2011 Indemnity Payments Eclipse $9 billion, Set New Record


FOR IMMEDIATE RELEASE
January 24, 2012

(Overland Park, Kansas, January 24, 2012) For the first time in history, indemnity payments surpassed the $9 billion mark, National Crop Insurance Services (NCIS) said today, noting that payments made to farmers for damages to the 2011 crop would continue to climb.

From historic droughts in the Plains to flooding along the Mississippi River and deep freezes in the South, growers faced unparalleled challenges in 2011 and crop insurance reached record amounts. The record of $9.1 billion could surpass $10 billion as the remaining claims are settled, NCIS noted. The previous record of $8.67 billion was set in 2008.

“Thanks to the foresight of Congress, crop insurance has been in place to weather enormous natural disasters and help ensure that farmers survive to plant yet another year,” said Tom Zacharias, president of NCIS. “Those billions in damages would have landed on the plates of input suppliers, lenders, marketers and farm families if crop insurance wasn’t in place,” he said.

Since 2008, more than $27 billion private sector dollars from crop insurance companies have gone back into the hands of farmers across the country for policies they purchased. Zacharias noted that during that same period, crop insurance has shouldered more than $12 billion in cuts in Federal investment even while exposure to risk has continued to rise.

“Two out of the last four years have seen the largest indemnity payments in history, all while the crop insurance industry was asked to do more with less,” said Zacharias.“The industry has become leaner and more efficient as it continues to serve the risk management needs of U.S. farmers,” he said.

“Faced with decreasing federal funding, record payouts and high crop values, it is imperative that Congress not weaken the crop insurance infrastructure further as it writes the 2012 Farm Bill,” he added.

###

NCIS serves as the crop insurance industry’s primary trade association and represents every company that participates in the Federal crop insurance program. While the group does not lobby for its members, NCIS serves as a liaison between the industry and the USDA, and provides timely information about crop insurance to the general public.

Convo 9

The speed of delivery of crop insurance — because it’s administered by private-sector companies — makes it a different kind of animal. In fact, if a natural disaster strikes and I’m covered by a crop insurance policy, typically the payment comes to me in one or two weeks, not in one or two years. Because of that speed of delivery, I can quickly recover from the loss and replant the field, garnering myself some needed income for the year and putting some food on the tables for consumers.

Convo 9

The speed of delivery of crop insurance — because it’s administered by private-sector companies — makes it a different kind of animal. In fact, if a natural disaster strikes and I’m covered by a crop insurance policy, typically the payment comes to me in one or two weeks, not in one or two years. Because of that speed of delivery, I can quickly recover from the loss and replant the field, garnering myself some needed income for the year and putting some food on the tables for consumers.

$7.1 B and Counting: Indemnities Soar In 2011

Crop insurance companies have paid out more than $7.1 billion and climbing in claims so far this year, which makes 2011 second only to 2008’s $8.6 billion in the total value of indemnities paid out to farmers. The combination of several large-scale floods in the Central U.S., record droughts in the southern plains, a strong tropical storm in the Northeast and a hard freeze in Florida set the stage for the widespread agricultural losses.

But what is the significance of this? The fact is that despite being one of the worst weather years in recent history, farmers had a policy backstop in place—crop insurance—to preclude major losses from natural disasters or market fluctuations that could lead to widespread bankruptcies and foreclosures.

Thankfully, Congress had the foresight to make decades of significant investments in crop insurance infrastructure, increase the varieties of crops covered and policies available as well as augmenting resources to increase farmer participation. The net result is the resilient and robust modern-day crop insurance policy.

But it hasn’t always been this way. Although the program was originally launched in 1938, it was not particularly successful because program costs were high and participation by farmers was low. In 1980, Congress passed legislation designed to increase participation in the crop insurance program and make it more affordable and accessible for farmers. This modern era of crop insurance was marked by the introduction of a public-private partnership between the U.S. government and private insurance companies. Despite these changes, farmer participation remained low, averaging about 30 percent.

Low farmer participation in crop insurance combined with several large natural disasters set the stage for today’s crop insurance policy. A major drought in 1988 spurred the first of what would be the last costly string of federal ad hoc disaster assistance bills for farmers. Another ad hoc disaster bill was passed in 1989; a third one enacted in 1992 gave farmers the option of claiming disaster losses on a farm-by-farm basis for any year between 1990 and 1992, and then an extremely wet and cool growing season in 1993 caused more losses, and Congress passed yet another ad hoc disaster bill.

Low farmer participation remained a major hurdle. Congress enhanced the crop insurance program in 1994 and again in 2000 in order to encourage greater participation. They accomplished this by combining federal dollars with farmer premiums to make otherwise cost-prohibitive crop insurance policies universally affordable to farmers of all sizes. The changes also expanded the role of the private sector in developing new products that would help farmers manage their risks. With these additional changes, farmer participation in the policy greatly expanded.

By 1998, more than 180 million acres of farmland were insured under the program, representing a three-fold increase over 1988. By 2010, roughly 80 percent of eligible farm land including all major grain crops and cotton, nursery, citrus, rice, potatoes, and livestock, covering more than 256 million acres of farmland and valued at nearly $80 billion, were protected by private crop insurance policies.

As the number of acres covered by crop insurance policies grew, so did the cost of the program along with it. Another factor that has driven up the cost of the policy is the recent dramatic rise in commodity prices. As the value of crops rise, the coverage needed to protect them rises too. For example according to USDA’s Economic Research Service, the average price a farmer received for a bushel of corn in September 2007 was $2.20. In September 2011, that price had nearly tripled to $6.37 per bushel. Soybean prices nearly doubled during the same period, with prices rising from $5.24 per bushel in September 2007 to $9.98 in September 2011.

The success of the agriculture sector due to these record prices has been a major boon to rural America. According to USDA, net farm income is forecast at $100.9 billion for 2011, up $21.8 billion for a rise of 28 percent from 2010. All three measures of farm sector earnings (net farm income, net cash income, and net value added) are forecast to rise more than 18 percent in 2011.

Underpinning this economic boon that has been one of the only bright spots in the U.S. economy has been this nation’s private crop insurance policies…and that’s been a dose of good news for taxpayers.

Kansas Farmer: One Size Doesn’t Fit All When it Comes to Risk Management

When it comes to risk management, one size does not fit all, said Kansas farmer Jay Armstrong during a recent radio interview with the National Association of Farm Broadcasters that ran nationally in early December. Armstrong noted that his 2,700-acre family farm is split between upland and bottomland. In years of drought, the upland withers while the bottomland blossoms. In years of wet weather, it’s the opposite.

“So no matter what extreme Mother Nature throws at me I will suffer losses,” he said, adding “my story is the story of many thousands of farmers across this country, who grow our nation’s food, feed, and fuel supply while dealing with Mother Nature’s tantrums, year in and year out.”

