FARM PLAN COULD HELP FARMERS WEATHER LEAN YEARS
MONTGOMERY The Alabama Farmers Federation supports legislation recently introduced in Congress that would allow farmers to divert up to 20 percent of their net farm income for up to five years into an interest-bearing accounts, said Federation President Jerry Newby.
These accounts, called Farm and Ranch Risk Management (FARRM) accounts, would allow producers to reserve part of their income in better years, while providing a safeguard for revenue shortfalls in poorer years.
"FARRM accounts would encourage producers to save for economic downturns by deferring taxes on up to 20 percent of their net farm income," said Alabama Farmers Federation President Jerry Newby. "Withdrawals would only be taxed as income, and interest would be taxed as it is earned. Only active farmers would be allowed to participate, and the funds would only be allowed to remain in the account for up to five years."
Farm income has become increasingly volatile in the last several years due to weather, changes in the world economy and a complete restructuring of the safety net in the Farm Bill, Newby said. As a result, producers are in dire need of adequate risk management tools such as FARRM accounts to allow them to plan for these volatile price swings in commodities, he said.
Some agriculture experts predict farm income will drop 6 percent this year. Pressure in Washington, D.C. is mounting from farm groups, including the Alabama Farmers Federation, to reform crop insurance and provide farm safety nets.
The Joint Tax Committee estimates that this legislation would save farmers $500 million over five years, and $900 million over 10 years, Newby said.
This legislation supported by the Alabama Farmers Federation also has gained backing from other farm groups such as National Cattlemen's Beef Association, the National Cotton Council and the National Peanut Growers Group.
Support of the FARRM legislation is one of several measures the Alabama Farmers Federation is implementing to help restore profitability to farming, Newby said. Last month, he appointed a Crop Insurance and Risk Management Committee consisting of farmers from throughout the state. The committee met several times and submitted suggestions to Congress that would improve the current crop insurance system. The committee also suggested that farm safety nets be restored to help stabilize price fluctuations caused by weather disasters and economic instability.