ND Senators promote RLAP

BISMARCK, N.D. -- Cooperation with southern Republican senators representing peanut, cotton and rice growers will be a key to whether a Revenue Loss Assistance Program can be passed in the Senate, said officials gathered for a roundtable on the 2012 farm bill.

Sen. Kent Conrad, D-N.D., hosted a discussion on April 4 with about 50 farm leaders on the farm bill commodity title initiative in Bismarck, N.D. He's pushing it in concert with Sen. John Hoeven, R-N.D., and Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, the other primary sponsor.

"Kicking this can down the road would be a huge mistake," Conrad told the roundtable participants, of the political urgency. "Time is not on our side. From a budget perspective this noose is only going to tighten."

Conrad wants the Senate to pass a bill with $23 billion in budget cuts calculated over a 10-year period, which is the same level of cuts as a House/Senate committee level budget proposed last December but not passed into law. If it can be passed in the Senate Agriculture Committee in the next several weeks, that would "build momentum" and perhaps get it accepted in the House, where others have proposed much higher cuts.

Hoeven is perhaps the Republican bipartisan linchpin in the deal.

North Dakota's former governor and soon-to-be senior senator invited farmers representing groups affiliated with national commodity and policy organizations to "reach out to some of our colleagues on this," he said. "We need a big vote out of the Senate Agriculture Committee" he said, saying he'd like to have a strong bipartisan vote -- maybe unanimous -- out of the committee.

"Let's set our goals high," Hoeven said.

U.S. Rep. Rick Berg, R-N.D., the Republican nominee to replace Conrad when he retires in 2012, said he'll push the Senate bill as "critical" in the House. He says that's not inconsistent with his support of the so-called "Ryan budget" proposal, which cuts farm programs twice as much. The plan is named for Rep. Paul Ryan, R-Wis., chairman of the House Budget Committee.

Crop insurance central

The Conrad-Hoeven-Baucus farm proposal plan keeps crop insurance as the primary economic safety net for farmers. It also protects against multiple-year (shallow) losses. Insurance guarantees are subject to short-term price variability. It is called the Revenue Loss Assistance and Crop Insurance Enhancement Act of 2012 and was introduced March 29.

"I think we have a real opportunity here because it's a bipartisan bill," Hoeven said. "It's cost-effective. I think it provides strong support for our farmers and ranchers."

Hoeven noted that a rival bipartisan Senate bill offers benefits for corn production in the "I states" (Illinois, Iowa, Indiana) but said the Conrad-Hoeven-Baucus plan offers more for farmers in the Northern Plains. He noted the program continues the "no-cost" sugar program.

"One of our biggest challenges still is connecting with the southern growers," Hoeven says. "Rice producers want a program that guarantees them close to 100 percent of the cost of production while wheat is down at the 60 percent level, and canola, dry edible beans are lower than wheat." Cotton "really takes the cake" because it "always pays" and is vulnerable to legal challenges by Brazil in the World Trade Organization.

How the farm program works is a high-stakes financial issue. In 2011, the farm program and insurance payments totaled about $2 billion in North Dakota.

RLAP retains a marketing loan program and eliminates direct payments. It replaces the Supplemental Revenue Assistance (SURE) Program and Average Crop Revenue Election programs from the 2008 farm bill. (It extends SURE through 2012, which the 2008 bill did not do.)

It offers a crop-by-crop revenue protection calculation on top of the crop insurance program. A key difference for farmers between RLAP and the existing SURE and ACRE is that the timing will be much quicker. It triggers at a 12 percent revenue loss, offering coverage of 75 to 88 percent of historic revenue.

Historic revenue is figured by a combination of two factors.

• Yield: The highest of a producer's average actual production history (APH), or five-year Olympic yield average or "counter-cyclical" yield.

• Historic commodity price: The five-year Olympic average of national prices. The price cannot exceed the full economic cost of production.

"Look, we're not devising a program here that guarantees profits," Conrad said. "We're not devising a program here that has moral hazard. That would not be defensible and we don't think it could pass. We're trying to get very serious about getting money to where it's needed. We're not going to double pay. We're not going to pay people who don't have losses."

No moral hazard

Actual Crop Revenue will be calculated by taking the national average price for the first four months of the marketing year. The price is adjusted for quality loss discounts by the state Farm Service Agency committee. It also includes crop insurance indemnities "net of producer-paid premiums."