Armstrong says most farmers would agree that the single most important item in their risk management tool kit is crop insurance. He says that before federal crop insurance became widely available several decades ago, farming on land like his felt like playing Russian roulette. “It was nearly impossible to get any kind of coverage for managing risks on my farm where flooding or drought was an occasional occurrence because the private sector just wouldn’t offer it.”

“But federal crop insurance took the universality of the public sector and made these important risk management tools available to everyone willing to pay for them,” he said. Armstrong called crop insurance “the quintessential tool” for managing farms risks because each farmer can choose the plan that makes the most sense for their operation

Armstrong also said that crop insurance has made him a better businessman, allowing him to market his grains, including corn, soybeans and wheat, well in advance because they are insured. “If my crop comes up short at the end of the year because of poor weather – or fails altogether – the insurance indemnity is there to purchase the grain to fulfill my marketing contracts at the end of the year.”

Crop insurance was designed by Congress to shield taxpayers from costly weather-induced bailouts that became commonplace in past decades – and Armstrong says it’s working. 2011 might be regarded as one of the worst weather years on record, with crop insurance companies paying out more than $6 billion. But Armstrong points out that with roughly 80 percent of eligible acres covered by crop insurance, there is no need for disaster bills.

Convo 8

Farmers like me need to have access to affordable risk management tools to better mitigate the impact of significant crop losses and sharp price declines. This is why the upcoming farm bill is so important. It is not about providing income to the less than 2% of the American population. It is about insuring that the same 2% can continue to provide affordable food for the other 98% of Americans who rely on them.

Mid Atlantic Lender Sold On Crop Insurance

Kenny Bounds feels strongly about crop insurance.

“For ag lenders, crop insurance is portfolio insurance,” says Bounds (56), the Government Affairs Officer for Mid Atlantic Farm Credit, which serves five states. Bounds has been in ag lending for his entire career and lives on Maryland’s Eastern Shore.

“I tell our producers that anyone who self-insures is rolling the dice and may well end up losing the gamble. It can take years to regain the net worth lost in one bad year and years of additional debt service to amortize the loss. Crop insurance protects cash flow, as well as net worth and keeps you credit worthy.”

Bounds not only tells his crop insurance story to producers, he also shares his feeling with state and federal legislators.

He makes the case, that unlike other forms of casualty insurance, like auto or home, the risks in agriculture cannot be spread over many small, widely dispersed events. In agriculture droughts, storms, and other risks are spread over huge regions of the country.

“Crop insurance marries the private interest of the farmer, who has to pay his or her share of the premium, with the national interest in preserving the critical mass necessary to sustain the infrastructure that gives us our ample, and affordable, food supply.”

He also points out that our nation’s economy benefits from the huge positive impact agricultural exports have on our balance of trade. “Crop insurance is good for agriculture, and it is also a pretty good deal for the taxpayers,” says Bounds.

“Crop insurance not only holds a risk management umbrella over producers, but also over rural communities. Rural businesses are affected by the financial well-being, and profitability, of agricultural producers. Businesses such as feed and seed dealers, farm equipment dealers, and automobile dealers… they are all protected by the crop insurance umbrella.”

When Mother Nature Gives You A Jolt, Crop Insurance is There

By Quentin Bowen

Sitting on a combine for 12 hours a day harvesting corn and soybeans gives a person a certain degree of clarity combined with long blocks of time to think and analyze. Looking at the corn I’m harvesting, I marvel at the fact that somehow, my family farm managed to dodge the many bullets Mother Nature shot at farmers this year. I’m referring to massive droughts in the Southern plains, record flooding in the upper Midwest, wildfires in Texas, a devastating freeze in Florida, and hurricanes and tropical storms that are still on their way.

Unlike me, a lot of farmers in the U.S. were not so lucky. Thankfully, farmers are able to purchase crop insurance, a private-public partnership that is protecting about 80 percent of the eligible crops across the country. And one of the greatest features of crop insurance—and an aspect that has made it a hands-down favorite among farmers of all types—is the speed of delivery of payments, that puts funds quickly into the hands of farmers who have lost everything in a natural disaster. This is possible due to large investments by private companies that have built the infrastructure that makes this delivery possible.

Crop insurance is a critical component of my risk management tool kit, and one that most farmers like me rely on to face the unknown every year. Because I’m a young farmer getting started, should disaster strike and the crops are wiped out, we, like all other small businesses, are in need of capital.

That’s where the speed of delivery component of crop insurance comes in to play. The industry has dramatically invested to make the speed of delivery possible. So while any farmer who has found himself in need of help from the government is thankful when the payment finally arrives, the payment can take a year or two to get into the hands of the farmer. If I had to wait a year or two to recoup the loss of an entire crop from a natural disaster, I’d be in bankruptcy court when the check finally came.

The speed of delivery of crop insurance —because it’s administered by private sector companies—makes it a different kind of animal. In fact, if a natural disaster strikes and I’m covered by a crop insurance policy, typically the payment comes to me in one or two weeks, not in one or two years. Because of that speed of delivery, I can quickly recover from the loss and replant the field, garnering myself some needed income for the year and putting some food on the tables for consumers.

Crop insurance is a key part of my farming operation because my agent and I evaluate in detail, prior to planting, the optimal coverage for what I’m planting. Once I’ve made that evaluation, crop insurance becomes the underpinning for financing from the bank.

Contrast that with some of the other government safety net programs that are conceived in a university laboratory, planned by a government bureaucrat who has never seen a cornfield, and administered by somebody behind a desk whose only connection to corn is his breakfast cereal. Need I say more?

There is another feature of crop insurance that makes this a terrific risk management tool stand out: We as farmers have to write a significant personal check to secure a crop insurance policy; it’s not a handout. Could it be that this public-private collaboration, with the recipient – the farmers – having “skin in the game,” could be the shining example to the Federal Government of the best way to use tax dollars? I think so.

I’m the third generation of my family to farm this piece of land and I strongly believe that a stable, viable, privately delivered crop insurance program holds the key to my future. It provides me the opportunity to efficiently and profitably produce the safest and highest quality food in the world. It doesn’t keep Mother Nature from jolting me with a disaster, but it does give me some protection and piece of mind should my farm take a hit.

Quentin G. Bowen is a farmer who raises corn and soybeans and resides in Humboldt, Nebraska.

This op-ed appeared in the Lincoln Star-Journal on October 31, 2011.

Living on a Prayer

By John Thamert

Agriculture is collectively holding its breath as the “super committee” meets to determine where the $1.2 trillion worth of federal budget funds will be cut. Having already shouldered more than $12 billion in cuts for deficit reduction in the past several years, farmers and ranchers feel the pain that other sectors have yet to experience.

