SDCGA supports revenue-based farm bill proposal

February 1, 2007

The South Dakota Corn Growers Association (SDCGA) supports a revenue-based countercyclical concept which was reflected in the Bush Administration’s 2007 farm bill proposal released this week.

SDCGA leaders attended the Sioux Falls briefing on Wednesday with Agriculture Under Secretary Bruce Knight as he detailed the Administration’s 2007 farm bill proposals which were released by Agriculture Secretary Mike Johanns earlier that day. The USDA’s proposals are based on nationwide input sessions held throughout 2006.

“The Administration’s proposal is a starting point to the farm bill debate but it does include a revenue-based concept that the SDCGA has been touting for months,” said Reid Jensen, president of the SDCGA and producer from Burbank, S.D. “However, it’s important to remember that the farm bill will be written in the Senate and House Agriculture Committees and South Dakota is well represented in the respective committees.”

South Dakota has a strong presence in Congress as the farm bill debates begin with Sen. John Thune on the Senate Ag Committee and Rep. Stephanie Herseth on the House Ag Committee.

As the title implies, the proposed revenue-based program supported by the SDCGA is based on a producer’s revenue and not on price as the current countercyclical program is. The revenue proposal is more effective in protecting farm crop revenue against production losses, depressed prices and rising input costs.

Isolated areas can be hit with low yields during a period of low prices. The result is low deficiency payments and crop insurance falls well short of offsetting the income losses.

Counter cyclical payments and Loan Deficiency Payments (LDP) fill part of the revenue gap in a low price market, but farmers with short crops during a year of high yields and high prices nationwide can’t look to counter cyclical payments or LDPs for relief.

“This effect was very evident in South Dakota this year for farmers hit by the drought,” said Jensen.

Overall the Administration’s 2007 Farm Bill proposal reduces farm spending by $18 billion over five years. One area of concern for the SDCGA is the spending cuts would exclude from subsidies and programs new ground broken for production. The SDCGA believes that would put South Dakota at a competitive disadvantage with the rest of the nation.

In order to meet the increased appetite for corn from the ethanol industry, more acres of new land must be set aside for corn production. If a South Dakota farmer opens new land for corn or other crops, that new land might not qualify for certain subsidies and programs necessary to operate the land, is the SDCGA’s concern.“The Administration’s proposal release has officially launched the 2007 Farm Bill debates and the SDCGA will work closely with Sen. Thune and Rep. Herseth as the meaningful discussions get underway in the respective Ag Committees,” said Jensen. “The Administration’s proposals include a wide range of changes to the current farm program which must be carefully evaluated to understand the impact on South Dakota farmers. We cannot support changes which would cause negative effects on our producers’ ability to compete.”