avatar
Politics and Crop Insurance:


INTRODUCTION
 
The politics of Crop Insurance in the Farm Bill is related to the basic politics of the issue as follows:
 
Republicans & later Democrats & later progressive Democrats in Congress reduced and ended Price Floors and Supply Management giving huge benefits to agribusiness at the expense of farmers, and changing the structure of agriculture of agriculture in unsustainable and other bad ways.
 
Subsidies back to farmers, (much smaller than the huge reductions to benefit agribusiness,) came later.  With much lower farm incomes, part of the subsidies were in help with authentic crop insurance for things like hail damage, which farmers could afford if they got fair prices.  A second part of Crop Insurance dealt with large disasters, such as multi-year droughts, which were made worse by the chronic low farm prices enacted by Congress.  Insurance Companies couldn’t handle this by themselves.  Congress brought this into Crop Insurance as a better alternative than ad hoc disaster funding.  Recently there has been a push to include a lot of the subsidies for low farm prices (ie. for NOT for low yields from bad weather, but for bad farm bills enacted by Congress,) in Crop Insurance, and to then make it sound like a good business practice, by using the label “risk management.”
 
FARMERS: 
 
The majority of farmers have consistently opposed these changes, and the major movements of farm activism over the decades (NFO, AAM, NFU, ACornGA, alliances leading to NFFC,) have always opposed them.  These farmers consistently lost, however, in every farm bill since 1952, and had to settle for weaker and weaker compromises, (subsidies instead of fair prices,) which are better than a return to pure Hooverism (‘free’ markets plus no subidies, like we had prior to 1933).  With the compromises, the reductions in farm income are reduced a little.  Instead of losing $8, farmers lose only $7, as they get $1 in subsidies for every $8 in reductions compared to 1943-1952.  With these weak compromises, however, diversified farmers lost value-added livestock to CAFOs, as the market prices that CAFOs paid for feed crops went down the full 8/8.  
 
In losing livestock to CAFOs, farmers lost a big part of the economic benefit of Resource Conserving Crop Rotations, (sustainable free nitrogen from the air, from livestock powerful forages and hay like alfalfa and clover, reduced/eliminated need for pesticides), and became increasingly dependent upon the Agribusiness Input Complex.  Family farms had to buy/rent much more land just to stay the same size economically (without value added livestock, with only low value commodity crops, and without effective crop rotations).  I must repeat this:  the problems of reduced sustainabiltiy occured because of low/no Price Floors, because of taking value away from farmers and giving it to CAFOs, not because of subsidies to compensate farmers and cut ? of the reductions.  Subsidies are not what hurt sustainability.
 
The Federation of Southern Land Cooperatives (ie. black cotton farmers), in a survey of members, found that their farmers support subsidies, (as a compromise,) but really support adequately restored Price Floor programs.  NFFC agrees over all.  Subsidies are clearly better than Hooverism (no Price Floors,) or partial Hooverism (low Price Floors,) without subisidies. National Farmers Union has a similar position, but is more likely to sign-on with the big commodity groups on various kinds of compromise.
 
Alternate commodity groups have been formed to support fair (parity) prices, notably, the American Corn Growers Association, which has a much better position on all of the “cheap corn” issues than almost all of the Food Movement.
 
FOOD MOVEMENT:
 
The Food Movement, Environmental Movement, Hunger Movement, etc. clearly oppose “cheap corn,” cheap food, in rhetoric, and have done much work on the problem (ie. obesity and diabetes, CAFOs).  This is clearly the goal of the movement, and is consistent with it’s values, such as justice, sustainability, and health.  On the other hand, these movement sectors misunderstand how the Farm Bill works, so they rarely propose or support any specific proposal that would end cheap prices (ie. those of NFFC or NFU).  They side with agribusiness on these issues, unknowingly, even as their rhetoric strongly opposes agribusiness exploitation.  In the end, they often take an extreme, conservative, Republican ‘free’ market position.  See, for example, Ken Cook of EWG in the film, A Place at the Table.  
 
COMMODITY GROUPS:   
 
This then partly explains the role of the big Commodity Groups (ASoybeanA, NCornGA, Wheat, etc.  They do, at least, support subsidies instead of Hooverism.   
 
