But America’s farmers are not just creating wealth here at home, they are buttressing the whole world — a fact that is not lost on the Chinese government.

Clayton Yeutter, former Secretary of Agriculture, touched on the reality of the situation in a recent interview with Green State TV.

“I can remember when I first came to Washington in 1970… We thought we had a huge success story when we reached $10 billion in agricultural exports. This year, it will be $137 billion.”

Additionally, he said, while other parts of American commerce may be struggling, agriculture had a trade surplus of $45 billion in 2011—and $20 billion of that will be exported to China.

It’s no secret to the Chinese just how much they depend on our food supply—with only about nine percent arable land, agriculture has always proved challenging to them. So, last month, they announced plans to boost agricultural innovation in an attempt to increase food output and keep up with demand—on their own.

These plans include increasing funding for subsidies for a growing agricultural technology sector and focusing on stabilizing grain production, as well as bio-technology, seed production and effective use of farmland.

The Chinese said the government should also play a leading role in investment for agricultural science and ensure that the investment will create and significantly grow the sector compared to the amount invested.

The goal is to improve production of China’s 800 major grain-producing counties and support the building of production bases for vegetables, cotton, edible oil crops, and sugar.

Banks have also been encouraged to increase lending to the rural regions with help from the government, so that farmers with small operations might have an opportunity to grow.

So why this sudden focus on agricultural production?

“The central government estimates that China’s national grain consumption will reach 572.5 million tonnes by 2020,” Reuters reported. That’s up from 500 million in 2000—and it’s projected to hit 640 million by 2030. Not to mention the expected tripling of corn purchases this year alone.

And, although China is largely self sufficient in wheat production, that’s not the case with soybeans and corn. In fact, not too long ago China imposed a ban on foreign grain imports but was forced to lift it when domestic production couldn’t keep up with the booming demand.

Fortunately for China and all nations, U.S. farmers have been making these investments for years — posting yearly productivity gains — and making their expertise and technology and their bounty available for the world. They truly are the thin green line standing between a secure food supply and global uncertainty.

Try to imagine what modern China, or for that matter the world would be like if not for the blessing of U.S. farmers.

Crop insurance has been widely hailed by producers, lenders, and lawmakers as the most important risk management tool available to farmers and ranchers today.  Without it, producers who borrow more money each year than most people will borrow in a lifetime would have to do so without insurance on their crops and, in turn, could very well be denied credit.

Under a system created by Congress to minimize taxpayer risk exposure and enhance delivery efficiency, producers purchase insurance policies that are tailored for their specific operation to help cover at least a portion of their weather and market risks.

Private companies make these policies widely available; more than 12,000 private insurance agents sell and service the policies; and when disaster strikes, private companies speed private insurance money to growers within 30 days.

Now, NASCOE wants to hand over much of the job back to the government, which was fired from the job of insurance delivery in the ‘80s after failed performance and cost overruns.

Naturally, farm and government leaders quickly quashed NASCOE’s idea.

Speaking to crop insurance leaders during an annual conference in Scottsdale, AZ, Senator Pat Roberts, the top Republican on the Senate Agriculture Committee called the idea “loony” and said it was “dead on arrival.” Sen. Roberts wasn’t alone in his criticism.

Jerry Hagstrom reported in The Hagstrom Report from Scottsdale that Bill Murphy, the USDA official who oversees the crop insurance system, saw many good reasons to continue private-sector crop insurance delivery.

“The Farm Service Agency does a great job, but crop insurance is a unique tool,” Administrator Murphy said.  “It is a financial tool. There is a good reason [crop insurance] agents are required to be licensed in every state.”

Meanwhile, American Farm Bureau Federation policy expert Mary Kay Thatcher told Hagstrom that crop insurance was too vital to make changes to the delivery mechanism.  “It is complex, and the agents have been at it for years,” she said. “That is where it ought to stay.”

Shawn Holladay, a cotton producer from Lamesa, Texas, representing the National Cotton Council; Blake Gerard, a rice producer from Cape Girardeau, Missouri, representing the USA Rice Federation; and Anthony Bush, a corn producer from Mt. Gilead, Ohio, representing the National Corn Growers Association, all stated during the annual meeting that their organizations would oppose this proposed government take-over of crop insurance.

