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Thursday, June 27, 2013 05:06 am

There’s still pork in corn and beans

Billionaire Paul Allen, New Yorkers and other folks who live many miles from farms will no longer get farm subsidies under the latest version of the federal farm bill now being bickered about in Congress.

But critics of farm subsidies say there is still plenty of welfare in federal farm policy.

The farm bill easily passed the Senate in May with support from both parties but stalled last week in the House, where conservatives want more cuts to the food stamp program, which has traditionally been wed to farm subsidies in a marriage designed to get enough votes from urban lawmakers to pass billions of dollars in subsidies for farmers.

The farm lobby has given up on keeping $5 billion in annual payments made to owners of farmland simply because they own land. Under that program due for elimination, Allen, a Seattle billionaire who got payments because he owned property in Idaho, and nearly 300 people who live in New York City, received hundreds of thousands of dollars each year. Also being curtailed is a program that paid farmers when the price of crops fell below target prices.

Both programs have long been targets for critics. But there is still plenty of pork in corn and soybeans, critics say, particularly in the federal crop insurance program.

That cutting crop insurance would be an uphill fight became clear last month when Sen. John McCain, R-Ariz., and Sen. Diane Feinstein, D-Calif., proposed ending subsidized insurance for tobacco farmers, which could cost the government as much as $333 million over 10 years. Both Illinois senators voted against spending public money to help tobacco farmers, but the proposal flopped by a 16-vote margin.

A harbinger, perhaps, for things to come, as efforts to curb crop insurance failed in the Senate, and so far, the House. After those who argued for deeper cuts to food stamps last week stalled the bill in the House, the Illinois Farm Bureau expressed disappointment.

Jim Birge, manager of the Sangamon County Farm Bureau, says that farmers pay the largest share of crop insurance premiums. Crop insurance, he said, is like car insurance or homeowner’s insurance, reserved for “large-scale, disastrous circumstances.”

“It’s not like they get free crop insurance,” Birge said. “They still pay very large premiums. … The federal government’s not on the hook for this whole thing. Farmers don’t get a claim every year.”

But Bruce Babcock, an Iowa State University economics professor who has done the math, says that crop insurance costs taxpayers more than it should.

In a paper published this year by the Environmental Working Group, Babcock studied payouts made to Champaign County farmers as a result of last year’s drought.

Crop insurance comes in three forms, one that pays out based on projected crop prices if yields are low, another that is based on the amount of money generated per acre and a third form that bases payouts on either the actual price at harvest or the projected price at planting, whichever is higher. The third form of insurance protects against both low yields and low prices, and that is the kind purchased by an overwhelming percentage of farmers. Babcock found that 89 percent of Champaign County farmers who bought insurance last year opted for the third form, which is the most expensive, both for taxpayers and for farmers. But the benefit for farmers can be huge.

Nationwide, more than 94 percent of $12.7 billion in payouts to soybean and corn farmers last year came as a result of the most expensive – and the most heavily subsidized – form of insurance, Babcock found. If farmers had purchased only yield insurance, the tab would have been cut by nearly $3 billion, he writes. And if insurance had been limited to the type that guarantees a certain amount of revenue per acre, the bill would have been slightly more than $6 billion.

Whether last year’s drought devastated farmers depends on the definition of “devastation,” Babcock says, thanks largely to payouts based on the harvest price of corn, which was high due to drought-induced shortages.

“For an Illinois farmer who completely lost their crop and bought (the most expensive insurance), they made more money than they anticipated when they planted their crop,” Babcock said in an interview.

Babcock doesn’t argue that crop insurance should be eliminated. Rather, he says, the government should pay less and farmers should pay more.

He’s not holding his breath.

“I’ve been listening to these congressmen saying we can’t eliminate these subsidies or we won’t have food to eat – that’s ludicrous,” Babcock said. “I don’t know why I do it. All I get is grief from the farming community.”

Contact Bruce Rushton at brushton@illinoistimes.com.
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