With this massive overhaul on the horizon, the Senate Agriculture Committee traveled to Wichita, Kansas, late last month to hear from farmers, bankers and local elected officials about what they thought were the necessary components of a strong and viable Farm Bill.

Farmers representing every crop from corn to cotton, bankers who loan to businesses of all sizes, and key elected officials all delivered one main message that was eventually heard all the way back to the halls of Congress: Crop insurance is one of the most important components of farm policy—it should not be touched.

Senator Debbie Stabenow (D-MI), the committee’s chair, recognizes that the upcoming farm bill will not only impact farmers and ranchers; it will also affect those workers who process, package and market agricultural products and services.

This is no small item when you consider that there are over 21 million jobs tied directly to the U.S. agricultural industry.
Obviously, crop insurance is not a policy used by every American—particularly those in urban areas who write about it. But as a banker, a farmer, and a resident of rural America, I see firsthand the benefits of crop insurance and its essential place in a farmer’s arsenal of risk management tools. “Some folks question the need for a Farm Bill with commodity prices where they are today,” Senator Pat Roberts (R-KS), the committee’s ranking member said. “I don’t have to tell this crowd that prices can fall much more quickly than they rise.”

So let me explain why farmers and agricultural lenders from all corners of the country are crying out in unison for maintaining crop insurance.

Crop insurance is a public-private partnership that combines the flexibility and efficiency of the free market with the support of the public sector, to ensure that a modest government investment is able to provide an economic “safety net” for a very unpredictable and high-risk industry.

In so doing, when farmers and/or ranchers experience a severe reduction in their cash flow due to a natural disaster they can depend on crop insurance to cover some of the loss. Any claim paid to a farmer or rancher will create dollars that can be used to cover operating loans from their bank, to pay for fuel, crop and machinery costs; all of which flow through the economies of our country’s small towns and rural communities.

Farmers need crop insurance as an economic “safety net”. Consumers need crop insurance so that they can take comfort in knowing that one of our nation’s premier industries, which provides an abundant and affordable food supply, will remain viable. And lenders need crop insurance in order to be confident that their investment in agriculture will be sound—and around it goes.

One other important consideration is helping the next generation of farmers and ranchers continue our nation’s dominance in food production. Finding a lender willing to invest in a young farmer is hard enough as it is. More often than not, they have very little capital. In these times of rising input costs, a volatile world economy and unpredictable weather patterns, the one thing that lenders and their young farm customers are able to rely on is the crop insurance policy.

“Certainly, farmers here in Kansas know the importance of a strong farm safety net,” Senator Stabenow said at the hearing. “You’ve been dealing with a record drought this year that is devastating crops and livestock production. Suffice it to say, if we ever needed a reminder about the risks farmers face, we got it this year.”

She’s right. Without crop insurance, I’m not sure that my operation would still exist—and the same goes for many of my neighbors—not just in Kansas but in the Texas panhandle where they haven’t seen a drop of rain since October 17, and Missouri, where flooding has left thousands of acres under water and unproductive.

The Senate Agriculture Committee asked for our input: “What are the risk management tools that farmers in the great state of Kansas need? What should an effective farm safety net look like? What are your priorities? What programs can we streamline or consolidate?” And the answer was nearly unanimous: No more cuts to one of the few remaining – and in most farmers’ judgment, the best – risk management tools. If you must cut from agriculture, do not cut crop insurance.

To our farmers and ranchers dealing with severe drought or other natural disasters, these are very trying times; to see high prices without any product to sell and yet have to put out next year’s crop with record high input costs. Without crop insurance, these producers would go out of business as well as cause economic harm to a number of their business providers. I would ask my fellow farmers and bankers to contact their senators and representatives and convey the magnitude of our concerns. Farming without strong farm policy, is nothing but living on a prayer.

John C. Thaemert is a Vice President & Trust Officer at Citizens State Bank & Trust Co. in Ellsworth, Kansas as well as past president of the National Association of Wheat Growers. Thaemert is a third generation farmer who resides in Sylvan Grove, Kansas.

This op-ed appeared in Agri-Pulse on September 6, 2011.

Convo 6

We have heard again and again from producers that crop insurance is the best risk management tool available. In jeopardizing this program, the President turns a deaf ear to America’s farmers.

Convo 6

We have heard again and again from producers that crop insurance is the best risk management tool available. In jeopardizing this program, the President turns a deaf ear to America’s farmers.

Everyone Wins with a Strong Crop Insurance Policy

It’s no great surprise when a well-funded libertarian think tank full of Washington policy wonks pushes for the belief that the federal government should not be involved in crop insurance and other key farm policies.

But those of us in farming know better. All we need to do is to remember the recent floods, droughts and other natural disasters that, without some government help, would’ve left our towns, our jobs, our economy and our lives in ruin.

The simple fact is that everyone wins with a strong crop insurance policy. It’s good for farmers because we’re not faced with losing our farms every time a natural disaster occurs. But it’s also good for consumers, particularly those in urban areas who rely on others to grow all of their food.

And it’s good for developing countries, which depend on us to help feed their growing numbers. Crop insurance ensures stability and reliability in the food supply.

But don’t take my word for the effectiveness of crop insurance. It happens that just last week, the Senate Agriculture Committee called together farm groups, elected officials and bankers in Kansas to ask what agriculture policies they thought were the most important.

During testimony, the governor of Kansas, every farm leader and two local bankers all agreed that crop insurance is the most important farm policy now.

Kansas Gov. and former Sen. Sam Brownback, no big fan of big government, said, “crop insurance is an important risk management tool to producers.” A spokesman for the Kansas Soybean Association called crop insurance “a vital part of the farm income safety net for soybean farmers.” His colleague with the Kansas Cotton Association agreed, calling crop insurance “an essential risk management tool for cotton producers.”

Karl Esping with the Kansas Sunflower Commission said that growers need crop insurance to manage their risky business. “As you look at priorities in this new farm bill, please consider that producers still need a safety net for crop failure and disaster. Crop insurance has been and still is the best tool for these situations.

“Full funding for the crop insurance program is the highest priority for sunflower growers, and I suspect that it is the case for all commodities.”

In fact, when all was said and done, groups representing corn, wheat, cotton, sunflowers and sorghum all sang the praises of crop insurance. But it didn’t stop there.

The director of High Plains Farm Credit promised to “continue to work hard to ensure that our customers and others have access to the crop insurance policies they need to protect their investment in their crop and farming operations.” The CEO and chairman of Western State Bank discussed the various proposed cuts in farm policies and urged members of the Senate to make sure that federal monies are spent on efficient and effective policies.

“I think the most efficient program is the crop insurance program,” he said.

While these testimonials come from a hearing in Kansas, the script would have been identical if the hearing was held in Minnesota, North Dakota or any other big agricultural state.

