Even as action on a new farm bill has stalled, a proposal to boost crop insurance subsidies is generating new debate on and off Capitol Hill.
Senate Agriculture Committee Chairwoman Debbie Stabenow is receiving criticism for a proposal to increase premium subsidies for area-based crop insurance policies along the lines of the Stacked Income Protection Plan, or STAX, that is currently available only to cotton growers. STAX coverage comes with a catch: Farmers who buy the coverage for a crop can’t enroll the same commodity base acreage in the Price Loss Coverage or Agriculture Risk Coverage programs that year.
In an interview with Agri-Pulse, Stabenow said she's “trying to really jump-start some serious negotiations” on the farm safety net. But she also defended her crop insurance proposal, saying allowing growers to participate in ARC or PLC at the same time they’re buying the highly subsidized insurance would open the crop insurance program to new attacks from industry critics.
STAX allows farmers to insure 75% to 90% of their county’s expected revenue, with the government picking up 80% of the premium. Subsidies on crop insurance policies generally average about 62%. Farmers can insure up to 85% of their expected revenue, but only about 70% to 75% in coverage, due to the steep premiums.
“What I want to do is create more opportunities around crop insurance … and other risk management tools, and this is just one idea. And I welcome my colleagues on the other side of the aisle coming to the table with their own ideas, which just hasn't happened yet,” Stabenow said.
The House Agriculture Committee is weighing a similar proposal to Stabenow’s that would still allow farmers to participate in PLC. The proposal is based on the existing Supplemental Coverage Option, which covers up to 86% of revenue with a 65% federal subsidy. Farmers who buy SCO can enroll in PLC but not the Agriculture Risk Coverage program because of its similarity to SCO. ARC triggers payments when county revenue for a commodity falls below the preceding five-year average.
A source familiar with the House Ag proposal says it would have an estimated cost of $1.5 billion over 10 years, a relatively modest sum in a $1.5-trillion bill.
However, the committee is simultaneously considering ways to boost PLC reference prices, including by rebalancing the rates. PLC triggers payments when the average annual market price for a commodity falls below the reference price.
Stabenow didn’t provide a cost estimate for her idea but has said that it would fit within the $5 billion in additional funding that she says Senate Majority Leader Chuck Schumer, D-N.Y., has made available for a new farm bill. Several sources are questioning where those dollars will actually come from, citing a lack of awareness from a likely source, the Senate Finance Committee.
Stabenow said that allowing farmers who buy a STAX-like policy to also enroll in PLC and ARC could spark criticism of “double-dipping,” she said.
“We've always had those who've been attacking crop insurance. We have proposals now in the Senate that would change or reduce crop insurance. And I'm a strong supporter of crop insurance, and not going to support cuts,” she said.
She also said that her proposal has been mischaracterized as extending broadly to other types of crop insurance policies. “This is (an option) that hasn't been available to all farmers, only cotton, and I just thought we can definitely do that and provide another choice,” she said.
Rep. Austin Scott, R-Ga.Rep. Austin Scott, a Georgia Republican who chairs the House Ag subcommittee that oversees crop insurance and commodity programs, says making farmers ineligible for PLC and ARC — if they want the STAX-like buy-up coverage — could destroy the value of the base acreage enrolled in commodity programs.
“One of my concerns with the language is what does it do to the value of base, because for your farmers out there, that base is an asset. And if you destroy the value of that asset, then you've created a balance sheet problem for those farm families,” Scott told Agri-Pulse.
John Newton, chief economist for the Republican minority on Senate Ag, said Stabenow's proposal would more likely address demands for ad hoc disaster assistance.
“I think there is some merit to making area-based plans of insurance more affordable, so producers can buy up to 90% or 95%,” but not at the expense of commodity programs, he said. He also warned against making farmers' annual program decisions more complicated. “Farmers coming in our doors are asking for more farm in the farm bill, not more decisions to make," he said.
Scott said he doesn’t think Stabenow, who has announced her plans not to run for reelection and instead retire at the end of the year — is serious about passing a new farm bill.
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“I have not seen anything from her that indicates that she is interested in passing a farm bill, which is surprising to me. I would have thought that in her last year in Congress that she would have wanted to do a bicameral, bipartisan piece of legislation, but she obviously doesn't,” Scott said.
Stabenow made clear to Agri-Pulse that she won't accept cuts to the farm bill's nutrition title or to the conservation funding provided by the Inflation Reduction Act for climate-related farming practices. Republicans have been eyeing both the nutrition title and the IRA funding as sources of money for their farm bill priorities.
“I will not leave the United States Senate with my legacy being going backwards on nutrition for children and families across the country. And I will not have my legacy be taking away the biggest win we've had for farmers and addressing the climate crisis,” she said.
STAX has its roots in a dispute between the United States and Brazil over U.S. cotton subsidies. After Brazil successfully challenged the subsidies at the World Trade Organization, Congress created STAX as an alternative to the subsidies and barred farmers from participating in PLC or ARC in years when they bought the insurance. Although cotton is now eligible for STAX, the PLC/ARC exclusion remains.
Joe Outlaw, a longtime economist at Texas A&M University, doesn’t believe the restriction on commodity programs is justified any longer.
“While there has long been a prohibition between the purchase of SCO and ARC — because both offer area-wide coverage and they are very similar in design — there is little justification for requiring producers to choose between PLC and area-wide coverage, both of which serve vastly different safety net functions,” Outlaw says in a commentary on Southern Ag Today.
He argues Congress should both increase PLC reference prices and increase premium subsidies for buy-up, area insurance coverage.
As it now stands, cotton growers are heading into the 2024 growing season without adequate protection from either PLC or STAX, he says. STAX “at most will partially offset significant losses they are almost guaranteed to face (absent well-above-expected prices or yields). In other words, growers are faced with two poor options.”
Jonathan Coppess, a farm policy analyst at the University of Illinois who ran USDA's Farm Service Agency during a portion of the Obama administration, said STAX coverage could have “real appeal to Midwestern farmers,” including soybean growers, due to the high subsidy level.
But he noted that farmer calculations may change during prolonged periods of relatively low prices for which programs like PLC are designed to protect farmers. Still, STAX would be “an option for farmers to consider and thus has merit for a farm bill conversation that is clearly stuck and in need of some new thinking,” he said.
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