Zulauf says it is possible to include both of those issues in an insurance program. One element would cover farm financial losses for a wide area risk, such as a drought. Another element would cover farm financial losses for multiple years of a risk, such as a multiple year drought. And Zulauf says the cost of the program would be the more costly of those two elements. For a farm to receive an indemnity payment, Zulauf says the farm has to be in the area of a loss and also suffer a financial loss. He suggests that benchmark revenues for indemnifying losses are not fixed, but change with market conditions. For example, fixed rate support provides no real support such as counter-cyclical programs or the fixed rate marketing loan, says Zulauf.
What policy makers will have to determine, according to Zulauf, are the geographic area for the risk; the unit of coverage for farmers whether that is a county, crop, or field; and the level of coverage. The policy specialist says private firms should assume some of the risk, since farmers are also assuming risk. If the systemic loss program becomes the farm safety net, it would replace direct payments, marketing loans, and the SURE program. ACRE would not be needed since it would be covered by the systemic risk program. The systemic risk program would also eliminate subsidies for crop insurance premiums. Zulauf says farmers gain a program that can protect them from the risk that can cause widespread bankruptcies through no fault of their own, and the public gains a more streamlined program that is less expensive to taxpayers.
Financial pressures and the stigma surrounding direct payments may force a change in the next Farm Bill to a different safety net that is focused on a streamlined version of a revenue-based crop insurance program. Premiums may not be subsidized by the USDA, but companies would pick up some of the risk. Farmers may be indemnified for losses, but could not profit from the program. Such a program would cover the risks that sometimes cause bankruptcies through no fault of farm operators, and would be less expensive to the taxpayer.