What most libertarians don’t like to admit is that crop insurance is a great example of a public-private partnership that combines the strengths of both sectors and increases the amount of good done by a modest government investment.

For skeptics who thought that the flexibility and efficiency of the free market could never be combined with the universality and affordability of the public sector, this policy proves them wrong. Crop insurance was bought for more than 80 percent of America’s principal crop acreage, with 256 million acres under policies worth $80 billion in total coverage.

There’s no denying that agriculture’s support for crop insurance is strong and deep. That might not be a tune libertarians want to hear, but it’s music nevertheless.

Author: Greg Schwarz, President, Minnesota Corn Growers Association

This op-ed first appeared in the Grand Forks Herald on September 20, 2011

Everyone Wins with a Strong Crop Insurance Policy

It’s no great surprise when a well-funded libertarian think tank full of Washington policy wonks pushes for the belief that the federal government should not be involved in crop insurance and other key farm policies.

But those of us in farming know better. All we need to do is to remember the recent floods, droughts and other natural disasters that, without some government help, would’ve left our towns, our jobs, our economy and our lives in ruin.

The simple fact is that everyone wins with a strong crop insurance policy. It’s good for farmers because we’re not faced with losing our farms every time a natural disaster occurs. But it’s also good for consumers, particularly those in urban areas who rely on others to grow all of their food.

And it’s good for developing countries, which depend on us to help feed their growing numbers. Crop insurance ensures stability and reliability in the food supply.

But don’t take my word for the effectiveness of crop insurance. It happens that just last week, the Senate Agriculture Committee called together farm groups, elected officials and bankers in Kansas to ask what agriculture policies they thought were the most important.

During testimony, the governor of Kansas, every farm leader and two local bankers all agreed that crop insurance is the most important farm policy now.

Kansas Gov. and former Sen. Sam Brownback, no big fan of big government, said, “crop insurance is an important risk management tool to producers.” A spokesman for the Kansas Soybean Association called crop insurance “a vital part of the farm income safety net for soybean farmers.” His colleague with the Kansas Cotton Association agreed, calling crop insurance “an essential risk management tool for cotton producers.”

Karl Esping with the Kansas Sunflower Commission said that growers need crop insurance to manage their risky business. “As you look at priorities in this new farm bill, please consider that producers still need a safety net for crop failure and disaster. Crop insurance has been and still is the best tool for these situations.

“Full funding for the crop insurance program is the highest priority for sunflower growers, and I suspect that it is the case for all commodities.”

In fact, when all was said and done, groups representing corn, wheat, cotton, sunflowers and sorghum all sang the praises of crop insurance. But it didn’t stop there.

The director of High Plains Farm Credit promised to “continue to work hard to ensure that our customers and others have access to the crop insurance policies they need to protect their investment in their crop and farming operations.” The CEO and chairman of Western State Bank discussed the various proposed cuts in farm policies and urged members of the Senate to make sure that federal monies are spent on efficient and effective policies.

“I think the most efficient program is the crop insurance program,” he said.

While these testimonials come from a hearing in Kansas, the script would have been identical if the hearing was held in Minnesota, North Dakota or any other big agricultural state.

What most libertarians don’t like to admit is that crop insurance is a great example of a public-private partnership that combines the strengths of both sectors and increases the amount of good done by a modest government investment.

For skeptics who thought that the flexibility and efficiency of the free market could never be combined with the universality and affordability of the public sector, this policy proves them wrong. Crop insurance was bought for more than 80 percent of America’s principal crop acreage, with 256 million acres under policies worth $80 billion in total coverage.

There’s no denying that agriculture’s support for crop insurance is strong and deep. That might not be a tune libertarians want to hear, but it’s music nevertheless.

Author: Greg Schwarz, President, Minnesota Corn Growers Association

This op-ed first appeared in the Grand Forks Herald on September 20, 2011

In response to the Deficit Reduction Plan unveiled today by President Obama, Tom Zacharias, President of National Crop Insurance Services, released the following statement:


FOR IMMEDIATE RELEASE
September 19, 2011

“The crop insurance industry shares the belief that deficit reduction is important. In fact, crop insurers have contributed more than most other industries to the goal of deficit reduction in recent years. However, the President’s plan to make further reductions to the crop insurance system does not serve the best interests of America’s farmers or the country’s food security.

“The plan is devastating to those in agriculture, particularly in a year that has seen extremely volatile commodity prices and weather events — from droughts in Texas and Oklahoma to floods in the Northeast and Midwest.

“The White House calls for further streamlining of the Federal Crop Insurance Program, which has already contributed more than $4 billion towards deficit reduction, and $12 billion overall in spending reductions since 2008. Congress needs to evaluate the economic impact of weakening the primary safety net on which farmers and our rural economy can rely.”

###

In response to the Deficit Reduction Plan unveiled today by President Obama, Tom Zacharias, President of National Crop Insurance Services, released the following statement:


FOR IMMEDIATE RELEASE
September 19, 2011

“The crop insurance industry shares the belief that deficit reduction is important. In fact, crop insurers have contributed more than most other industries to the goal of deficit reduction in recent years. However, the President’s plan to make further reductions to the crop insurance system does not serve the best interests of America’s farmers or the country’s food security.

“The plan is devastating to those in agriculture, particularly in a year that has seen extremely volatile commodity prices and weather events — from droughts in Texas and Oklahoma to floods in the Northeast and Midwest.

“The White House calls for further streamlining of the Federal Crop Insurance Program, which has already contributed more than $4 billion towards deficit reduction, and $12 billion overall in spending reductions since 2008. Congress needs to evaluate the economic impact of weakening the primary safety net on which farmers and our rural economy can rely.”

###

Crop Insurance Takes A Disproportionate Share of Cuts

In the President’s budget reduction proposal released yesterday, crop insurance and the farmers who both support it and depend on it are once again being asked to shoulder a disproportionate portion of the budget cuts.

In response to being asked to take more than $8 billion in budget cuts over the next decade, Tom Zacharias, President of National Crop Insurance Services, released the following statement:

“The crop insurance industry shares the President’s goal of deficit reduction, but we are deeply concerned that the President’s debt reduction proposals seriously threatens the viability of the crop insurance program, and with it the vital safety net it provides the nation’s farmers.

“We do not need to look to the past to know how important crop insurance is to agriculture today and in the future. This crop year is not even over yet and farmers have experienced extremely volatile commodity prices and devastating weather events — from droughts in Texas and Oklahoma to devastating floods in the Northeast and Midwest.