Mark Lange, president and CEO of the National Cotton Council, also spoke out against the idea.

“I think it’s clear that the delivery of insurance or revenue programs from government has a very chilling effect for agricultural producers,” Lange said during a radio interview from the crop insurance conference.

He said growers wouldn’t be interested in government crop insurance delivery and pointed to recent delays under SURE as proof. “It’s just now providing benefits to growers on losses the incurred in 2009,” he said of SURE.  “That’s just too long.”

Lange said cotton growers in West Texas, facing conditions worse than the infamous Dust Bowl, weathered the storm and planted a 2012 crop because of insurance and speedy private-sector indemnity payments.  All told, payments from private crop insurers to farmers across the country have totaled nearly $10 billion—a new record—on the 2011 crop.

No wonder crop insurance is so popular and NASCOE is getting such a chilly reception.

As the managing editor of a major agricultural publication, DTN, summarized: “In the light of the country’s current abhorrence of big government, and the pressure on the administration to create private jobs vs. expanding the government payroll, it is harder to believe that this plan that would decimate some private businesses while possibly enlarging Big Brother will fly.”

But the economist in me wanted to dig into the data to better understand the damages reflected by the overall numbers. And there were a number of surprises. Most people might expect that, given the severity of the drought in the southern plains, farms with the greatest damages per dollar of premium for insurance would be there. But while farmers in those states did suffer greatly, it was actually the farmers in Vermont who saw the highest loss ratio last year.

Remember when Hurricane Irene slammed into New England? The farmers up there won’t soon forget it.

That finding underscores just how vulnerable farmers are, and how the federal government needs to have a hand in production agriculture. Farmers in 2011 were fortunate that crop insurance was available for more than 125 different crops and was purchased for 80 percent of eligible acreage.

But despite the success of the crop insurance program, many in Congress will be seeking even deeper cuts to this primary risk-management tool, even though program funding has already been reduced by $12 billion since 2008. Congress and the Obama administration need to remember that farm income stabilization through risk management programs like crop insurance is critical for ensuring continuous and stable growth in overall supplies of food, feed and, increasingly, fuel.

In the not too distant past, when Mother Nature struck America’s agriculture sector, it often resulted in ad hoc disaster packages from Congress to address the damage and help the farming sector recover. While those packages were greatly appreciated by farmers, Congress decided to push to make crop insurance more universally available and affordable, giving farmers the tools they need to manage their own risks while taking some of the burden of disaster assistance off the back of the public and putting it onto the lap of the private sector.

Today’s crop insurance policy makes more sense and works better because it puts the onus of managing risk on producers and farmers, not the government. The private sector crop insurance agent works directly with the producer to help put together an insurance plan that best meets their specific needs and is tailored to their comfort with risk. The outcome is a plan that protects physical and financial assets in the face of natural hazards and market risks.

Farmers and insurance agents alike recognize the wisdom in making farmers bear some of the risk and costs of the program. In order for a risk-management program to work efficiently, it cannot completely remove risk from the equation – risk-bearing ensures program accountability and discipline.

There are other surprises in the 2011 claims data. Wouldn’t you expect that the ongoing drought in the southern plains would have meant that cotton and wheat were the most heavily damaged crops last year? But the hurricane that drowned out New England first passed over the Carolinas and severely damaged the flue-cured tobacco crop, which, combined with several other weather issues, resulted in the flue-cured tobacco crop having the highest loss ratio last year of any crop.

Of course, drought did heavily damage much of America’s cotton and wheat, as $3.7 billion in indemnities have been paid for those crops so far, but with crop insurance in place, farmers are able to bounce back. Wheat growers in Kansas, Oklahoma and Texas sowed 1.7 million more acres this fall than they did last year.

Hopefully, the rains will come and we will all see a bounty. But if they don’t, the farmers have something in place to keep the bottom from falling out.

