Congress should provide a “meaningful enhancement” of crop subsidies and the crop insurance program in light of declining farm income, said Republican staff workers on the Senate Agriculture Committee on Thursday. “Headwinds persist in the U.S. farm economy,” they said in a report, pointing to a slowdown in farm exports, weakening commodity prices, high production costs, and rising interest rates.
Farm income is facing a steep drop this year from the record high of 2022. Farm groups are united in calling for higher reference prices, a key element in calculating subsidy payments, and an expansion of taxpayer-subsidized crop insurance. The 2018 farm bill expires on Sept. 30. Leaders of the Senate and House Agriculture committees are aiming to pass its successor by the end of the year.
“Expectations that the farm economy could weaken again in 2024 emphasize the importance of reauthorizing the farm bill and investing in a meaningful enhancement to the risk management and commodity program tools that farmers and ranchers depend upon to weather a volatile farm economy — beginning in 2024 and into the future,” said the GOP staff report.
The crop insurance program, often the largest strand in the farm safety net, is spiraling in cost and needs reform, said the Environmental Working Group in a report also released on Thursday. The government pays 62 cents of each $1 of premiums on crop policies. Last year, expenditures totaled $11.6 billion, compared to $6.3 billion when the 2018 farm bill was enacted.
“Because of how the program is designed and has been managed over time, it actually only protects around 20 percent of U.S. farms, even as costs skyrocket,” said the EWG, a frequent critic of crop subsidies and a proponent of soil and water conservation. “Crop insurance payments are incredibly concentrated” on row crops and a small number of states, it said, adding that growers in Texas, North Dakota, and Kansas have received $3 of every $10 in indemnities for losses since 2001.
Its suggested reforms include a cap on premium subsidies per farm, denying premium subsidies to wealthy operators, reducing the profit margins guaranteed to insurance companies, reducing federal payments to insurance agents, and requiring farmers to pay a larger share of the premium for crops planted on risky land.
“This year’s record-high production expenses combined with weakening prices received by farmers for major crop and livestock products have led to an unsurprising large drop in U.S. net farm income,” said the Republican staff report. The drop in net farm income of $42 billion would be the largest ever in numerical terms.
But net farm income of $141 billion this year would also be the second-highest total ever. The USDA says median farm household income has exceeded U.S. median household income every year since 1998. For many farmers, and particularly for small farmers, off-farm income is a vital part of household income.