According to testimony by John Ford, USDA undersecretary under John Block (80s), and later Director of Congressional Affairs for the American Corn Growers Association, National Corn Growers Association lobbied against better prices for farmers (like agribusiness beneficiaries,) but claimed to represent farmers.  He also says that, during farm bill negotiations, NCGA President Varel Bailey called ADM President Duane Andreas, essentially to get permission on what position he was allowed to take on issues like Price Floors (which were lowered in the 85 bill) and Target Prices (which were also lowered).  
 
At the time of Farm Aid 3, 1987, there was a debate between Dixon Terry, (Iowa Farm Unity Coalition, NFFC) and Varel Bailey, President of the National Corn Growers Association, in Lincoln, sponsored by F.A.C.T.S., a member of Students Empowered for Rural Action.  Terry was the clear winner, supporting fair prices and no subsidies, as Bailey supported lower farm prices plus subsidies.  
 
FARM BUREAU:  
 
Farm Bureau, representing a minority of farm activists, has ideologically supported ‘free’ markets, (which, data has long shown, meant low prices,) and has viewed by farm ustice groups as primarily an insurance company.  So it also supported ever weaker compromise positions (low/no Price Floors, bigger subsidies, worse kinds of subsidies, and then smaller subsidies).  Farm Bureau Insurance, is one of the corporate beneficiaries of switching the farm program to one dependent upon insurance, with companies getting increasing shares of the pot of money, leaving less for farmers. That has surely been their long term goal, as an insurance-corporation/farmer-front-group. 
 
According to John Ford, USDA undersecretary under John Block (80s), Farm Bureau lobbied against better prices for farmers.  To hear that from commodity buyers was understandable.  To hear it from a group purporting to represent farmers was puzzling to him.   
 
When Farm Bureau president Dean Kleckner spoke at the National Farm Crisis Action Rally (1985), farmers booed him, and later laughed as a big balloon was bounced around reading “Farm Bureau Hot Air.”   Kleckner was the only speaker I heard calling for subsidies.  All other speakers favored adequate Price Floors with no subsidies needed, and opposed lower Price Floors plus subsidies (weak compromises).
 
In his book, The Corporate Reapers, Al Krebs writes:  “As Dixon Terry, co-chairperson of the National Coordinating Committee for the Farm Policy Reform, summarized the efforts by his colleagues to obtain passage of the Harkin-Alexander amendment:
 
    … One thing was disgustingly obvious:  The Farm Bureau Federation, 
    the National Corn Growers Association, the National Cattleman’s 
    Association, the Soybean Association and others spend thousands of 
    dollars of farmers money in joining with the National Chamber of 
    Commerce and other corporate interests to lobby for lower farm prices 
    for the next five years.” 
 
(Krebs source is:  Dixon Terry, “Grassroots Farmers Move Full Steam Ahead on 1985 Farm Bill,” North American Farmer, North American Farm Alliance, 10/15/85.
 
Other documents from the history of the Farm Justice Movement reinforce this view that the Farm Bureau did not support farm interests.
 
Willis Rowell, Mad as Hell:  A Behind the Scenes Story of the NFO: “In 1952 after Eisenhower was elected President, the benefits of government farm programs were attacked by just about everyone outside of farming, plus the American Farm Bureau Federation which tried to leave the impression that they were acting in the best interests of farmers by lobbying for” lower Price Floors.” p. 1
 
Samuel Berger, Dollar Harvest:  An Expose on the Farm Bureau: “The Farm Bureau may serve two masters, the ‘farmer’ and agribusiness, but it speaks for agribusiness.  It lines up with the food processor rather than the farmers and when it does line up with the farmer, it is the wealthy farmer.” Quoted in Jim Hightower, Hard Tomatoes, Hard Times, p. 131.
 
