AFBF proposes ‘systemic risk reduction’ farm program

AFBF proposes ‘systemic risk reduction’ farm program


WASHINGTON, D.C., October 21, 2011 -- Stating that government agricultural support programs traditionally were intended to provide a safety-net to help farmers deal with “large systemic risk issues” rather than “smaller fluctuations in income” that can result from “average weather and market events,” the American Farm Bureau Federation today sent a farm program proposal to Congress that is an alternative to earlier shallow-loss proposals.

A proposal to establish a “systemic risk reduction program” was approved today by the AFBF Board of Directors as an alternative to “shallow loss” proposals that would provide government support after a region, or in some cases an individual farmer, faced some initial loss as little as 5 to 10 percent of expected revenue. But shallow-loss programs were structured to support “only a relatively small portion of a producer’s potential loss, should a major problem occur,” according to AFBF President Bob Stallman.

“Our systemic risk reduction program would help protect America’s farmers from catastrophic type losses that truly would endanger the economic viability and the core of their farms,” Stallman said. “The business of farming has always been risky and it always will be, but we firmly believe that farmers possess the business skills and have tools at their disposal to manage the shallow ups and downs associated with typical weather and market events. That is especially true as our nation wrestles with deficit and debt issues. Helping protect farmers from large systemic type losses, however, is entirely a different situation that warrants government support and is in the best interest of our nation.\

“While this systemic risk reduction program is similar to the current ACRE approach, it does represent a radical shift in the structure of government support. This approach to the safety net concept is to provide farmers with more down-side protection and allow them to deal with the upside end of the risk profile on their own.”

AFBF’s systemic risk reduction program would provide farmers “area-based coverage” that would be similar, but not identical to core-type policies offered today, but at a minimal charge to the farmer. County level yield data would be used for the area trigger, but where data is limited, a crop reporting district or other geographical region would be used.

One of the major differences between current core-type policies and the systemic risk reduction program is the price used to determine trigger levels would be based on a three-year average, or a five-year Olympic average, depending on budget considerations.

Proposed systemic risk reduction program coverage levels would likely be in the 70-80 percent range, with the exact level of coverage determined by budgetary guidelines. Additional details regarding the proposed program were sent to members of Congress today and are included in a document posted at: http://bit.ly/pGXGZT.