The Farm Bill that was passed recently was the result of three and a half years of arguing about what would be in it.
The safety net for in the bill relies heavily on insurance to reduce the risk incurred by agricultural producers. John Malazzo farms in the Brazos river bottom in Burleson County.
“The safety net part of this is the most important in my opinion, because again we can rock along at normal yields and normal prices for a while, but you know eventually that there’s going to be one of the years where you would consider it to be devastating.”
Malazzo says that aside from pests and diseases there are two other major risk factors.
“The weather is unforgiving but we’re also price takers. We don’t set our own price. We take what the market gives us, so we really have no control, even if we were to raise a good crop, we still have to take what the buyers will pay us. If the market is below our production costs, it’s going to be hard to continue.”
Buying price insurance gives a farmer a chance to survive low market prices, and a constant supply of food and fiber is essential to low prices for consumers.
“The heavy swings that we see that are weather related and market related are those that, that’s what can create the short falls and the low supply of certain products that we grow. If we can maintain an average balance of supply, then I think the whole country benefits from that.”
The existence of a safety net also allows bankers to have more confidence when they’re loaning money to finance a crop.