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Mike's Blog

Insights from the President of ProAg

“Kickin’ the Can”

by Mike Connealy on 01.02.2013

NEWSFLASH—Farm Bill extension attached to fiscal cliff legislation that passes Senate and House on strong bi-partisan votes. Both votes occurred during rare New Years Day sessions as time ran out on the deadline established months ago by the so called “super committee”. 

The 112th Congress is closing out business at this writing on January 2, 2013. The 113th Congress is to be sworn in and starts business on January 3rd. While this writer had often referred to the 112th Congress as “do nothing”, we have come to realize that they were very good at “kickin’ the can”. 

Rather than reach a “grand bargain” on the fiscal cliff, sequestration and debt ceiling issues, this Congress passed some tax rate changes and “kicked the can” on the serious issues regarding deficits, sequestration and debt ceiling. These will surface again in 8-12 weeks as near as we can tell. Rhetoric is already coming from both sides about how they now have the “leverage” and will extract their pound of flesh when the next artificial deadline is reached. 

Same thing with the Farm Bill, thanks to a media blitz about the so called “milk cliff” and 1949 price supports for dairy, the “powers that be” decided to attach a 9 month extension (kick that can!) of the old Farm Bill to the fiscal cliff solution. In my opinion, this is actually a one year extension back to October 1, 2012 as the old bill expired on 09-30-2012 and the extension runs out 09-30-2013. The primary “powers that be” were apparently Republican Kentucky Senator Mitch McConnell and Vice President Joe Biden as they hashed out the controversial fiscal cliff deal, they also designed a Farm Bill extension that “”is what it is”…

Crop insurance is 100% safe for 2013 and hopefully for 2014 is not adversely affected. The Senate and House Ag Committee Chairs (Debbie Stabenow and Frank Lucas) are already setting the table for February and March committee activity in writing the now 2013 Farm Bill. The money available for such is likely less (or much less, not counting SNAP) than the 2012 version and the fact is that everything will be on the table – we are back to square one.

It would have been not possible to administer the proposed new Farm Bill programs such as STAX and “shallow loss program”. This blogger questions whether any of these new proposed “risk management” programs were designed for anything but to preserve the baseline budget for USDA. My opinion is that the existing and robust crop insurance program should be the foundation of risk management going forward. Any crops that are not insured need to be in the plan going forward, otherwise let’s allow the ACRE and SURE type programs to “sunset” as will direct payments. Was personally amazed that the Farm Bill extension as passed included another full round of direct payments, this could certainly lead to some future backlash as the price tag is some $5 billion. 

The crop insurance sector will be vigilant going forward as Congressional committees take up the 2013 Farm Bill. We also need to close out our 2012 losses on a timely manner and take care to provide the necessary protection on 2013 plantings. In short, we just need to keep doing our job and maintain our positive status in the mind of farm producers and lenders. “Do no harm to crop insurance” served us well in 2012, no reason not to press this forward again in 2013. 

Thanks to all our agents and employees for their tremendous work in 2012, especially those in the drought stricken area of the USA. We will do a 2012 MPCI loss status update next week as we near completion of the open claims. Wishing all good health and prosperity in 2013!

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