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What's the Safety Net Got to Do with It?

September 13, 2011

Since becoming President of the American Farmland Trust, I have been asked many times why an organization that promotes the protection and conservation of farm and ranch land cares about the safety net in the farm bill.

The answer to me is simple: If you want to protect farmland, keep farmers farming.

Putting aside nutrition spending, the conservation, crop insurance and commodity titles of the farm bill have lots to do with keeping farmers in business. They affect farmland values and farm viability, both of which are critical components in our efforts to protect farm and ranch land. They influence how farms stay in business, how we protect farmland, and, how we care for our greatest natural resource.

Let’s consider commodity programs and crop insurance. I know from the experience on our farm that the biggest problem we face is extreme volatility often caused by factors we can’t predict or control. It might be a drought, or a dramatic increase in oil prices, or a political decision by a foreign government. I believe the American people have it in their interest to help farmers – people who care the most and have in their personal interest to protect the land that sustains them – manage against these kinds of shocks in the market.

While the safety net is necessary, in this time of scarce budget resources we ought to be asking what is the right role for government in risk management, when should they get involved “on the farm”, and what should the principles be by which we help decide our agricultural policies and programs?
We believe that a good safety net is one which meets the needs of modern-day agriculture. I believe the current budget conditions have brought a bit of cohesion among agriculture groups —with a new level of recognition that it’s time to talk about changing programs that were designed for agriculture decades ago—and working toward programs that better serve both farmers and taxpayers.

Some today would eliminate all government support to save only crop insurance. We believe that such an aspiration is misplaced. Crop insurance works well now to provide producers protection during a planting season from a variety of risks. What crop insurance does not do well is deal with multi-year risks, risks that can be caused by things like long-term drought or a multi-year economic downturn. For such multi-year events we need the safety net needs to also include a pure government program.

It’s no secret that American Farmland Trust worked with the National Corn Growers Association in the 2008 Farm Bill to promote the Average Crop Revenue Program (ACRE). Few government programs work perfectly right out of the chute, and ACRE has been no exception.

Some producers have suggested that the current state-level revenue triggers for ACRE are too high. While we have heard these complaints, we also believe that a safety net that takes out too much risk from farming is no safety net at all. Rather, the program becomes a “government hammock.”

Farming is risky, if the government takes too much risk out of the business, producers’ decisions about what to plant become influenced more by government payments, guarantees and programs than they do by market forces, input prices, weather and soil type.

Those government-induced distortions have real consequences on our environment and create oversupply, fueling dramatic fluctuations in farm income. While the appropriate level of risk management can be found, the closer the level of support is to the farm level, and the more generous that level of support is, the greater the distortion.

AFT believes the workable model we should pursue is a partnership between private crop insurance that lets farmers manage farm level risk along with an ACRE-type program that serves to manage risks that broadly affect markets.

There are principles that should set a standard for risk management—and ACRE meets the standard. These principles tend to reduce the market and environmental distortion that our current government support may create.
The principles are:

Responsive to Markets: Programs should reflect the current economic reality that farms face. Programs with arbitrary target prices set by Congress every five to ten years don’t do this and should be changed.

Accountability: Farmers should only receive assistance if there is an unavoidable loss. Trying to justify a program that that doesn’t meet this standard in the face of the fiscal problems our government faces is not a message we can succeed with.

Minimize distortion: Great care should be taken to design a safety net that protects farmers from extreme economic volatility but doesn’t encourage production in areas that can’t be farmed in an environmentally sustainable manner. The public will not stand for programs that don’t consider this concern.

We must find balance in risk management. It is important that programs provide an adequate means for farmers to manage risk while not making it too safe to grow crops on land that shouldn’t be farmed. ACRE needs improvement, but the concept it promotes provides that balance.

For more than a decade, farmers have felt that government’s role in agriculture should be more limited in scope. I wholeheartedly agree with that sentiment. The federal government’s current budget problems give us a golden opportunity to make the farm safety net workable for farmers, more justifiable to taxpayers, and friendlier to the long term health and well being of the land resource that makes the wonderful productivity of American agriculture possible. That’s an outcome that a leader of an organization that seeks to promote conservation and farmland protection can get very excited about!

Jon Scholl

Jon Scholl is President of American Farmland Trust, and a partner in a family farm in McLean County, Illinois.

American Farmland Trust is the nation’s leading conservation organization dedicated to saving America’s farm and ranch land, promoting environmentally sound farming practices and supporting a sustainable future for farms. Since its founding in 1980 by a group of farmers and citizens concerned about the rapid loss of farmland to development, AFT has helped save millions of acres of farmland from development and led the way for the adoption of conservation practices on millions more. AFT’s national office is located in Washington, DC. Phone:202-331-7300. For more information, visit www.farmland.org.

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