About the author: Keith Collins is retired from USDA and now works part time as a consultant for the National Crop Insurance Services in Overland Park, Kan. He holds a Ph.D. in economics and statistics from N.C. State University.

Editor’s note: This article first appeared in the Feb. 8 edition of the Raleigh News & Observer.

Agriculture—and by extension, America’s food and fiber supply—isn’t worth much government investment, Bloomberg’s editors surmised in a January 30 opinion piece.

Try telling that to the 21 million Americans employed in some stage of agriculture, or to the scores of businesses—ranging from publicly traded equipment manufacturers to Main Street retailers—that benefited from the more than $300 billion farmers spent in 2011 and the $400 billion worth of goods they produced.

Never mind the fact that every government since the beginning of time has made agriculture a priority since people cannot survive without food or clothes.

And never mind the fact that our current investment in agriculture represents less than one percent of the federal budget; or that agriculture has stood alone in shouldering $15 billion in funding cuts in recent years to help America tame its deficit.

What is truly appalling is that Bloomberg’s suggestion—halting spending for the infrastructure in place to help growers manage weather risk and markets crawling with speculators—is that it would derail an industry that boasts America’s lone trade surplus and has been hailed by the Federal Reserve for leading our economic recovery.

Of particular surprise was Bloomberg’s laser-like focus on crop insurance—a system that was specifically designed by Congress to limit taxpayer exposure to agriculture risk while speeding relief to farmers when they need it most.  This policy, which makes valuable private crop insurance policies more affordable and widely available to the masses, worked to near perfection in 2011.

By offsetting a portion of their premiums, Uncle Sam helped farmers and ranchers in every state secure a total of $113 billion in liability coverage.  And when record freezes, floods, droughts, and hurricanes slammed crops throughout the year, taxpayers were not asked to pay for damages.

Private insurers have already sent out a record $9 billion in claims checks—far more than the government invested in farmer premiums—and that figure is expected to climb.

Without this public-private partnership, there is no doubt that Congress would be debating a messy ad hoc disaster bill for farmers today to keep America’s food supply secure.

Instead, lawmakers can spend their time fixing the parts of our economy that aren’t working, while farmers prepare their fields for what they hope will be a bumper 2012 crop.

Bloomberg needs to keep this “big idea” where it belongs: at the bottom of the heap, before they send rural economies spiraling and do more harm to us all.

From the meeting, there was a consensus that the agricultural community needs to closely work together to find common ground as the process unfolds.

The group released the following statement at the meeting’s conclusion:

Over the past two days, producer leaders have met to discuss policy priorities, to hear the perspectives of key policymakers, and to work toward consensus on the future of U.S. farm policy. What was confirmed in our meeting is that we are committed to work together to come up with a viable farm policy.

Also confirmed is our common belief that Congress should pass and the President should sign a strong new Farm Bill into law this year. The law expires at the end of this year and producers – like all job creators – need certainty from Washington.

American agriculture has a solid record that we are proud of.

The people we represent ensure that American consumers spend less of their paycheck at the grocery than anyone else in the world.

American agriculture stands out as one of the few sectors of the economy that has, throughout the economic downturn, still contributed positively to our nation’s balance of trade while helping to create jobs and put this country back on its economic feet.

And we have accomplished these things with a farm policy that also stands out as consistently under budget over the past 10 years and for leading the way on deficit reduction, contributing disproportionately and in some cases even alone in the effort to get our nation’s fiscal house in order.

The economy is fragile, unemployment is high, and Americans are worried. Given the need for economic growth and deficit reduction, for our part we have offered to do more with less. If Washington provides America’s farmers and ranchers with some certainty, we can continue to help lead our nation’s economic recovery.

American Farm Bureau Federation
American Soybean Association
National Association of Wheat Growers
National Barley Growers Association
National Corn Growers Association
National Cotton Council
National Farmers Union
National Sorghum Producers
National Sunflower Association
Southern Peanut Farmers Federation
US Canola Association
USA Dry Pea & Lentil Council
USA Rice Federation

Funding for farm policy over the last five years (’07-’11) averaged $12.9 billion per year. This is a 28% reduction from the ’02-’06 average of $17.9 billion and a 31% reduction from the $18.8 billion average from ’97-’01.

