New programs aim to lower financial risks for farmers

The nation's top agriculture official came to St. Paul on Thursday to launch a successor to a much-criticized financial protection program for farmers.

Agriculture Secretary Tom Vilsack said the initiative will help crop farmers better manage risk, and he called it one of the most significant reforms to U.S. farm programs in decades.

"These programs don't cover every loss and they don't cover all losses, but it does provide the safety net and the cushion to ensure that we keep people on the land and keep people in business," he said.

The new program is part of the 2014 farm bill and replaces the former direct payments program, which paid crop farmers in good years and bad.

In its place will be a system that kicks in only when market forces cause substantial drops in prices or revenue for corn, soybeans, wheat and other crops, and does not provide payments when times are good.

Vilsack said the programs are needed because farming is a risky business, and no one can accurately predict weather, world demand, foreign restrictions and other variables that affect market prices.

"What a lot of folks in this country do not fully appreciate is how much financial investment our farmers make in putting a crop in the ground," he said. "In some cases it's tens of thousands but in most cases it's hundreds of thousands of dollars that they have at risk."

Kevin Paap, president of the Minnesota Farm Bureau, said he's optimistic that the new system will be a big improvement.

"The best part about it is that we've got some time," he said. "This isn't a decision that we need to make in the next two weeks or the next month while we're busy in the field actually harvesting."

A key part of the program allows farmers to choose between two programs, agricultural risk coverage and price loss coverage, depending on which works best for their businesses. Producers have until spring of 2015 to select one of the programs, but then can't change their minds until 2018.

Vilsack unveiled the programs at a podium framed by two large tractors used on research fields at the University of Minnesota's St. Paul campus. He was accompanied by Sens. Al Franken and Amy Klobuchar, Reps. Collin Peterson and Tim Walz, Minnesota Agricultural Commissioner Dave Frederickson and several University of Minnesota administrators.

A key factor in the programs are free online tools developed by several universities to help farmers calculate the best programs to select. The programs allow growers to enter information about their operations and see projections about what each program will mean for them under possible future scenarios.

Robert Craven, University of Minnesota Extension economist, said the new programs do not replace underlying crop insurance that growers still purchase. "This is an additional safety net provided by the government to help producers in the extreme cases when prices have extreme drops," he said.

But unlike the former direct payments system, Craven said it does not pay farmers in the years when market prices for particular crops are high.

Farmers may go online or visit their local Farm Service Agency offices if they want to update their yield history and/or reallocate base acres, officials said, the first step before choosing which new program best serves their risk management needs.

University of Minnesota Extension has also planned half a dozen joint meetings with the Farm Service Agency in the next several weeks to explain the new system to bankers, crop insurance agents and farm managers, and expects to convene about 60 local information meetings with farmers around the state beginning in late November or early December after harvest.

Tom Meersman • 612-673-7388