Regional differences on how best to construct a farm safety net arose during a March 15 Senate Agriculture Committee hearing on risk management and the new farm bill. Even so, following four panels of witnesses, those backing federal crop insurance programs held the loudest bullhorn.

One thing that most witnesses and legislators agreed on – besides the finish of direct payments -- was a dislike of the Supplemental Revenue Assistance Payments (SURE) program which can require farmers wait 18 months for payments following a disaster. Michael Scuse, USDA Undersecretary for Farm and Foreign Agricultural Services, got an earful on the unpopular program from several legislators. Nebraska Sen. Mike Johanns, former Agriculture Secretary during the last Bush administration, said SURE is “very, very flawed.”

For hearing testimony, see here.

Chuck Coley, Georgia cotton farmer and National Cotton Council Chairman, said for cotton producers the “combination of the marketing loan, direct payments and counter-cyclical payments, as structured in the 2008 farm bill, has served the cotton industry extraordinarily well and, in recent years, has required minimal federal outlays. However, deficit reduction efforts are placing unprecedented pressure on the existing structure of farm programs. Deficit reduction will lower the baseline funds available to upland cotton. Yet simply downsizing the current program structure would undermine the effectiveness of the programs to the extent that alternatives need to be evaluated to ensure growers have access to an effective safety net.”

In a statement following the hearing, the NCC stated it “believes a revenue insurance program that supplements existing insurance products would provide an important and affordable tool -- especially given the weather uncertainties and risks that farmers face.”

The NCC says effective risk management would come with the adoption of the Stacked Income Protection Plan (STAX). STAX, “is designed to provide a fiscally responsible and effective safety net for upland cotton producers,” reads Coley’s prepared testimony. “The program will be administered in a manner consistent with current crop insurance delivery systems and is designed to complement existing crop insurance programs. This proposal does not change any features of existing insurance products.

“The STAX plan is designed to address revenue losses on an area-wide basis, with a county being the designated area of coverage. In counties lacking sufficient data, larger geographical areas such as county groupings may be necessary in order to preserve the integrity of the program. The ‘stacked’ feature of the program implies that the coverage would sit on top of the producer’s individual crop insurance product. While designed to complement an individual’s buy-up coverage, a producer would not be required to purchase an individual buy-up policy in order to be eligible to purchase a STAX policy.”

For more on the NCC proposal, see here.

“We have to have access to crop insurance, risk management tools and even emergency assistance programs to survive and recover from these natural disasters,” said Coley. He added that “the availability of effective risk management tools like crop insurance is important even in so-called normal years because cotton producers need to recover a portion of lost revenues if their crop is damaged after they have invested in the inputs, technology and equipment necessary to produce and market a crop. In those areas where cotton growers have not had access to adequate coverage, we want to continue to work with USDA, the companies and Congress to improve and increase the products that are available to our growers.”

Michigan Sen. Debbie Stabenow, committee chairwoman, asked Coley about U.S. cotton’s “unique position” in light of the WTO case lost to Brazil. “Why do you believe (the proposal from cotton growers) achieves the goal as it relates to the WTO case?”

For more on the WTO case, see here.

Coley replied that the WTO Brazil case was in two parts: the export credit guarantee program and the upland cotton program. “Our proposal – STAX, the insurance product – makes changes to the marketing loan and counter-cyclical payment.”

As part of the WTO case, “Brazil challenged the insurance program for cotton. But the WTO panel did not find any fault with insurance programs in terms of distorting production, trade or price.”

STAX, said Coley, “is only triggered by loss in revenue. Support is established and based on the current futures market. The product doesn’t provide support above the market but simply allows the producer to ensure a portion of the expected market returns.

“Provisions of (STAX were) in the market loan adjustments. (Between) 1999 through 2005 – the years in question with the WTO case – we would have had a 60 percent reduction in support in the programs deemed to be economically injurious by the panel.

“We understand the framework agreement between the United States and Brazil calls for a resolution of the dispute as part of the development of the 2012 farm bill. Our proposal addresses cotton but not the findings regarding the Export Credit Guarantee Program.”

Georgia Sen. Saxby Chambliss wondered if Coley saw any of the proposals from other commodity groups providing an adequate safety net. “Do they seem to be configured to work better for particular commodities rather than treat everybody equitably?”

Coley: “The revenue products offered will not work for cotton … due to the fact that we have extreme prices, yields and variations in the calculated years.”