Charles Walters, Unforgiven:  quoting Carl Wilken:  “The Farm Bureau … was brought in back in the 1914-1915 era to bring about an increase in farm production….  Q… to make production outrun demand? Well it was done for the purpose of getting cheaper raw materials.  And the Farm Bureau, in all of its history has never been in favor of a price.  And they aren’t today. p. 133  “Allan B. Kline’s election to Farm Bureau chiefdonship caused new cream to rise to the surface–and sour.  Kline had headed the powerful Iowa Farm Bureau and rated recognition as a Republican.  He served for seven years before retiring from office to take a position as Director of J.I. Case, the farm machinery company.  Both before and after leaving the Farm Bureau presidency, Kline hammered parity, not with a hand tool but with a wrecking ball.”  pp. 261-2; Farm Bureau as “shills” for agribusiness, p. 267; “They debated the issue of 90% price supports or the Farm Bureau’s idea of no price supports…. Eisenhower” p. 320   Herell DeGraff … had distinguished himself as a Farm Bureau speaker and secretary of the Foundatin for Economic Education, the Irvington-on-the-Hudson parking ground for ex Cornell professors who could rationalize low … prices.” p. 321 Foundation for Economic Education:  list of corporations. p. 262-3  “Cotton Council …. formed in 1939 by the biggest plantation owners, and the agri-business interests ..:  ginners, warehousemen, merchants, spinners, cottonseed cruchers…. Farm Bureau leaders staffed the farm end of the Council.” p. 346  “Within a few months, farmers would be asked to buy the proposition that $1.25 wheat was better than $2.00 wheat, with the Farm Bureau equating the right to go broke with the right to make a profit.” p. 349
 
We see, then, that the Farm Bureau has never represented very many positions that could be called authentic “farm” interests.  It has mainly opposed the biggest farm interests. 
 
AGRIBUSINESS:  
 
OUTPUT COMPLEX:  COMMODITY BUYERS:  These are the biggest beneficiaries of the lowering of Price Floors and the return to Hooverism, and they get the benefits whether or not farmers get any subsidies.  Subsidies don’t lower prices, so they aren’t the big issue.  What subsidies do for these interests is to divert attention from the real issue, with everone blaming farmers, and few groups calling for restoration of Price Floors. 
 
So Cargill and ADM do not benefit from subsidies including subsidized crop insurance, they’ve benefited from the low/no Price Floor programs that are the underlying reason why subsidies are needed.  Subsidies to compensate for low prices have been morphed, increasingly, into Crop Insurance.  Cargill and ADM don’t benefit from the subsidies, they benefit from the unmentioned absence of Price Floor Programs, and they benefit much more than the Insurance Companies do.  So the biggest winners don’t get subsidies, but they benefit from the way that subsidies lead people to blame farmers and to ignore the real problem.
 
INPUT COMPLEX:  CROP INPUT SELLERS AND CAFO INPUT SELLERS:  As farmers lost livestock to CAFOs, including dairy, and then pastures, and hay grounds, and small grains (& fragile lands were plowed up, such as on the plains and in hilly dairy country,) there was much more land for which inputs were needed, and without crop rotations, more inputs were needed per acre (harsh fertilizers, pesticides).  Set Asides (row crop acreage reductions) were also reduced and eliminated.  Farmers went broke, so there was less labor, so only farmers with a lot of capital (off farm income) could farm, and they bought more products to replace labor (more pesticides, more fertilizer, bigger machinery). The dominant sellers of the biggest tractors, etc. survived, while the small tractor and implement industry was greatly reduced.  So they benefited, not from subsidies, but from the lowering of Price Floors.
 
CROP INSURERS:  These are part of the agribusiness input complex, but now get their own direct subsidies from the farm bill.  They include Farm Bureau (Insurance), and Their interests.
 
SUMMARY
 
APAC’s ANALYSIS OF CROP INSURANCE PROPOSALS  (Daryll Ray & Harwood D. Schaffer) 
 
APAC shows that the proposals of commodity groups (NCGA, ASA) and Farm Bureau and the Insurance Lobby and Insurance Bureaucrats, and the House and the Senate all favor the weak compromise that gives agribusiness zero Price Floor programs (Hooverism), but that gives farmers some subsidies to compensate for low farm prices.  
 
(The better subsidy compensations are reduced, however, as they’re morphed into Crop Insurance, where the rules mean that farmers are NOT GUARANTEED to get subsidies at current levels, but will get very little, if/when prices crash and stay low, as has usually happened in the past through 2006 (ie. 1981-2006).  So countercyclical subsidies have given farmers the better compensation in relation to low prices, and only when they are needed.  Direct Payments give a fixed amount and do not go away during hard times like Crop Insurance, but they’re also given when not needed.)
 
The Environmental Working Group Proposal (representing a wide concensus in the Food and Environmental Movements,) differs in that it’s not based on a view that subsidies compensate farmers for the chronic problem of low prices.  It’s also maintains the return to Hooverism, therefore, and goes against the views of black cotton farmers (FederationSLC) and family farmers (NFFC, NFU, NFO) who believe that weak compromises are better than pure ‘free’ market Hooverism.
 
