Bloomberg News

‘Era of Direct Payments’ Over for Farmers, Stabenow Says

March 15, 2012

Senate Agriculture Committee Chairwoman Debbie Stabenow said the “era of direct payments” for U.S. farmers is over, signaling the end to a certain type of crop subsidy in the next farm bill.

Stabenow, a Michigan Democrat, said at a committee hearing today that farm policy should focus on crop insurance and tools that “help producers who have suffered a loss on the crops they actually grow.” Direct payments are a form of subsidy that farmers collect based on historical production, regardless of commodity prices.

Today’s hearing in Washington was called to examine risk- management tools available to farmers as lawmakers prepare to draft a new farm bill, which will authorize U.S. Department of Agriculture programs, including crop subsidies and nutrition initiatives, for the next five years. The current law expires Sept. 30.

Stabenow said strengthening and expanding crop-insurance programs will be one of her priorities in the new legislation. Last year, federal programs paid out over $10 billion in claims for lost revenue and production because of natural disasters, Michael Scuse, the USDA’s acting undersecretary for farm and foreign agricultural services, told the committee.

Obama’s Proposed Savings

President Barack Obama has proposed changes to crop- insurance programs that would account for more than $7.6 billion in savings in the next decade, Scuse said. Eliminating direct payments, as Obama proposed in his fiscal year 2013 budget, would save $31.1 billion over the decade, he said.

Republican Senator Pat Roberts of Kansas, the committee’s ranking member, said that while two-thirds of U.S. cropland -- more than 250 million acres -- is protected by government insurance program, some farmers remain vulnerable to disasters because they can’t afford coverage.

“The more producers under that crop-insurance tent and protected from disaster, the more stable our food supply and rural economies will be,” Roberts said.

Crop subsidies encourage production, which can reduce costs for grain brokers such as Archer Daniels Midland Co. (ADM), corn-based ethanol makers like Poet LLC, and livestock producers including Tyson Foods Inc. (TSN), which buy grain for feed.

To contact the reporter on this story: Daniel Enoch in Washington at denoch@bloomberg.net.

To contact the editor responsible for this story: Jon Morgan at Jmorgan97@bloomberg.net


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