“The tragic irony in this proposal is that it may hamstring the nation’s primary risk management program that it is already contributing at least $4 billion towards deficit reduction as a result of program changes made last year – and $12 billion overall when changes made in the 2008 Farm Bill are taken into account. This is happening at a time when the industry is providing coverage on approximately 260 million acres at a value of over $110 billion. Congress needs to give the President’s proposals a very close examination and reject those elements that truly threaten the federal safety net on which farmers and our rural economy can rely.”

Matt Huie – A Personal Face On The Farming Crisis

My grandparents’ children left the farm in pursuit of city jobs, but I loved everything about that life. So when I got the opportunity to move in with my grandparents at age 16, I didn’t hesitate.

After college, I made the decision to become a full-time farmer. Today, I live on a ranch about a mile from my grandfather—who is still operating part of his cattle ranch at 89—and hope to be able to one day pass on the skills that he passed on to me.

But many farm families are unable to compete with the lure of the city and are finding it harder to locate that member of the next generation willing and able to bear the torch. Without a new generation of farmers stepping forward, the world’s food supply, and Texas’ economy, will be challenged.

The average age of farmers in America is 58, the oldest at any time in our country’s history. Assuming most Americans retire at 65, that puts us about seven years away from real problems unless more young people shun lucrative desk jobs for riskier, and often lower paying, jobs on farms and ranches.

It sounds scary, and it is. But the idea of investing a future in farming is equally as scary for most young people. The expense of raising crops and cattle, the high risks faced every day, and the low returns on investment, is enough to make anyone run in the other, more secure direction.

Leading Lawmakers Laud Crop Insurance

As the recent budget deal is interpreted and the Farm Bill debate heats up, important members of the House Agriculture Committee are singing the praises of crop insurance and underscoring its prominence as a necessary risk management tool that helps farmers weather adversity.

Both the Chairman and top Democrat on the Subcommittee on General Farm Commodities & Risk Management – which has jurisdiction over farm policy and crop insurance – addressed the sugar industry’s annual conference – The International Sweetener Symposium – held July 29 until August 3 in Stowe, Vermont.

Chairman Mike Conaway (R-TX) outlined some key principles that should guide the writing of the 2012 Farm Bill. The first principle on his list was that the policy must not undermine federal crop insurance. “There is one thing besides faith in God that is keeping Texas producers afloat right now during the worst drought we have seen in years, and that is federal crop insurance. We cannot afford to mess that up,” he said.

The chairman went on to explain just how important a strong farm policy is right now. “Agriculture is the one bright spot in an otherwise grim economic picture,” he said. “We shouldn’t take it for granted and we certainly shouldn’t gamble with it. We need good farm policy. Good farm policy doesn’t cost a lot. However, what history teaches us is that bad farm policy costs too much.”

Congressman Leonard Boswell (IA), the top Democrat on the subcommittee, gave crop insurance his own boost in the arm. Boswell recounted that when he retired from the army and returned to Iowa to farm, he quickly realized that farming had really changed in the 20 years that he had been away. He explained that in the old days, in order to farm, a producer needed access to land and a place to buy and sell a product, like a co-op or an elevator.

“After surviving the farm crisis in the late ‘70s and early ‘80s, I realized the importance of a good crop insurance agent to help me manage my risk,” said Boswell. “I work closely with my agent to ensure that I will never be put in a position that I was during the 1980s farm crisis.”

Boswell echoed Conaway’s sentiment that farm policies are important to ensuring the health and vitality of the nation as a whole. “I share this because I understand the importance of crop insurance in the country and safety net programs across the country that enable producers to provide for their families and feed those across the nation,” he said.

Joining the leadership in speaking out about the importance of crop insurance was Ohio freshman member Bob Gibbs (R), who is a farmer and also a member of the House Agriculture Committee. “I believe that in this next farm bill, the vehicle to protect farmers from weather and price disruptions will be a viable crop insurance program,” he wrote in a recent op-ed in The Hill. “Crop insurance, along with other initiatives such as the ACRE program, can be tailored to reduce risk and protect the viability of our farming infrastructure,” he said.

Gibbs explained that in the next Farm Bill, Congress needs to ensure that risk management tools are in place to help farmers hedge their risks and in turn, ensures a stable food supply for U.S. consumers. “These programs provide farmers with some level of certainty and confidence as they make their management decisions to risk a tremendous amount of capital by putting that seed in the ground,” he said.

House Agriculture Committee ranking member and one of the lead architects of the 2008 Farm Bill, Collin Peterson (D-MN) recently said that there should be no changes to the crop insurance program in the upcoming Farm Bill. “I am against making any cuts in crop insurance…any changes in crop insurance,” he recently told a group of Minnesota farmers. He added that “crop insurance for me is the bottom line,” adding that he fears that at some point in time, it may be the only viable farm policy left.

Convo 4

Now I understand that when Congress starts trimming the budget, everyone is going to argue that their specific program deserves protection. While I can’t speak for other aspects of federal spending, I can attest to the fact that crop insurance and other aspects of farm policy work for me. Without a doubt, they are the policies that keep family farms like mine in business and our nation food secure.

Convo 4

Now I understand that when Congress starts trimming the budget, everyone is going to argue that their specific program deserves protection. While I can’t speak for other aspects of federal spending, I can attest to the fact that crop insurance and other aspects of farm policy work for me. Without a doubt, they are the policies that keep family farms like mine in business and our nation food secure.

USDA to Congress: “Crop insurance is a vital part of the farm safety net”

“Crop insurance is a vital part of the farm safety net and has become an integral part of business life for a large majority of American farmers and ranchers,” said USDA’s Risk Management Agency (RMA) Administrator William J. Murphy in testimony before the House Subcommittee on General Farm Commodities and Risk Management.

“[Farmers] would find it difficult to continue providing the United States and the world with an abundant supply of food, fiber and fuel without the protection provided by this part of the farm safety net,” he said in his June 24, 2011, appearance before Congress.

With droughts, floods and other disasters affecting crop production across many parts of the U.S., “this year is an excellent example of how important the farm safety net has become,” said Murphy. “Food security is important to this country. I’d hate to be put in a position where we don’t have these [crop insurance] programs and have widespread losses across the country.”

Murphy detailed the unique public-private partnership which makes the crop insurance program unique and how RMA works directly with its private partners—the 15 approved insurance companies—and the agents who deal directly with farmers and ranchers.

“Producers purchase Federal crop or livestock insurance from insurance agents operating in their communities, who sell the insurance on behalf of the 15 insurance companies,” he explained, noting that “this relationship leverages the respective strengths of the public and private sectors.”

Murphy also explained how participation in the crop insurance program has increased significantly, following changes enacted in 1994 by Congress when fewer than 100 million acres of farmland were insured under the program. “Today, over 250 million acres of farm and ranch lands are covered by Federal crop insurance, for an overall participation rate exceeding 80 percent for the major crops.”