The House side has given better attention (ie. than the Senate, EWG & allies, and other conservatives who are farm bill critics,) to the fact that Crop Insurance subsidies, even at weak compromise levels, go away under conditions of chronic low prices.  In this way, then their position is better than that of EWG and much of the Food and Environmental Movement (and others with similar “Hooverism,” ‘free’ market conservative views).  
 
CONCLUSION: ONLY NFU AND NFFC REPRESENT FARM INTERESTS
 
We see, then, in the various Farm Bill proposals, (see APAC series linked below,) that Farm Bureau, NCGA, ASA and others favor no Price Floors, and also call for reduced subsidies to compensate farmers for the low prices.  So they don’t represent objective farm interests.  They favor worse programs for farmers, but do call for some subsidies.  So they aren’t totally opposed to all farm interests, they just call for farmers to get less.
 
This is confused, however, by the fact that, with fair prices replaced by subsidies, and subsidies then morphed into Crop Insurance, the formulas enable farmers to get subsidies when they don’t need them, which can be an INCREASE in benefits.  On the other hand, however, we’ve usually had chronic low prices in ‘free’ market conditions (ie. with no Price Floors and no Supply Management, as in all proposals except NFFC & NFU).  So if prices drop, and we have 25 years like we had 1981-2006 (25 of 26 years below full costs for a sum of 8 commodities, or 1981-2012 for 5 of 6 years for 5 of these commodities,) then Crop Insurance will provide a SMALLER amount of subsidies to farmers that what they got, for example, 1996-2008.  That’s explained below, in the series of articles:  “APAC & IATP:  CROP INSURANCE IS  NOT  A ‘GUARANTEE.’”  The reason why this is true, is that, as Revenue Insurance for low crop prices is added into Crop Insurance, the standards for getting benefits float up and down with markets (following markets,) with no fixed standard, such as cost of production.  So the standard can easily fall far below zero.
 
On these same grounds, the EWG proposal is even worse, because EWG does not consider the problem of chronic low farm prices, but rather assumes that ‘free’ markets are good for family farmers.  Four kinds of evidence clearly show that that assumption and premise is false (http://www.zcomm.org/michael-pollan-rebuttal-four-proofs-against-pollans-corn-subsidy-argument-by-brad-wilson.html).
 
Only the NFU and NFFC proposals, effectively administered by USDA, really “guarantee” fair prices for farmers.  (They also guarantee that prices won’t rise too high, as they include Price Ceilings, backed up by Reserve Supplies to protect consumers and others.)
 
On this point, it’s sometimes claimed that Price Floors don’t offer such a guarantee, that they don’t really work very well.  For example, the Union of Concerned Scientists claimed that “Price supports and supply controls from farm bills prior to 1996 could only moderate rather than prevent below-cost production.” (“CAFOs Uncovered,” p. 30)  That’s not an accurate description of history.  The truth is that they DID NOT, not that they COULD NOT.  So Congress reduced Price Floors and Supply Management, so it did result in lower prices, but they could have increased these programs in adequate ways, which would have been effective.
 
UCS also stated that the “programs have moved away from” Price Floor, Supply Management programs.  That’s passive language, as if it was happening inevitably or on the basis of objective conditions.  Really it was a choice by Congress and the Presidents, with implementation by USDA, and it happened in spite of the fact that objective needs for Price Floors and Supply Management did not go away.  That is, the basic economic problem, “the lack of price responsiveness,” “on both the supply and the demand sides for aggregate agriculture,” (Daryll Ray, APAC:  http://agpolicy.org/weekcol/325.html, http://agpolicy.org/weekcol/248.html) continued into the 21st century, with the lowest prices in history (ie. 8 of the 9 lowest, 1997-2005, for corn and soybeans).  In making these statements, the UCS position sounds very much like that of a deeply flawed ERS report that I recently critiqued, here (http://www.lavidalocavore.org/diary/5375/exposing-the-myths-in-a-usdaers-document).  My view is that sources like ERS and similar academic sources have become a dominant and largely false and misleading perspective for food, environmental and similar group work, and the mainstream media.  They’ve all supported each other in views that are seriously inadequate to the basic values and goals of the Food Movement, the Environmental Movement, etc. and also to the Family Farm Movement and to farmers generally.
 
