With apologies to author Charles Dickens, the opening line of "A Tale of Two Cities" is appropriate for this Farm Bill Discussion.
It's the worst of times because farm income is projected to be $87.5 billion in 2007, according to Kansas State University economist Barry Flinchbaugh. With so much cash on hand, it's difficult to convince politicians that farmers need a safety net. But It's a good time for reform, as prices are good and true reform is possible. Getting it done correctly means these three provisions are crucial, says Flinchbaugh, who spoke at the Kansas Commodity Classic in Salina last week.
"We must preserve the decoupled fixed payments. To the wheat industry, this is most important," the economist says.
But it isn't easy, what with record farm income and increasing hostility towards those off-farm folks who are getting direct payments. "But no matter what the payment is, that fixed payment will be paid! There's your safety net! And there is no limit in World Trade Organization Talks," Flinchbaugh says.
Counter-cyclical target program
Talk about true disaster assistance, and the counter-cyclical program is just that – if it's written correctly.
"Frankly, we're a long ways from doing that," Flinchbaugh says.
The principle is correct: The price rises above the target, and there is no counter-cyclical payment. Price drops, and the CCP is paid. But just the opposite has been occurring. Let's say there is a weather disaster, and farmers are in trouble. If there is no crop to sell, price doesn't matter. Farmers have no "safety net" under the current program.
Flinchbaugh's associate at K-State, crop insurance guru Art Barnaby, has spent a great deal of time developing an equitable plan. Problem is, the corn folks favor a 27-year yield trend; the wheat folks, a 35-year trend.
"I have the solution: pick a 27-year trend for corn and a 35-year trend for wheat! Why does it have to be so complicated?"
Flinchbaugh advocates choosing an arbitrary revenue target, and let crop insurance pick up the slack from the formula that Congress decides to use.
"I want to get the principle established. It will be perfected during the next Farm Bill discussion," he says.
Payment limits and means testing
Regardless of whatever the payment limit winds up being – and Flinchbaugh expects the bi-partisan proposal of $250,000 to stick – lawyers and accountants will figure out how to get around it.
"What will get more attention is the means testing, which I call the Ted Turner, Sam Donaldson and Scottie Pippen rule. It's hard to defend, but most of the payments go to 10% of the farms. And they produce the most commodities," Flinchbaugh says.
The House version of means testing lowers the adjusted gross income level from $2.5 million to $1 million, and keeps the off-farm income restriction to 75%.