“As the amount of insured acreage has increased, so too has the liability, or value of the insurance in force,” said Murphy. For example, in 1994, program liability was less than $14 billion, compared to the 2011 liability which is estimated to exceed $100 billion. But the program has seen sustained growth as demonstrated by the increasing proportion of acres insured at buy-up levels over the last decade. “Today, over 90 percent of all policyholders purchase buy-up levels of coverage,” he added.

Additionally, Murphy explained to Congress that one of the most important considerations for the Federal crop insurance program is the premium cost for producers. “If premium rates are too high, producers will not participate in the crop insurance program. If premium rates are too low, actuarial performance will deteriorate,” he added.

That is why government involvement is necessary. Without it, affordable and widely available coverage wouldn’t exist. And without crop insurance, farmers would be hard pressed to obtain necessary operating capital from lenders.

Murphy explained many lenders now require crop insurance coverage in order to make operating loans to crop and livestock producers, and many producers use crop insurance as collateral for the loans.

Convo 3

Most farmers now see [crop insurance] as a primary tool for risk management. An important tool for risk management.

Convo 3

Most farmers now see [crop insurance] as a primary tool for risk management. An important tool for risk management.

We All Rely on the Farm Safety Net

The weather has been so wild and so unpredictable this year that it’s not just farmers who are complaining about it. Here in the Corn Belt, it’s been cold and damp for so long that it took us forever to get our crop in.

Parts of the Southwest wheat belt are parched, while millions of acres in the vast Mississippi Delta region are underwater.

But being subjected to the unforgiving whims of Mother Nature is a central aspect of being a farmer.

Decades ago, our elected leaders recognized this fact and decided that in order to have a safe and ample food supply, we needed to have farm safety net policies in place to ensure that unpredictable weather doesn’t knock America’s farmers out of business and leave the country short on food.

It’s the future of a key aspect of the farm safety net — crop insurance — and whether or not it will be viable after the upcoming federal budget cuts, that keeps me awake at night. As a business owner, I understand the importance of balancing a budget, and I hope Congress does, too.

But if Congress eviscerates crop insurance or other farm policies that are but a dot on the federal budget but are so important to our unique sector of the economy (“Farming: Of equity and evolution,” June 2), then all Americans and a rapidly expanding global population would feel the pinch.

Crop insurance is an example of a federal program that provides a tremendous amount of benefit per dollar of federal investment.

For example, in 2010, for a relatively small federal outlay combined with private monies from the farmers who purchased the policies, the government was able to leverage a $4 billion investment into an astounding $80 billion in liability coverage for America’s food, feed and clothing crops.

That’s a $20 return on every dollar invested.

This amplification is possible because crop insurance combines the best of government and private sector to help protect farmers from adversity — promoting a safe, affordable, ample food supply for our citizens and for the world.

The government helps farmers underwrite a portion of their premiums to make crop insurance more affordable, and the private sector provides the policies and coverage that kick in when needed.

So if disaster strikes — whether in the form of floods or free-falling grain markets — crop insurance means that farmers aren’t thrown to the wolves and that they live to provide food, fiber and energy for this country yet another day.

This security helps farmers farm better and is a fundamental reason why America has the most dynamic agricultural sector in the world. The modern crop insurance model is a great example of the ability of the public and private sectors to partner, harmonizing their efforts and increasing their benefits.

And crop insurance is very popular among farmers nationally. In fact, more than 1.1 million policies covering 256 million acres across the country were written in 2010 to deal with risks.

And when you consider that the agricultural sector produces the food that we eat, the ethanol that we use as fuel for transportation and is a significant economic engine in the United States, it seems that it might be worth protecting.

Now I understand that when Congress starts trimming the budget, everyone is going to argue that their specific program deserves protection. While I can’t speak for other aspects of federal spending, I can attest to the fact that crop insurance and other aspects of farm policy work for me.

Without a doubt, they are the policies that keep family farms like mine in business and our nation food secure.

It is important to note that nearly $12.45 billion total has already been cut from crop insurance in the last several years. That’s sobering news for a farmer like me, because I know how much I need crop insurance to protect myself from disaster and how important it is for farmers to have crop insurance to secure a loan.

Agriculture is one of the only industries to have already made big sacrifices to help trim budgets. And, there isn’t much left to cut — farm policies account for less than one-quarter of one percent of federal spending.

Further reductions will only weaken our country’s food supplies and punish our state’s workforce — one-fourth of which depends on agriculture for jobs.

The United States needs to be put back on firm financial footing. But sacrificing food security and one of the economy’s lone bright spots is not the best path to get there. We’ll all sleep better knowing there will be food on the table tomorrow.

Author: Greg Schwarz is the president of the Minnesota Corn Growers Association and a third-generation Minnesota farmer who raises corn, soybeans and turkeys in Le Sueur County.

This op-ed appeared in the Minneapolis Star Tribune on June 13, 2011.

We All Rely on the Farm Safety Net

The weather has been so wild and so unpredictable this year that it’s not just farmers who are complaining about it. Here in the Corn Belt, it’s been cold and damp for so long that it took us forever to get our crop in.

Parts of the Southwest wheat belt are parched, while millions of acres in the vast Mississippi Delta region are underwater.

But being subjected to the unforgiving whims of Mother Nature is a central aspect of being a farmer.

Decades ago, our elected leaders recognized this fact and decided that in order to have a safe and ample food supply, we needed to have farm safety net policies in place to ensure that unpredictable weather doesn’t knock America’s farmers out of business and leave the country short on food.

It’s the future of a key aspect of the farm safety net — crop insurance — and whether or not it will be viable after the upcoming federal budget cuts, that keeps me awake at night. As a business owner, I understand the importance of balancing a budget, and I hope Congress does, too.

But if Congress eviscerates crop insurance or other farm policies that are but a dot on the federal budget but are so important to our unique sector of the economy (“Farming: Of equity and evolution,” June 2), then all Americans and a rapidly expanding global population would feel the pinch.

Crop insurance is an example of a federal program that provides a tremendous amount of benefit per dollar of federal investment.

For example, in 2010, for a relatively small federal outlay combined with private monies from the farmers who purchased the policies, the government was able to leverage a $4 billion investment into an astounding $80 billion in liability coverage for America’s food, feed and clothing crops.

That’s a $20 return on every dollar invested.

This amplification is possible because crop insurance combines the best of government and private sector to help protect farmers from adversity — promoting a safe, affordable, ample food supply for our citizens and for the world.

The government helps farmers underwrite a portion of their premiums to make crop insurance more affordable, and the private sector provides the policies and coverage that kick in when needed.

So if disaster strikes — whether in the form of floods or free-falling grain markets — crop insurance means that farmers aren’t thrown to the wolves and that they live to provide food, fiber and energy for this country yet another day.