APAC SERIES LINKS
 
National Corn Growers Association:  http://agpolicy.org/weekcol/586.html
 
American Soybean Association:  http://agpolicy.org/weekcol/587.html
 
Farm Bureau:  Daryll E. Ray & Harwood D. Schaffer, "American Farm Bureau's farm bill proposal," October 7, 2011 #584, HTML: http://agpolicy.org/weekcol/584.html. 
 
Environmental Working Group:  http://agpolicy.org/weekcol/589.html
 
Crop Insurance Bureaucrats:  http://agpolicy.org/weekcol/603.html
 
Crop Insurance Lobby:  http://agpolicy.org/weekcol/604.html
 
Senate:  2012:  http://agpolicy.org/weekcol/622.html
 
House:  2012: (Lucas & Peterson): http://agpolicy.org/weekcol/616.html
 
NFU Proposal to eliminate need for subsidies:  http://agpolicy.org/weekcol/583.html
 
NFFC Proposal to eliminate need for subsidies (similar to):  Daryll E. Ray and the Agricultural Policy Analysis Center, University of Tennessee, Knoxville, TN:  
      “Rethinking US Ag Policy,” September 12, 2003 #162, http://agpolicy.org/weekcol/162.html
      “Farmer-oriented blueprint increases corn prices 37%,” August 26, 2005 #264, http://agpolicy.org/weekcol/264.html
      “Eliminating commodity programs reduces net farm income by 25%,” August 19, 2005 #263, http://agpolicy.org/weekcol/263.html
 
Brad’s comparison of EWG and Larry Combest (House):  ie. Which is better for Black Cotton Farmers:  http://www.zcomm.org/ewg-s-ken-cook-debates-former-ag-chair-larry-combest-loses-by-brad-wilson.html
 
Black Cotton Farmers View:  http://www.zcomm.org/ensure-that-farmers-receive-a-fair-living-wage-by-jerry-pennick-heather-gray.html
 
Others:  http://www.lavidalocavore.org/diary/5157/primer-revenue-insurance-in-the-2012-farm-bill; http://agpolicy.org/articles11.html.
 
 
APAC & IATP:  CROP INSURANCE IS  NOT  A GUARANTEE
 
Daryll E. Ray, "ACR: Strong safety net when prices are high but snaps when prices fall," Agricultural Policy Analysis Center, University of Tennessee, November 2, 2007, http://www.agpolicy.org/weekcol/378.html.
 
IATP, "Revenue-based Countercyclicals: A Poor Substitute," Institute for Agriculture and Trade Policy, September 12, 2007, http://www.iatp.org/documents/revenue-based-countercyclicals-a-poor-substitute.
 
Daryll E. Ray & Harwood D. Schaffer, "Insurance is an effective within-year price safety net but fails across years," Agricultural Policy Analysis Center, University of Tennessee, October 14, 2011 #585, HTML:  http://agpolicy.org/weekcol/585.html.
 
Dr. Steve Suppan, "Revenue-based Countercyclical Payments: U.S. Policy Disaster Relief?" Institute for Agriculture and Trade Policy, April 10, 2007, http://www.iatp.org/documents/revenue-based-countercyclical-payments-us-policy-disaster-relief.
 
"Price and yield (and revenue) risks: Is insurance up to the task of handling them all?" Daryll E. Ray & Harwood D. Schaffer, Agricultural Policy Analysis Center, University of Tennessee, May 25, 2012 #617, http://agpolicy.org/weekcol/617.html.
 
More:  http://www.lavidalocavore.org/diary/5157/primer-revenue-insurance-in-the-2012-farm-bill.
 
FOR FURTHER READING
 
Brad Wilson, Smashing the Illusion 'Farmer Clout:' A White Paper,” ZSpace, Jan 08, 2013, http://www.zcomm.org/smashing-the-illusion-farmer-clout–a-white-paper-by-brad-wilson.html.

Brad Wilson, “Do you support the ‘Farm Coalition Group,’" La Vida Locavore, Jan 08, 2010, http://www.lavidalocavore.org/diary/3053/do-you-support-the-farm-coalition-group.

Brad Wilson, “Subsidies vs Price Floors in Farm Bill History,” La Vida Locavore, Jan 02, 2010, http://www.lavidalocavore.org/diary/3018/subsidies-vs-price-floors-in-farm-bill-history

Leave a comment