After cuts and other recent savings, the budget for next five years (’12-’16) is expected to remain in this low range.

Agriculture also gets a unique amount of attention from its critics and from budget hawks, despite its being so fundamentally important, and despite its being such a small portion of the overall budget.

At $12.9 billion out of $3.8 trillion in annual federal spending, securing our nation’s food supply accounts for a tiny fraction of the budget.  Even eliminating the agriculture budget totally, it would take more than 130 years to cancel the $1.6 trillion deficit accrued in 2011 alone.

And given agriculture policy provides a foundation for a sector of the economy that produces more than $300 billion of new crops and new wealth each year, common sense ought to counsel against reckless cuts.

Finally, if past is prologue, agriculture will be uniquely singled out for new cuts in this year’s budget process while other areas of spending that would actually matter in terms of balancing our budget are left untouched.

Former Chairman of the House Agriculture Committee, Larry Combest, offers some advice on this annual ritual, offering perspective in terms of sharing the workload.  Agriculture will do its fair share but it can’t get us to a balanced budget alone.

Listen to what Chairman Combest had to say on the subject in this National Association of Farm Broadcasting piece.

Balance the Budget on Farmers’ Backs?

To see what a joke that is, convert $1 trillion into 1,000 miles and imagine taking the following road trips.

National Debt:
Key West, Florida to Anchorage, Alaska;
then back to Key West and back to Anchorage again
15,288 miles
Drive time, 11 days, 21 hours

Annual U.S. Budget:
Key West, Florida to Delta, British Columbia
3,613 miles
Drive time, 2 days, 11 hours

Annual Deficit:
Key West, Florida to Eddyville, Kentucky
1,174 miles
Drive time, 20 hours

Farm Spending:
Key West, Florida to Saddlebunch Keys, Florida
13.1 miles
Drive time, 19 minutes

“Working as designed since 2008, more than $27 billion in private-backed crop insurance payouts over the past four years have helped farmers pick up the pieces after natural disasters or market drops,” said Keith Collins, former USDA Chief Economist. “Without crop insurance in place, those billions in damages would have fallen onto the laps of lenders, input suppliers, marketers, land owners and farm families, just as the economy was spiraling downward and unemployment was soaring,” he said.

Collins noted that despite the fact that the two largest indemnity payments in the history of crop insurance have taken place in the last four years, Congress has reduced the federal investment in the crop insurance by more than $12 billion during the same time frame. “We’re doing more with fewer resources while our exposure continues to rise as crop values stand at historically high levels,” Collins said.

Collins pointed out that while these cuts have been taking place, many farmers are planting corner to corner, hoping to meet the needs of growing domestic and world demand for food, feed and fuel, which has caused a continued spike in commodity prices and land values. Increased planting will likely yield an increased demand for crop insurance.

“Crop insurance has never been more important, and today it is leaner and more efficient than ever,” he said. “But any erosion to the crop insurance infrastructure in the next Farm Bill could be a big problem for producers and the industry, especially with crop prices – hence the value of the insured product – remaining elevated and creating a high exposure to risk,” he added.

Dee Vaughan, a farmer who raises corn, cotton, sorghum, soybeans, and wheat in the Texas Panhandle, underscored the importance of crop insurance to farmers in Texas in a September 11, 2011 op-ed in the Lubbock Avalanche and argued that further cuts to crop insurance could hamper the ability of the policy to carry farmers through another large disaster. “While it’s important for agriculture to shoulder its fair part of the pain, we need to recognize that it’s not only in the farmer’s best interest, but in the best interest of consumers and the nation as a whole that farm policies remain adequately funded, and viable,” he said.

And crop insurance is a public-private partnership that serves as the bedrock to the modern-day farm policy, according to Vaughan. Texas farmers, like Vaughan, were fortunate this system was in place in 2011. USDA data reveal that more than one out of every four dollars of those payments went to farmers and ranchers in Texas, who have received $2.4 billion in indemnities to date. For every dollar Texas farmers paid into crop insurance for their 2011 crops, approximately $2.23 was paid out.

