POSTED: Wednesday, February 5, 2014 - 1:00pm
UPDATED: Thursday, February 6, 2014 - 1:15pm
AUSTIN, Texas — The nearly $1 trillion farm bill passed by the U.S. Senate on Tuesday after years of contentious political fights will bring about major changes for Texas farmers and ranchers, eliminating direct payments to producers in favor of programs that will only compensate farmers if they lose money.
For close to 20 years, agricultural producers across the country have enjoyed direct cash payments each year, regardless of their profits or how many crops were actually planted. Cotton growers in Texas have been some of the biggest beneficiaries, receiving upwards of $3 billion in such payments over the past two decades.
The new farm bill — which now heads to President Obama, who is expected to sign it — eliminates that system. But much of the savings will go to heavily subsidized insurance programs for farmers that could be even more financially beneficial for them. (Cotton growers across the country will still get more than half a billion dollars in “transition” payments in 2014.)
“It’s designed to cost less overall,” said Jason Johnson, an economist for Texas A&M University’s AgriLife Extension Service. “But those intentions have not always worked out in previous years.”
Farmers will now be able to choose between two different crop insurance programs, which trigger payments either when prices dip below a certain level or when their overall revenues drop below a calculated average based on previous years of local crop data. They also have an option to buy supplemental coverage, two-thirds of which will be subsidized by the federal government.
That essentially means that if crop prices are lower than projected, or a weather disaster results in steep revenue losses, the farm bill could be more expensive than expected. “Initially, it very well may mean [larger] payments this year that in the old farm bill would not have been received,” Johnson said.
Johnson said smaller crops, like peanuts or rice, are likely to benefit from a different insurance program than a larger commodity like corn. But farmers have very little time to decide which one they will choose — and they can’t change their mind each year. They’ll be locked into their choice until the farm bill expires in 2018. After Johnson spoke on Tuesday to an audience of about 100 people in Waco on the farm bill’s implications, some producers were still unsure how it would affect their bottom line.
“It’s going to be pretty confusing, I’m sure,” said Don Ramsey, who grows corn, sorghum, wheat and cotton near Waco. “We may lose [our safety net], we may not.”
The direct cash payments were a boon for Ramsey’s farm, he said, especially during the debilitating drought of the past few years. Without them, he said, “how are we going to make it?” Ramsey said he is considering alternative crops that are more drought- and heat-tolerant, like sunflower, but the risk of disease for such a crop is high, and insurance may also be harder to find.
But others said the federal government needs to rein in its spending, and that includes the assistance on which agricultural producers have historically depended.
“I’d just as soon not participate,” said Steve Stiles, who grows a variety of crops and raises cattle about 80 miles northeast of Austin. “I think all of us could be weaned off of it. … The market will tell who has to stay and who has to go to town.”
The mammoth farm bill, which is projected to save $23 billion over the next decade, was held up in large part because of heated disputes over food stamps for low-income Americans. The legislation cuts $8 billion in food assistance over the next 10 years.
Both Texas senators, Republicans Ted Cruz and John Cornyn, voted against the legislation, in part because of its massive price tag.
Cruz said in a statement on Tuesday that the legislation is not really a farm bill but rather a food stamps bill with farm provisions. "We should address the true needs of American farmers, but this bill doesn’t do that," Cruz said.
Cruz and Cornyn's opposition to the bill did not bring them favor from the state’s largest agricultural lobbying groups.
“A no vote on this bill accomplished nothing,” Texas Farm Bureau President Kenneth Dierschke said in a statement. “No reforms, no benefit, nothing.” (Several members of Texas’ U.S. House delegation also voted against it, including Republicans Steve Stockman and Randy Weber, and Democrats Joaquin Castro and Sheila Jackson Lee.)
The subsidies for crop insurance have been a flashpoint for criticism from both Republicans and Democrats. In many cases, crop insurance will guarantee more than three-quarters of a farmer's typical revenue, no matter how much is actually grown. But Democratic Congressman Henry Cuellar of Laredo, who voted for the bill, said it marks a shift in thinking about agriculture in America.
“The good old days where the ranchers and the farmers were sacred cows, I think those days are now gone,” said Cuellar, who represents a sizable agriculture constituency in the Rio Grande Valley. "Everybody’s going to be given the full review up and down to see what’s needed, what’s not needed.”