New US ag subsidies to replace old US ag subsidies

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The next five-year agricultural plan farm bill will cover 2013-2017. The NY Times looks at where Congress is headed, in a piece titled “Farmers Facing Loss of Subsidy May Get New One“:

Lawmakers’ reluctance to simply eliminate a subsidy without adding another in its place demonstrates how difficult it is for Washington to trim the federal largess that flows to any powerful interest group. Indeed, the $5 billion program that lawmakers are willing to throw under the tractor, known as the direct payment program, was created in 1996 as a way to wean farmers off all such supports — and instead was made permanent a few years later…

It is unclear how much support a new subsidy would garner, since many lawmakers view farm programs as a likely source of budget savings. Critics say that farm subsidies today have little to do with helping struggling family farmers. Instead, they go predominantly to well-financed operations with large landholdings. All told, the subsidies amount to about $18 billion a year — about half of 1 percent of the federal budget…

Direct payments have come under fire, however, because farmers get them whether markets are high or low. The new subsidy, called shallow-loss protection, would act as a free insurance policy to cover commodity farmers against small drops in revenue. Most commodity farmers already buy crop insurance to protect themselves against major losses caused by large drops in prices or damage to crops. Those policies typically guarantee 75 to 85 percent of a farmer’s revenue, with the federal government spending $6 billion a year to pay more than half the cost of farmers’ premiums.

The proposed new subsidy would add another layer of protection to guarantee 10 to 15 percent of a farmer’s revenue, paying out not only in years of heavy losses, but also when revenue dipped less severely…

It is unclear how much the proposal would cost taxpayers. Dr. Schnitkey said the plan could pay farmers $40 billion over 10 years. That would be $20 billion less than the programs it replaced, including direct payments and some smaller subsidies.

But Dr. Smith, the Montana State economist, said the cost could be much greater because the plan used recent high crop prices as its benchmark.

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