The next hardest hit state was North Dakota, with $1.5 billion in damages. The other states to fill out the top five were Kansas, South Dakota and Minnesota. Together, these five states account for 63 percent of the damages paid nationally.

Just three of the more than 128 crops covered by crop insurance in 2011 accounted for 70 percent of the indemnities paid so far: Corn, cotton and wheat. Soybeans and grain sorghum fill out the top damaged crops, with the top five accounting for roughly 86 percent of total damages paid.

But because of these payments, farmers are hard at work again in 2012. Informa, a company widely-known for crop forecasting, projects a dramatic increase by nearly two million acres to the nation’s 2012 corn crop, from 92.3 million acres planted in 2011 to 94 million acres in 2012.

And if past statistics hold true, at least 80 percent of eligible acres will be protected by private-company backed crop insurance policies, shielding production agriculture and food consumers from extreme risks when Mother Nature strikes again.

The Kansans who lost their jobs weren’t alone. From 1985 to 2008 low sugar prices remained stagnant as costs continued their upward march, 53 sugar-producing facilities across the country closed their doors, and more than 100,000 sugar related jobs were lost.

But things are turning around in Kansas and elsewhere, and sugar again seems to be at the center of it all.

Despite the recent economic meltdown, the candy-making business is booming. Since the housing bubble popped in 2008, the U.S. Census Bureau notes that production of confections in America have remarkably climbed 2.5 percent.

Big candy makers earned the description of being “recession proof” among Wall Street traders and have posted record profits and a rosy sales outlook. Just a few months ago, the confectioners even cashed in on one of the most profitable holidays ever, selling $2.3 billion in Halloween candy.

All this added business has lead to U.S. expansion and job growth as well, and Kansas is poised to be a big beneficiary. Mars, Inc. just broke ground on a new 350,000-square-foot factory in Topeka, which the company says will add at least 200 local jobs.

This story is playing out in other parts of the country, too. Spangler Candy, which makes Dum Dum suckers, is expanding its Ohio operations and adding 20 to 30 jobs to keep pace with growing demand. BestSweet just announced a $6.4 million expansion that should generate 37 extra jobs in North Carolina. And other stories of new candy jobs are sprouting up from California to New York.

As for sugar producers, two decades of bad news appears to have subsided, which is more good news for the 18 states where sugar is still made.

Sugar prices have rebounded to enable companies to pay off debt and make infrastructure investments for the future. Best of all, the plant closure problem has reversed itself.

So, with so many positive developments for sugar producers and sugar users since 2008, why are sugar farmers and candy companies bickering on Capitol Hill right now?

Because Congress passed a sugar policy in 2008 that confectioners–despite their undisputed economic success–aren’t happy with.

Back in 2008, sugar farmers rejected confectioners’ pleas to accept $1.3 billion a year in government subsidy checks–a controversial policy that would have theoretically sent sugar prices downward to help candy makers boost profits while using taxpayer dollars to insulate farmers from the wild market ride.

Sugar growers instead backed Congress’ plan to preserve a policy that operates at no cost to taxpayers but may keep the prices candy companies pay a little higher by avoiding market oversupplies.

Congress’ plan clearly prevailed, and by the looks of the fiscal health of candy producers and the recent recovery by sugar growers, it’s a good thing for the economy that it did.

With the 2012 farm bill on the horizon, confectioners are again clamoring for extreme change in hopes of further boosting their bottom lines. And again, sugar growers and taxpayers would wind up on the losing end. Not to mention, Kansans. If more Midwest sugar factories go under, who will provide the commodity needed to keep Topeka’s new plant humming?

It’s not often Congress comes up with a no-cost policy that works. Lawmakers struck gold in 2008, and now is not the time to upend this no-cost success story.

About the author: Alan Welp is a sugarbeet farmer from Wray, Colo. and is a member of Western Sugar Cooperative.

Editor’s note: This article first appeared in the Jan. 16 edition of the High Plains Journal.

