Senator Dick Durbin's Revenue Protection Program Secured For Farmers In Senate Passed Farm Bill

December 14, 2007 -- [Washington, DC] – Today, the U.S. Senate passed a revenue protection program introduced by Senator Dick Durbin (D-IL) as part of the 2007 Farm Bill. Durbin's provision, called Average Crop Revenue (ACR), will provide farmers with a safety net by replacing current price-support programs with a comprehensive revenue protection program.

“We want farmers protected during years when yields are low. While the final version of this crop revenue program isn't as comprehensive as we wanted, it will improve the safety net program and provide producers with a real choice," said Durbin.

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Durbin's provision will provide farmers with a state-based revenue-counter-cyclical program to protect against losses in both yield and price. In lieu of direct payments, farmers opting into the program will be provided with a fixed payment of $15 per acre. Under the optional ACR proposal approved today, the federal government will provide a payment when a participating farmer’s actual revenue falls below 90 percent of the forecasted revenue for a specific crop.

As originally written, the program would have been integrated with farmers' crop insurance policies to reduce duplicative payments and provide producers with relief on the cost of crop insurance. However, during Senate Agriculture Committee action, an amendment was accepted that weakened Durbin's original language by stripping out a section that allowed farmers to reduce their crop insurance premiums.

The benefits of this program are:

* Better protection for farmers by protecting revenue rather than merely price as the current system does. Revenue protection fixes many of the holes in the existing safety net. Currently, farmers fail to receive assistance even though they face real losses in revenue when prices are high but yields are low. By protecting farmers’ yields, this program also reduces the need for ad hoc disaster assistance.

* Less production distortions by using a revenue target that adjusts with the market rather than politically set target prices and loan rates. Current programs discourage farmers to plant for market demand. This revenue protection program reduces the incentive to overproduce on marginal land and helps reduce production distortions.

* Equitable treatment across crops resulting in planting decisions being made based on market signals not the government program. All commodities are given equal protection based on market risk rather than federally set targets.

* Savings to taxpayers because of the efficiencies created by the program.

The Senate passed Farm Bill also includes reauthorization for the US Commodity Futures Trading Commission, CFTC. The CFTC reauthorization will provide more legal certainty to options exchanges, will enhance competition in options trading, and will reduce the systemic risks in the markets for futures and over-the-counter derivatives. Senator Durbin urged the Senate to reauthorize the CFTC through 2013 (rather than the proposed 2011 end date) in order to provide two additional years of legal certainty to the options industry, so that the exchanges in Chicago and nationwide can expand and innovate with less fear of a contradictory change in the near term in the legal climate for futures trading.

Source: Senator Dick Durbin