Crop Insurance, Risk Management to Shape Next Farm Bill

9/29/2012 7:00 AM

LONDON, Ohio — The soaring cost of crop insurance and the move away from direct payments to farmers in favor of risk-management measures will shape the future of the Farm Bill, according to Ohio State University agricultural economists who shared their perspectives with farmers and other attendees Sept. 18 on the inaugural day of the 50th Farm Science Review in London, Ohio.

The panel featured farm policy expert Carl Zulauf and international trade and policy specialist Ian Sheldon, both from the university’s Department of Agricultural, Environmental and Development Economics.

The 2008 Farm Bill expires on Sunday.

“It’s more common than not common that the Farm Bill expires before another one is approved,” Zulauf said, noting this situation has become the norm in recent history. “Jan. 1, 2013, is really the date to watch for, when some of the programs would go away if there’s no new Farm Bill and the resolution to continue it expires.”

Zulauf said there are a lot of incentives for the current Congress to pass a new Farm Bill before the end of the year, as the bills drafted by the Senate and the House include billions in savings at a time when deficit reduction is a hot topic on Capitol Hill.

The Senate has passed a bill, which cuts $23 billion over 10 years. The House version — which shrinks the Farm Bill by as much as $36 billion over a decade — has been passed by the Agriculture Committee, but the full House has not yet taken up the legislation.

“It’s hard to believe this Congress will not pass a Farm Bill that saves money,” Zulauf said.

Whenever a new Farm Bill is passed and whatever it ends up costing, panelists said the issue of crop insurance and its cost will affect the future of the legislation.

“The next Farm Bill will be about crop insurance and the cost of crop insurance,” Zulauf said. “It costs $5 billion a year now. It’s no longer a small program. We are at that point where we will be taking a hard look at that.”

Also shaping the Farm Bill will be the shift from direct payments to producers and a stronger emphasis on risk management, mostly in the form of crop insurance programs to guarantee that farmers are protected when events such as this year’s drought rear their ugly heads, Zulauf said.

The form in which farmers receive payments from the government also has implications for foreign trade policy, Sheldon said. The World Trade Organization has criticized U.S. agricultural legislation for what it considers excessive subsidies that undermine fair global competition.

Source: Ohio State University.

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