Hello everybody out there in farm country. This radio commentary is brought to you by the Renewable Fuels Association, Monsanto, and John Deere. They are all friends, supporters, and allies of a healthy farm economy and prosperous rural America. Thank you.
And now for today’s commentary—
Is it a big deal? Well, maybe it is. The Senate passed a farm bill this week. The House still must pass one, and the two will have to be reconciled.
However, considering the political gridlock that has tied our Congress in knots, the Senate action is significant. It is a game changer in some respects. Here is why. Let’s look at the history of farm programs. Go back as far as the 30s and most of the programs were designed to cut production to support prices. Buy land out of production. The objective was stable prices at an acceptable level.
We started moving away from land set asides in the 80s and 90s. Still wanting to provide some farmer support, direct payments became very popular. With the new farm bill, direct payments are gone. No land set asides either. We’re going to let the market work without heavy-handed government interference. Federal crop insurance will become the centerpiece of the farm safety net.
We’ve had federal crop insurance for many years, but it was always an after-thought. In the new bill, crop insurance has to be attractive enough for farmers to be willing to pay for the protection. It’s not free. To keep the cost from being excessive and encourage the farmer to buy it, the government subsidizes the cost.
The debate goes on over how much the government subsidy should be. I don’t know the answer to that. This is all voluntary and we would hope farmers would buy the crop insurance for their own protection against draught, floods, and all kinds of crop failure. In many cases, their bankers will insist on insurance. Even the public wants farmers to have some protection because we need a secure and abundant food supply.
Crop insurance is not a perfect solution. We don’t want it to be so lucrative that farmers would plant crops in high risk areas just to collect insurance. It is designed to deal with this question. The maximum coverage is 80% of loss.
In my judgment, farm programs have been too complicated with too much government control. Crop insurance looks like a step in the right direction. It puts more responsibility on the farmer to decide how much insurance to buy and which crops to plant.
The Senate did their job saving some 23 billion dollars. Let’s see what the House can do.
In closing, I would encourage you to access my website which archives my radio commentaries dating back 10 years and will go back 20 years when complete. Check on what I said back then. Go to www.johnblockreports.com.
Until next week, I am John Block in Washington