies too complex for most people to figure out, let alone care about.

To get behind the Post series - and what motivated it - check out this Mp3 audio interview Good had with Post series reporter Dan Morgan last year. "By and large, we've had a lot of positive feedback from farmers, and from the agriculture community who understand the series is not about beating up on farmers," Morgan says. "It's about trying to identify and spotlight flaws in the program, and ways that the money could be used better, to the benefit of farmers."