It was evident from the hello that the South Dakota rancher had practiced his pitch before he dialed my office.
“I’m (so and so),” he said in a clipped, clear voice, “an independent cow-calf producer west of the (Missouri) river with 500 cows. I’m calling with one question: Where do I go to sign up for revenue-based cow-calf insurance?”
“I’m sorry, did you say ‘revenue-based cow-calf insurance?’”
“I did,” replied the cowboy. “You know, like revenue-based federal crop insurance. Farmers get that now and they’ll get even more of when Congress passes the farm bill, right?”
“Probably, yes, but I’m sure you know there’s no such thing as revenue-based, federally subsidized cow-calf insurance.”
Question
A long, tired sigh came across 750 miles of cellular ether. “Well, yeah,” he said finally, “but somebody needs to ask why taxpayers are guaranteeing my neighbors $300 and $400 an acre profit through federal crop insurance to farm ranchland when I can’t buy any insurance — let alone subsidized insurance—to lock-in one-tenth of that by doing the land right and ranching it.”
It was my turn to sigh. “No argument; you’re right.”
“Being right won’t mean much when my neighbors rent or buy the land I rent to plant more corn and beans while you, me and taxpayers buy most of the insurance to guarantee them a profit and me a smaller ranch.”
No, it sure won’t.
That was late March and this is late May and being right still won’t matter because each version of the 2013 farm bill that cleared its respective Congressional ag committee earlier this month includes expanded versions of today’s generous federal crop insurance programs.
Concern
In fact, some of the liveliest debates on the bills centered on how to grow the federal crop insurance program while keeping ag outsiders — mostly environmental, nutrition and conservation groups — from either placing restrictions on the expanding program or poaching some of its funds.
Each bill is far from any finish line, though. The Senate bill (soon to be voted on by the full Senate), for example, includes compromise wording that links conservation compliance with the new, bigger insurance program.
The House farm bill does not.
But the Senate language carries a distinctive only-in-Washington ring: In return for agreeing to tie the subsidies to conservation guidelines, a standard in almost every farm bill since 1939, the committee agreed to eliminate any provision that would cut insurance subsidies to farmers with more than $750,000 adjusted gross incomes.
Sweet deal
Sweet as that is — essentially, continue to do what you’re already doing and get even better coverage — some farm bill watchers now suspect the conservation part of the deal won’t survive the Senate-House conference to marry the two bills.
They see the House version — no conservation compliance, no limits — gaining traction. If so, my ranching pal’s future will sport more tractors and combines than cows and calves.
Landlords and farmers, unleashed from any conservation requirement and able to buy cheap crop insurance that virtually assures a profit, will plow under more grass to plant more corn and beans.
But even if the Senate’s conservation linkage remains in the final bill, the rancher is headed for an almost equally woeful future because farm program benefits, be they direct payments or insurance subsidies, end up being capitalized in land.
Reason
That’s the biggest reason his cows and calves can’t compete with corn and beans now; the land has been made too valuable by the federal crop insurance guarantees paid for, in part, by you and me.
In fact, that puts you and me in the business of pretty much putting this rancher out of business, as we underwrite the expansion of an already sweetly-subsidized government program.
And here I thought one of us was for limited government.
Guebert and the farmer are wrong. Contrary to widespread myth, there is no guarantee of profit with revenue insurance or crop insurance. There can be profit under some conditions, there can be subsidization on top of profit, but if/when farm commodity crop prices crash again, there will not be any profit with these programs. The programs use standards of subsidization that float, that follow markets, up or down, so it’s all a gamble. The farm bill is being passed under conditions of much higher prices, at least for corn, wheat and rice, all of which have been above zero vs full costs in recent years (not wheat, cotton, oats, sorghum, barley, ie. 2007-2011). Of course, those previous prices were the lowest in history (ie. 7 of the lowest 9, 1997-2005) The government program is not at all “sweetly subsidized,” in that if market prices do what they’ve usually done for 140 years then we’ll have a new farm crisis for crop farmers. In the long haul, commodity crop farmers have had increasingly low prices since 1953, (except for a few years during the 70s when livestock farmers were also complaining). For example, USDA-ERS found below zero prices vs full costs for a sum of wheat+cotton+rice+corn+sorghum+barley+oats+soybean every singly year 1981-2006 (except 1996). Likewise, in 6 ERS studies where they added subsidies in, the overall result was below zero in each case. Livestock interests were too weak at supporting a balanced farm bill, with price floors AND ceilings, supply reductions as needed AND reserve supplies. As a result, ranchers got CAFO competition, with only a few corporations (ie. 4) dominating (ie. 66% of production). By the way, the biggest subsidy recipients got much less than the CAFO corps got (in below cost gains), according to a Tufts University study. The top 4 “big ag” farmers look quite tiny compared to the CAFO corps, which are something on the order of 1,000 times bigger, in terms of share. The real debate is over how the CAFOs, the exporters, the food and feed mills and others have been so successful in their divide and conquer strategy, getting real farmers to fight each other. And to ignore what’s really happening.