Years of drenching rainstorms in several northern farm-belt states have caused payments under a popular type of government-subsidized crop insurance to nearly triple in the past decade, heightening debate about whether farmers should be compensated when they can’t plant their fields.
Payments for “prevented plantings” exceeded $2 billion annually in both 2011 and 2013 and are nearing $1 billion for 2014, with some claims still being processed.
While these payments are available to farmers nationwide, the lion’s share of the 2014 payouts, as in previous years, went to farmers in the Prairie Pothole Region—which includes parts of North and South Dakota, Minnesota, Iowa and Montana. This area contains pockets of wetlands that some say are largely unsuitable to farming.
Craig Cox, an agricultural expert at the Environmental Working Group, said the payments encourage farmers in the region to take risks they wouldn’t normally take.
“These seasonal wetlands are called seasonal because they’re wet in the spring” when planting often takes place, he said. “If farmers didn’t have that sort of risk protection—and they actually lost money—I don’t think we’d see the same sort of behavior.”
Mark Formo, president of the North Dakota Grain Growers Association, said it is unfair to use recent history to judge the effectiveness of the prevented-plantings system.
“A lot of the land that’s farmed now has been farmed for generations, [but] normal just hasn’t been normal,” he said. “My dad is 75 and he’s always saying this is the wettest he’s ever seen it.”
A report released this week by the Environmental Working Group, a frequent critic of agricultural subsidies, said farmers in the Prairie Pothole Region received about 60% of all prevented-planting payments between 2000 and 2013, equal to about $5 billion. That allocation dropped to 40% in 2014, according to the group. The analysis, based on Agriculture Department data, covers years of record-high crop prices, which resulted in higher payments to farmers.
After last year’s wet spring prevented Doyle Lentz from planting 10% of his acreage, the Rolla, N.D., farmer filed a claim under his crop-insurance policy and received 60 cents on the dollar for the insured value of wheat, barley, and soybeans that he had intended to plant.
“Farmers don’t want to have to file for this,” Mr. Lentz said. “They’re not set up to not plant.”
Others aren’t so sure. Some environmentalists say the wetlands aren’t fit for farming and farmers are abusing the system. Critics are calling on Congress to stop subsidizing this type of coverage.
Prevented-planting policies, which are overseen by the Agriculture Department but sold by insurance companies, became a part of crop insurance in 1995. The federal government, in addition to subsidizing farmers’ premiums, also shoulders some of the claim-related losses.
The government picks up the tab for an average 60% of farmers’ insurance premiums. The policies generally kick in when crop yields or revenue come in lower than expected, or, in the case of prevented planting payments, when farmers can’t get their crops in the ground.
Since its rollout, the program has come under fire from both the Government Accountability Office and the USDA’s internal watchdog. In 2013, the department’s inspector general cited hundreds of millions of dollars in potentially excessive payouts, and said the program discouraged farmers from planting other crops later in the season when their first choice was no longer an option.
USDA spokeswoman Gwen Sparks said the prevented-plantings payments help preserve the environment. “These provisions protect the soil by providing a safety net when conditions are not suitable for planting, such as when there is too much or too little water,” she said.
The debate about prevented plantings is taking shape as a broader fight about agricultural subsidies simmers on Capitol Hill. Farm-state lawmakers contend growers need to be protected from forces beyond their control, often weather related,while nonfarm representatives and fiscal conservatives maintain that the government is providing a needless and costly form of income support.
“We should not be forcing taxpayers to foot the bill for expensive subsidies to big businesses that don’t need it,” said Sen. Jeanne Shaheen (D., N.H.). Ms. Shaheen was part of a group of senators earlier this year who proposed to limit government-subsidized crop insurance.
Sen. John Thune (R., S.D.) said the number of prevented- planting claims should drop in coming years as new conservation compliance requirements deter farmers from trying to plant in areas known for being seasonal wetlands.
The latest statistics “fail to recognize how recent important policy and legislative improvements will likely reduce future prevented-planting claims and protect marginal lands, including wetlands,” Mr. Thune said.
So far this year, the region is getting less-than-average rainfall, suggesting flooding won’t be as big of an issue.
The White House proposed new limits on prevented-planting payments in its 2016 budget. The Agriculture Department, meanwhile, is rolling out new eligibility standards specifically for Prairie Pothole farmers.
Starting last year, farmers have had to show they were able to harvest a crop at least once in the past four years.
According to the National Oceanic and Atmospheric Administration, three of the 10 wettest years on record in North Dakota have occurred since 2010. The situation is similar in South Dakota.
Source - http://www.wsj.com/