"What we're trying to get at here is actual crop revenue," Conrad says.

Payment acres include planted acres and acres prevented from being planted. The plan is for an "enterprise unit plus" concept, including all acres of a crop in all counties for each farm. Total payment acres for all commodities on a farm can't exceed total base acres. "If total acres exceed total base acres, each crop's payment acres are prorated back," Conrad says.

The program sets a payment limit of $105,000 and an adjusted gross income limit of $999,000. "These are limits that were voted for overwhelmingly on the Senate floor in an amendment," Conrad says. "We take our cues from how people actually vote. There's no sense running up a hill you can't get to the top of."

The program allows the farmer to purchase "supplemental area plans in addition to individual plans," for all program crops. There's a 25 percent deductible to avoid duplication with the "shallow loss program." The program guards against double payments and against paying people who don't really have losses.

Livestock disaster programs are permanently extended.

Also, the RLAP would be crop-by-crop and farm-by-farm, where the ACRE program needed a state trigger and a farm trigger to be reached. Under SURE you needed a total farm/all crops in America loss threshold. There are caps in the program that limit payments when a farmer's crop sales and insurance payments bring them close to even in disaster.

Hoeven exuded optimism, but he must deal with key southern Republicans on the ag committee. Among them are former agriculture chairmen Sens. Saxby Chambliss, R-Ga., and former chairman Sen. Thad Cochrane, R-Miss., ranking member on the Senate Appropriations Committee, and Sen. Mitch McConnell, R-Ky., minority leader in the Senate; and Sen. John Boozman (pronounced BOHZ-men), R-Ark., the ranking Republican on the agriculture committee, even as a freshman.

Conrad made the point that the program he and Hoeven support also works for southern crops -- better than the SURE and ACRE programs in the 2008 farm bill. Farmers have to have a loss to collect on the program, but will make payments to peanut, cotton and rice growers -- if they suffer a loss.

Berg said he strongly supports the Conrad-Hoeven-Baucus initiative. At the same time, he supports the Ryan budget in the House, which would cut $47 billion in the same categories.

No difference

"They're not really different," Berg said of the budget cutting levels. "If you take out the SNAP program (Supplemental Nutrition Assistance Program), where you make block grants to allow states to make those decisions, it leaves the decision-making up to the ag committee members. It's not $180 billion, but we're looking at $33 billion to avoid sequestration."

Berg noted that President Barack Obama's budget called for $32.2 billion in farm-related and conservation programs, but zero cuts from nonfarm parts of the budget. "We're talking $33 billion," Berg said, even though his fact sheet indicated another $16 billion in conservation cuts.

"This is a legislative process; we're going to work that out," Berg said, noting that House Agriculture Chairman Frank Lucas, R-Okla., must deal with the entire ag budget. "Originally we had $4 billion coming out of the (nonfarm related) nutrition title," Berg said. "There's no question when we come to common sense cost savings, there's no question that in the SNAP program and nutritional programs we can't be smarter and leverage those dollars more."

Berg said the Ryan budget, if implemented, would balance the nation's budget in 26 years. "If we don't start to turn this thing around, I think it puts all of our small businesses, including our farmers and ranchers, at risk, if we have challenges financially as a country."

The Ryan cuts are more than double the $23 billion cut ($13 billion in commodities, $6 billion from conservation, $4 billion from nutrition) proposed by leaders of the committee in an effort to meet the Joint Select Committee last December.

Berg acknowledged the House Agriculture Committee will make decisions within the Ryan budget of how the cuts will be determined. "The suggestions in the budget are simply that, they're suggestions," Berg said, adding that nutrition programs are "part of that mix." He noted that sequestration exempts the nutritional programs, including SNAP.

Conrad said he fears that if cuts to those "nonfarm" food programs can't be passed, lawmakers will seek deeper cuts from farm-related commodity, conservation and crop insurance.

Under the Ryan budget, cuts that would have to be achieved in a combination of commodity, conservation and crop insurance would make it difficult to design a "safety net" for farmers, Conrad said. That's in addition to $134 billion in cuts to nonfarm-related programs, including the supplemental nutrition assistance programs, which offer a market for some agricultural products.

The House has a reconciliation instruction for agriculture, to get rid of the sequestration requirement under the Budget Control Act. That specifies $33.2 billion in savings over 10 years, of which $8 billion must occur in fiscal year 2013.