This security helps farmers farm better and is a fundamental reason why America has the most dynamic agricultural sector in the world. The modern crop insurance model is a great example of the ability of the public and private sectors to partner, harmonizing their efforts and increasing their benefits.

And crop insurance is very popular among farmers nationally. In fact, more than 1.1 million policies covering 256 million acres across the country were written in 2010 to deal with risks.

And when you consider that the agricultural sector produces the food that we eat, the ethanol that we use as fuel for transportation and is a significant economic engine in the United States, it seems that it might be worth protecting.

Now I understand that when Congress starts trimming the budget, everyone is going to argue that their specific program deserves protection. While I can’t speak for other aspects of federal spending, I can attest to the fact that crop insurance and other aspects of farm policy work for me.

Without a doubt, they are the policies that keep family farms like mine in business and our nation food secure.

It is important to note that nearly $12.45 billion total has already been cut from crop insurance in the last several years. That’s sobering news for a farmer like me, because I know how much I need crop insurance to protect myself from disaster and how important it is for farmers to have crop insurance to secure a loan.

Agriculture is one of the only industries to have already made big sacrifices to help trim budgets. And, there isn’t much left to cut — farm policies account for less than one-quarter of one percent of federal spending.

Further reductions will only weaken our country’s food supplies and punish our state’s workforce — one-fourth of which depends on agriculture for jobs.

The United States needs to be put back on firm financial footing. But sacrificing food security and one of the economy’s lone bright spots is not the best path to get there. We’ll all sleep better knowing there will be food on the table tomorrow.

Author: Greg Schwarz is the president of the Minnesota Corn Growers Association and a third-generation Minnesota farmer who raises corn, soybeans and turkeys in Le Sueur County.

This op-ed appeared in the Minneapolis Star Tribune on June 13, 2011.

Rural America’s Roller Coaster

Things were going well in rural America.

The Federal Reserve Bank of Kansas City credited small towns, specifically farming communities, with leading the country’s recession recovery in 2010.

Farm household incomes climbed. Agricultural exports reached new records. Buying power from the Heartland trickled out to the coasts. Farm policies came in well under budget. Crop prices for many commodities grew to help offset increasing input costs (if you think filling up an SUV once a week is expensive, try filling up a tractor or combine multiple times a day).

And the Fed said the good news should extend into 2011, unless something unforeseen happened.

It did, and Mother Nature rained on the parade. And rained and rained and rained — or in some parts of the country, kept the rain from coming at all.

Droughts have destroyed wheat crops in the Plains and have already cost Texas farmers and ranchers $1.5 billion, according to Texas A&M University.

Meanwhile, moisture made it difficult for many corn farmers to plant their crops — for example, only 11 percent of the Ohio crop was in the ground by mid May, compared to the normal 80 percent.

And don’t forget the floodwaters along the Mississippi River from Illinois to Louisiana and in the Red River Valley. Or the damaging spring tornadoes that hammered the Midwest and South. These disasters took lives and destroyed communities along with valuable farmland.

Bad weather is nothing new to farmers. They know the risks when they get into the business, and they hope there are enough 2010’s to offset the 2011’s. The question becomes: how do you weather the storm in a lean year to still be around for another?

That is where our nation’s farm policy comes into play — to provide some stability for our farmers and for the country’s food and fiber supply while limiting taxpayer exposure.

A good example of this is crop insurance. Farmers buy policies, made possible with government investment, to act as a cushion. When disaster strikes, private insurance companies cover the bulk of the losses, shielding taxpayers from tremendous risk exposure. But, without the public partnership, multiple peril insurance on a crop — something we take for granted on our cars and homes — would not be possible.

Banks also extend annual operating capital to growers — yearly loans that usually exceed the amount most Americans will borrow in a lifetime — without any knowledge of what the weather will bring. They are willing to make the loans because crop insurance and farm policies are in place to act as a backstop to the kind of farm financial crisis America experienced in the mid and late 1980s.

But for how long will that backstop be in place? Farm policy was cut sharply in 2006, 2008 and again last year—making agriculture among the only sectors to make a sacrifice toward deficit reduction. Still, farmers find themselves in the crosshairs yet againthis year.

A lot hangs in the balance as lawmakers determine whether crop insurance and other vital farm policies will survive.

Besides providing us all three square meals a day, the country’s 210,000 remaining full-time farmers underpin 21 million U.S. jobs and annual economic activity larger than most foreign countries’ GDPs.

Retired Army General and Supreme Allied Commander of NATO Wesley Clark recently credited these men and women with being key to the country’s security, calling them “a thin green line standing between prosperity and disaster.”

As our country struggles to get back on its feet, and rural America picks up the pieces following a string of violent storms, it’s time to put an emphasis on holding the thin green line.

So this week, we are teaming up to bring this timely message to Washington.

Considering it’s all made possible for less thanone-quarter of one percent of the federal budget, it is under budget, and it has already contributed $15 billion toward deficit reduction, we have a good story that should resonate with everyone, regardless of their political stripes.

After all, not everybody farms, but everybody eats.

Authors: Teresa Scanlan, a native of Gering, Neb., is Miss America 2011. Larry Combest, a Republican from West Texas, was a member of the U.S. House of Representatives from 1985 to 2002 where he served as Chairman of the Select Committee on Intelligence and the Agriculture Committee. He currently lobbies for numerous agricultural organizations, including crop insurance agents.

This op-ed appeared on The Hill on June 6, 2011.

Convo 2

It’s just a real good risk management tool. We’re able to have famers pay part of the premium and have government pay part of the premium to make it affordable and it just ensures that if we have tough weather – especially like we’re having now – lots of wildfires in Texas and a lot of flooding in the Midwest, that farmers are able to indeed get enough assistance that they can farm for another year.

Convo 2

It’s just a real good risk management tool. We’re able to have famers pay part of the premium and have government pay part of the premium to make it affordable and it just ensures that if we have tough weather – especially like we’re having now – lots of wildfires in Texas and a lot of flooding in the Midwest, that farmers are able to indeed get enough assistance that they can farm for another year.

AFBF’s Thatcher Discusses Crop Insurance as a Key Part of Farm Safety Net

There are going to be more challenges to the writing of the 2012 Farm Bill than agriculture has ever seen, said the American Farm Bureau Federation Senior Director of Congressional Relations Mary Kay Thatcher, during a recent interview with the National Association of Farm Broadcasting that ran nationally.

“We don’t have as much money to write the Farm Bill as we did in 2008,” noted Thatcher, who added that another challenge is the large number of urban members of Congress who believe that farmers are getting rich off of strong crop prices this year.

Thatcher explained that good prices come and go and inclement weather can strike at any time, which is why it is important to remember that Farm Bills cover a number of years and that crop insurance is a very important component of the legislation. “It’s just a real good risk management tool. We’re able to have famers pay part of the premium and government pay part of the premium to make it affordable,” she explained.

