This week, the Senate Agriculture Committee’s Subcommittee on Commodities, Risk Management, and Trade held two hearings entitled: “Commodity Programs, Credit, and Crop Insurance – Part 1: Producer Perspectives on the Farm Safety Net” and “Part 2: Industry Perspectives on Risk Management and Access to Credit.” In total, 18 witnesses representing conventional commodity producers as well as lenders and crop insurance providers shared their priorities and perspectives ahead of the 2023 Farm Bill. In this post, the National Sustainable Agriculture Coalition (NSAC) highlights key takeaways. 

Lack of representation 

Unfortunately, these hearings did not reflect the diversity of American agriculture. There were no witnesses that primarily represented or served smaller, specialty crop, diversified, organic, or socially disadvantaged farmers and ranchers, and yet it is these very farmers and ranchers who often have little to no access to any safety net or reliable credit. 

Exclusively featuring the voices of those who already benefit from the existing risk management and finance apparatus means that members of Congress are only hearing one perspective. This lack of representation projects a facade of unanimous support for the short-term, status quo policies which are harmful to underserved farmers and rural communities. 

NSAC will continue working with committee and subcommittee leadership to invite a more diverse range of rural and farm stakeholders to the decision-making table to any additional hearing on risk management and credit. 

For a full witness list, see here. 

Commodities  (Title I)

The conversation around price supports for commodity producers, namely corn, soybeans, wheat, cotton, etc., centered around two programs: the Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC) programs. PLC makes payments relative to reference prices fixed in legislation, whereas ARC makes payments calculated according to market conditions in the preceding five years.

Witnesses asserted near unanimous support for increasing PLC statutory reference prices, as was the case at last week’s hearing in the House. With an expectation that costs of production and commodity prices are peaking and will stabilize, on average and over several years, this would all but guarantee that commodity farmers receive payments every year hence under PLC and even ARC, for which the reference price is embedded in calculations. 

The lone voice to push against this proposal was Senator Chuck Grassley (R-IA), who has a proven legacy as a fiscal conservative who believes the farm safety net should be just that – a safety net, not an entitlement. He asked two pointed questions:

“According to ERS farm data, we will see net farm income drop slightly this year. But we have to remember that in 2022, the United States set a record in farm income. Farm safety is there to help mitigate losses, not just improve producers’ bottom-lines during times of relatively high commodity prices. As [the] Ranking Member of the [Senate] Budget Committee, I care about how we are saddling future generations with our debt.”

“Rules that you must be actively engaged in farming to be eligible for commodity price support programs were intended by Congress to make sure that farm subsidies made it directly to the hands of our country’s hard-working farmers. However, a 2020 USDA rule exempts all “family farms” from the requirement – which we know USDA defines as 98 percent of all farms. Is it fair to the taxpayer and smaller farms that do not qualify that extended family members, including siblings, cousins, nephews, nieces, can all receive up to $250,000 annually from the federal government even though they have not done a tick of farm work over the last year?… Remember, this question comes from the fact that 10 percent of the biggest farmers get 70 percent of the benefits of farm programs.”

Despite the perspective conveyed by the hearing witnesses, there is a strong nonpartisan alliance of taxpayer, farm, and environmental groups that opposes reference price increases. Last week, NSAC delivered a joint letter to House and Senate Agriculture Committee leadership alongside the Environmental Working Group, Taxpayers for Common Sense, Farm Action, Rural Coalition, R-Street, Land Stewardship Project, among other groups to exhibit the broad alliance against increasing PLC reference prices. 

Crop insurance (Title XI)

Several senators asked witnesses about opportunities to improve access to crop insurance for smaller and specialty crop farmers. All witnesses agreed that it is important to expand insurance access to the producers who are historically underserved by the program. James Korin, President of NAU Country Insurance testifying on behalf of the American Association of Crop Insurers, noted that:

“With higher participation we can reduce the need for ad-hoc assistance in case of a disaster. Importantly, investing in crop insurance is more efficient for taxpayers and provides more security for our farmers that ad-hoc assistance simply does not… one the tenets of crop insurance is to make sure that we can make the pool as large as we can, so that we can spread risk and get everyone in the program – benefitting all.” 

Korin continued to say that in the wake of recent changes implemented by the Risk Management Agency (RMA) to improve access to Whole-Farm Revenue Protection (WFRP) insurance, his company has enrolled more farmers in WFRP this year than last year.

Nationwide, the number of WFRP policies sold have indeed increased from 1,804 last year to 1,876 in 2023. In Minnesota, where NAU Country Insurance is based, 16 policies have been sold over 11 policies last year. National enrollment in Micro Farm has increased as well, from 26 to 90 farms. It is the first year since 2017 that enrollment has not declined from the year prior, and that is positive news. However, this total is still far below peak enrollment at 2,833 farms in 2017. And it remains to be seen how many farmers who purchase an insurance policy will actually earn a premium this year.