And just when we didn’t think it could get more absurd than the off-the-wall argument that American corn farmers are to blame for environmental atrocities in Brazil, the debate took a strange turn last week.

In a January 5 article for Daily Finance, an online publication owned by AOL, an expert who writes for the website blamed ethanol producers for causing obesity.

Yes, you read that right.  Even though people don’t eat ethanol, it is now being scapegoated for the country’s rapidly expanding body mass index—never mind the fact that Americans eat too much and exercise too little.

This departure from reality was too much for Hector, Minnesota corn farmer Steve Kramer to handle.

Below is an online comment he posted to the piece, which we thought was worth recognizing:

The article written by Bruce Watson (“How the (Finally Ended) Corn Ethanol Subsidy Made Us Fatter”) is ridiculous.

The upshot of Watson’s argument is that a policy (tax credit) that moves a commodity (corn) into non-food use (ethanol) and increases the price of corn product still dedicated to food use (HFCS) made Americans fatter.

I am not an economist but if I remember what I learned in economics, this logic makes at least one thing thicker than American waistlines:  Bruce Watson.

Well said, Steve.  And to think, Daily Finance positions itself as a place to get advice on how to invest your hard-earned money.  No thanks; I’ll trust my 401(k) to someone who doesn’t eat so much ethanol.

And one of the biggest offenders is also one of the biggest agricultural superpowers and biggest critics of U.S. farm policy: Brazil.

“Overall government support for Brazilian agriculture has mushroomed over the past decade,” the report noted.  “The government has raised support prices for a range of commodities and increased funding for other programs as well.”

Among the most egregious examples included in the detailed eight-page country profile:

• $64 billion in subsidized or mandated agricultural credits for the 2010/11 crop—this was up from $7.5 billion 10 years earlier.

• Legislation under consideration to provide $14 billion in direct farm subsidies and the rescheduling of $50 billion in farm debt.

• A complex web of support programs that guarantee minimum commodity prices—in 2010, these programs resulted in a $785 million benefit for wheat producers, $1.1 billion for corn growers, $908 million for rice farmers, and $276 million for cotton producers.

Amazingly, DTB’s commodity-specific support program calculations don’t even include the impact of massive credit subsidies provided, or the fact that $43 billion of these credits are estimated to be in arrears.

Notwithstanding this, the subsidies generated by these support programs exceed the allowable amount, or cap, to which Brazil committed in the World Trade Organization (WTO).

Just on the basis of these programs alone, Brazil appears to be in violation of its Aggregate Measure of Support (AMS) cap by more than $2 billion.

The United States and European Union, by comparison, are well under their respective AMS caps.

DTB isn’t alone in their criticism of Brazil, which ironically has led the charge against U.S. and European farm policies at the same time it has been rapidly expanding its own subsidization.

Texas Tech University recently updated its popular handbook of foreign farm subsidies.

In addition to describing numerous foreign commodity subsidies, Texas Tech also noted Brazilian ethanol supports underpinning the world’s biggest ethanol producer and exporter.

Those programs include usage of mandates, preferential tax treatment, storage credits, and import restrictions.

A search of the he Texas Tech handbook—which has a searchable database by country and commodity—also turned up that Brazil maintains a 75-cent support price for cotton.  This is ironic given they brought an action against the U.S. in the WTO courts for a 52-cent marketing loan.

Despite the emergence of studies like those done by DTB Associates and Texas Tech, Brazil’s subsidization spike has gone largely ignored.

“[B]ecause the run-up in subsidies is a recent development, and because countries have not reported new programs to the WTO or have failed in their notifications to calculate properly the level of support, the changes have attracted little attention,” DTB Associates concluded in its report.

“We believe that when trade officials examine the developments, they will discover clear violations of WTO commitments.”

Here’s hoping Congress takes notice of high foreign subsidies, too, as it shapes America’s farm policy future.

A unilateral disarmament of U.S. policy—which already ranks among the lowest in the world in terms of the support it provides to producers—at a time when competitors are ramping up subsidization would endanger one of the U.S. economy’s only economic bright spots.