Producers have greatly appreciated the efforts of Congress to provide badly needed emergency economic assistance the past few years. However, it is time to
place into permanent law a program that would trigger this assistance automatically when conditions beyond producer control cause economic stress to production agriculture. Then, and only then, can farmers, bankers,
consumers, taxpayers, and lawmakers evaluate, with some level of confidence the strength of the farm sector from year to year.Grain groups in the region along with the National Association of Wheat Growers have spent
the last several months objectively assessing common sense solutions to enhance the viability of agriculture in the U.S., as well as our position in the global trade arena.
The result is a plan that takes many of the
positive components of the current farm bill and combines them with a counter-cyclical safety net that automatically triggers when commodity prices fall below a certain level.
We feel the price of the commodity is
itself the most accurate and fair trigger mechanism available. While we are in the initial stages of the economic analysis necessary to properly assess the plan, it is our hope that over the next several years the cost
would be less than the average annual cost of the last three farm bills while providing much more stability to American agriculture.
Even more important, it does not detract from, but rather enhances the all-out
effort we must make to regain world market share, which has slipped the last few years. This plan would allow U.S. producers to react to the world market signals while providing a level of support when prices fall, for
whatever the reason.
Key concepts of the proposal:
• Establish a trigger price that would be in place so when prices dip below a certain level, a counter-cyclical payment is triggered (safety net).
• Current
marketing loan, PCP, and LDP structures would remain in place
• This payment would equal the difference between the trigger price, minus the sum of the AMTA payment and the higher of the marketing loan or an average
price.
• AMTA payments would remain frozen at 1999 levels (63 cents).
• The current marketing loan mechanism would remain the same. However, in the case of grains, the loan level could be raised
somewhat to create equity between grains and oil seeds without creating production distortions.
• Full planting flexibility remains — all AMTA and variable payments are totally decoupled from production.
• A
separate payment limit would be in effect for the variable payment, with the same production history as the current AMTA payment.
An example of the payment calculation:
Trigger Price
4.30 4.30
Fixed payment
-.63 -.63
Marketing Loan or...
-2.58
...Avg. Price
-3.00
Variable payment
1.09 .67
Farm economic problems are not only driven by lower prices, but also by a
slow creeping virus known as higher production costs. In this plan, we have included a method of adjusting support as needed based on a formula that compares some basic input costs on a per bushel basis, excluding land
cost because of its inflationary nature.
Because price risk is dealt with in this plan, crop insurance could be simplified and return to doing what it was originally intended: protect against crop loss. And, it could
do so with higher levels of coverage at less cost.
We indeed must think globally to understand consumer needs relating to our products and fight with all our might to increase market share in the world. However, it is
vitally important to the well being of our nation's food producers, its citizens and the economy as a whole, to have a consistent, responsible, and fair domestic farm policy, which does not distort production based on
free market forces. We believe this policy proposal clearly accomplishes that.
(Based on testimony presented by Valley City, ND producer Allan Skogen at the U.S. House Ag Committee farm policy hearing
May 2 in Sioux Falls, SD, on behalf of the North Dakota Grain Growers Association, Minnesota Association of Wheat Growers, and South Dakota Wheat Inc.)