The reality is that most small and diversified producers continue to be left without access to a reliable and affordable insurance product to protect against worsening disasters. But because no witnesses represented small to midsize farmers, specialty crop growers, or insurance agents who specialize in selling WFRP, no one could adequately speak to the opportunities to further improve the program and compensate agents who sell WFRP appropriately. 

Senator Cory Booker (D-NJ) concisely stated the need for an expanded safety net:

“There is a lot of talk today about strengthening the Title I safety net for commodity growers, but we really have a crisis with specialty crop growers. There is really no such program for them. And a lot of beginning farmers really don’t have an option for any federal safety net at all. In the farm bill, we should be looking to create a comparable safety net instead of only incentives for specialty crops – [these are] nutritionally what we say our diets should be made up of.”

More alarming yet are the calls to increase subsidies to private insurance companies. Private insurance companies have a guaranteed profit rate of 14.5 percent written into the standard reinsurance agreement with USDA, and a farm bill provision prevents USDA from renegotiating this rate. The Government Accountability Office (GAO) has issued several reports noting that this rate does not reflect market necessities and should be reduced. This did not stop insurance industry witnesses from agreeing with Senator John Hoeven’s (R-ND) assessment that USDA should use existing authorities to elevate this rate of return to keep pace with inflation. 

Additionally, there were calls to increase premium discounts for farmers who enroll in an insurance plan with higher coverage levels as a proposed solution to address worsening disasters and thinner projected profit margins. Rather than invest in proven solutions to improve resilience via on-farm risk mitigation strategies, including practices that build soil health and help farmers diversify production and markets, it was suggested that taxpayers continue to shoulder more of the costs associated with an inherently risky production system – at a time when crop insurance premium subsidies have already reached a record-high. That is a bandage, not a solution. 

Credit (Title V)

Prominent lines of questioning about agricultural credit referenced the stability of the industry at a time of heightened interest rates and recent bank failures. An exchange between Senator Gillibrand (D-NY) and lender witnesses seemed to reveal that while agricultural lending institutions and banks are not in any structural danger, reinsurance costs are up and capital availability may decrease, particularly for new borrowers. 

Relatedly, lender witnesses unanimously agreed that statutory limits on USDA guaranteed loans should be raised to account for rising costs of production. NSAC has historically opposed increases to guaranteed loans, which are already adjusted in accordance with inflation. This is in part due to awareness that commercial lenders backed by USDA guarantee lend to many concentrated animal feeding operations (CAFOs). Raising the cap would allow even larger CAFOs to receive public dollars. 

There were several questions raised about how to increase access to capital for young, beginning, and small farms. Senator Tina Smith (D-MN) also asked witnesses how they invest in underserved producers and local communities. Jase Wagner, President and CEO of Compeer Financial testifying on behalf of the Farm Credit Council, said that “breaking down artificial barriers to capital should be a priority for this committee.” Wagner suggested that flexible programs are important to meet changing needs and highlighted a new emerging markets initiative to contribute to regional economic development. 

NSAC recognizes the successful programs to support young, beginning, small, and undeserved producers that several Farm Credit associations voluntarily sponsor. Farm Credit is a government-sponsored enterprise (GSE), which affords them special tax and other financial advantages due to federal government backing. That is why we call for increasing the footprint of voluntary and flexible programs through a Farm Credit grant program in our 2023 Farm Bill Platform. 

Final takeaways 

At a time when gross farm income is higher than ever, Congress should not increase taxpayer-funded subsidies to the largest and most successful farms in the 2023 Farm Bill. Commodity programs and federal crop insurance were designed as an alternative to the direct, annual payments untethered to the farm economy eliminated in the 2014 Farm Bill. They are meant to act as a safety net to help mitigate unexpected loss from disaster and precipitous revenue falls. 

These hearings perpetuate a thoroughly debunked myth that farm subsidies are really about supporting consumers and rural communities. A 2017 American Enterprise Institute (AEI) report finds that despite claims to the contrary, farm subsidies do little to reduce food prices and almost nothing to alleviate rural poverty. Instead, large and successful farmland owners and operators tend to receive almost all of the benefits. 
In contrast to this myth, the premise that we must get this right in the next farm bill cannot be overstated. NSAC’s vision for the 2023 Farm Bill is one where the farm safety net is made accessible to all producers requiring protection against worsening disasters while investing in on-farm risk management practices that can mitigate the need for reliance on a safety net in the first place.