April 21, 2010 / 10:43 PM / 7 years ago

US farm supports may need change -key lawmaker

* Revenue protection is an option

* ACRE has elements "we need to look at"--Peterson

* Four field hearings through May 4, more possible

By Charles Abbott

WASHINGTON, April 21 (Reuters) - U.S. farm groups and lawmakers must consider whether fundamental change is needed in farm subsidies that date from the Depression, said the head of the House Agriculture Committee on Wednesday after the opening work on the new farm bill, due in two years.

Chairman Collin Peterson told reporters the Average Crop Revenue Election, an option created in 2008, has "elements we need to look at for the future." ACRE is the first program to shield farmer revenue from poor yields as well as low prices.

Price support payments now are triggered by low prices. Critics say they provide little support when growers lose a crop to bad weather.

There also are complaints that support rates are too low, compared to rising production costs.

"I think it will be very difficult to pass a status-quo farm bill in 2012," said Peterson, a Minnesota Democrat. "I think it's inadequate."

For one thing, he said, there will not be enough money to increase crop subsidy rates as high as some backers want.

The committee has scheduled four field hearings through May 4, with more possible. "I'm trying to get people to look ahead here," said Peterson.

Besides mentioning ACRE as a possible model, Peterson said attention also was being given to a "whole-farm revenue" concept. It could allow more cropping flexibility than ACRE, which is tied to growing a specific crop. In the long run, he said, the United States could move to an insurance-like support system.

As part of farm bill work, Peterson said he has compiled data on support given to major crops through subsidies and crop insurance. On average, subsidies equal 5.8 percent of the value of those crops, he said, but the value of federal supports varies widely by crop.

Peterson has asked farm groups to consider if a better system can be arranged than the hybrid now in use. Three types of support are available to grain, cotton and soybean growers -- a guaranteed annual payment based on past production, a "loan deficiency" payment made when prices are below a minimum set by law, and counter-cyclical payments made when returns from sales and subsidies are below a target set by law.

By comparison, ACRE has a higher price guarantee. Farmers get a payment when when revenue from a crop falls at the state level and on their farms. ACRE went into operation last year, attracting 13 percent of eligible land. Participation is highest among corn, wheat and soybean growers. Traditional supports are more valuable to rice and cotton growers.

In discussing potential paths for farm policy, Peterson mentioned revenue-protection programs, which might be combined with disaster funds or crop insurance coverage, or a crafting of farm supports so benefits go to producers rather than landowners.

Price supports, estimated for $2.3 billion this year, and crop insurance are regarded as a benefit to producers while direct payments, worth $5 billion this year, are easily captured by landowners.

Nearly $12 billion is forecast in cash payments to farmers this fiscal year, the bulk of it in crop subsidy and land stewardship programs. (Reporting by Charles Abbott; Editing by David Gregorio)

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