Boehner Offers Farm Subsidy Reform Amendment to Save Taxpayers $3 Billion

WASHINGTON, D.C. – Congressman John Boehner (R-West Chester) today introduced an amendment to the 2007 Farm Bill to save taxpayers $3 billion by fixing a loophole in current disaster relief law that some producers have been able to exploit to obtain large government subsidies.

Because of the loophole, Boehner noted, some producers have been able to take advantage of low crop prices early in the harvest to obtain large government subsidies while retaining the ability to sell their crops later at much higher prices – “gaming the system” to obtain farm subsidies at the expense of both taxpayers and farmers who are truly in need of assistance.

“No one should be able to exploit natural disasters to get subsidies from the federal government. Turning our back on this problem cheats both taxpayers and farmers who are truly in need of emergency aid,” Boehner said.

The amendment would replace the current daily posted county price (PCP) with a monthly PCP for each crop. PCPs are used to establish loan repayment rates, which determine loan deficiency payments and marketing loan gains under marketing assistance loan programs. Boehner’s amendment would eliminate the excessive cost of loan deficiency payments (LDPs) and marketing loan gains. If a similar provision had been in effect for the 2005 crop year, government outlays would have been nearly $3 billion lower.

“The issues in the Farm Bill are not abstract issues for my constituents,” Boehner said. “My amendment aims to fix a problem that has not been addressed in the bill we’re currently considering. If we are going to continue Loan Deficiency Payments, we need to address the situation that allows farmers to lock in an LDP when prices are low and then sell their crop when prices are high. LDPs are a valuable for farmers and to preserve them, we need to fix this problem.”

Agriculture Secretary Mike Johanns included this provision in his Farm Bill recommendations. The problems with calculating LDPs based on the daily posted county price were highlighted in the days after Hurricane Katrina. The storm halted grain transport on the Mississippi River for several days, causing a short-term decline in market prices, which then triggered a large volume of LDP requests at a high LDP rate that did not reflect the longer-term or underlying market conditions. The farmers who locked in these artificially low LDPs were simply using the program to increase the payments that they received from the government.

“If we allow the marketing loan program and LDPs to continue to be used in this manner we will undermine their integrity by allowing them to game a pricing system that reacts to daily to natural disasters,” Boehner said. “Supporting a good farm policy is important but exploiting catastrophic natural disasters cannot stand. We need to make this change if we are going to preserve LDPs and the integrity of our farm policy.”