Thatcher pointed out that crop insurance ensures that if we have tough weather like “wildfires in Texas and flooding in the Midwest, that farmers are able to indeed get enough assistance that they can farm for another year.”

Thatcher urged all areas of agriculture to come together during the upcoming debate, using all of our voices to push for as much political influence as possible. “We don’t just compete with the farmers down the road, we compete with the farmers of the world,” she added.

No better investment than farm safety net

We have been taught from an early age that humans have four basic needs: food, water, clothing and shelter. Interestingly enough, it is the U.S. farm sector that provides two — food and clothing — out of those four needs. This fact puts farming and the programs that protect farmers from adversity — the farm safety net — pretty high on this country’s priority list. Yet farm programs account for just one-quarter of 1 percent of the federal budget, and some are advocating further reductions. Though every dime we spend must be scrutinized, dollar for dollar there is not a better investment of taxpayer funds than the U.S. farm safety net. Take the federal crop-insurance program, for example. It’s hard to think of a federal program that exacts so much benefit per dollar of federal investment. This amplification is possible because crop insurance combines the best of government and the private sector to help protect farmers from adversity and, therefore, ensure a safe, affordable, ample food supply for our citizens and the world.

No better investment than farm safety net

We have been taught from an early age that humans have four basic needs: food, water, clothing and shelter. Interestingly enough, it is the U.S. farm sector that provides two — food and clothing — out of those four needs. This fact puts farming and the programs that protect farmers from adversity — the farm safety net — pretty high on this country’s priority list. Yet farm programs account for just one-quarter of 1 percent of the federal budget, and some are advocating further reductions. Though every dime we spend must be scrutinized, dollar for dollar there is not a better investment of taxpayer funds than the U.S. farm safety net. Take the federal crop-insurance program, for example. It’s hard to think of a federal program that exacts so much benefit per dollar of federal investment. This amplification is possible because crop insurance combines the best of government and the private sector to help protect farmers from adversity and, therefore, ensure a safe, affordable, ample food supply for our citizens and the world.

Convo 1

Failure to anticipate an imminent downturn in the agricultural economy by not maintaining farm policies through the farm bill and crop insurance… would, in time, prove penny wise and pound foolish.

Convo 1

Failure to anticipate an imminent downturn in the agricultural economy by not maintaining farm policies through the farm bill and crop insurance… would, in time, prove penny wise and pound foolish.

2012 Farm Bill Should Hold The Thin Green Line

Minnesota has more at stake than most in 2012 farm bill.

Rural America has been abuzz lately about a term coined by retired Army Gen. Wesley Clark to describe the challenge of feeding more and more Americans with fewer and fewer farmers. His phrase, “hold the thin green line,” sums up what many of us have spent a lifetime trying to convey.

“If we cannot feed, fuel and clothe ourselves, then we cannot defend ourselves. If this one bright spot in our economy is choked off, then recession recovery will certainly stall,” Clark said.

Here in Minnesota, we have more at stake than most when it comes to holding the thin green line.

Almost half of the state’s land is devoted to food production, one-quarter of our residents are employed by agriculture, and we are national leaders in producing staple crops such as corn, wheat and sugar. So how does Minnesota build on this success story? It all starts in the halls of Congress with debate of the 2012 farm bill, and that debate is about to get under way.

Some lawmakers are already taking aim at agriculture. Some are pointing to federal budget deficits as an excuse to cut gaping holes in the farm safety net and leave Minnesota’s economy vulnerable to the whims of Mother Nature and the roller-coaster rides of current commodity markets.

Such attempts are as foolish as they are disingenuous, especially when you consider the current state of farm budgets. The sugar policy that underpins the state’s Red River Valley, for example, costs taxpayers $0. Some policy replacements that have been proposed in the past would cost $1.3 billion a year or more.

Meanwhile, the policies in place to help the state’s corn, soybean and wheat growers hedge risk continue to operate under budget and represent less than one-quarter of 1 percent of federal spending.

Then there’s arguably the most important tool to Minnesota farmers: crop insurance. Crop insurance was specifically designed to shield taxpayers from mega-payouts that could result from catastrophic situations such as commodity price collapses and weather disasters.

By helping farmers afford insurance policies that would otherwise be cost-prohibitive, the government is able to stretch tax dollars much further. The 2010 crop is a prime example – every dollar spent by the government yielded $20 worth of protection for farmers. And this divide is expected to grow in 2011.

If you doubt the need for crop insurance, just look at recent data from the National Weather Service, which shows that excessive snow in the Great Plains and Midwest may leave more of the state’s valuable crops under water than the 2009 record-setting floods.

Now is not the time to weaken crop insurance and put taxpayers – instead of private insurance companies – on the hook for picking up the pieces. If anything, discussions should be centered on ways to strengthen crop insurance and the rest of the safety net. After all, there’s far more at stake than farmers in the next farm bill.

Widner is chairman of the American Crystal Sugar Co. and grows sugar beets, wheat and soybeans in Stephen, Minn.
This article appeared in the Fargo Forum on April 24, 2011.

Keeping Crop Insurance Strong

As lawmakers place farm policy under the microscope again, they should consider 12 essential strengths that make crop insurance the linchpin of the farm safety net programs. In this on-going series, we’ll introduce one strength of crop insurance per month and explain how the sum of these strengths has given us the successful program we have today.

Strength: Producers receive an individualized risk management solution.

Crop insurance is specifically tailored to each individual policy holder, covering the expected yield and revenue risk of each individual producer. The producer is free to select alternative levels of coverage, based on their historic or projected yield. Different rules govern new lands brought into a coverage plan or covering “risky” land. In addition, the producer may also receive coverage for prevented planting, planting losses and lower quality yields.

Crop insurance is an excellent tool for producers who want individual protection specifically matched with the risks they face and the character of their operation. In general, other safety net programs are structured to be the same, across the board, because of easier delivery and wider application. Unfortunately, with the one-size-fits all approach, payments received by producers may not adequately reflect the full degree of damage to their crops.

Crop Value, Crop Insurance Coverage At Record High

At least $110 billion worth of crop insurance liability – the largest amount in U.S. history – will be written this year, underscoring the popularity of crop insurance and the growing value of agricultural commodities, according to National Crop Insurance Services (NCIS).

“The value of our agricultural output is at an all-time high,” said NCIS President, Tom Zacharias, at a March 8 news conference. According to the Federal Reserve Bank this is helping to fuel the overall economic recovery in the U.S.

Best of all, Zacharias noted, “If disaster strikes and puts the valuable 2011 crop at peril, it is the private sector delivery system, and not the U.S. taxpayer, who will be the first line of defense to ensure that America’s farmers do not suffer severe financial hardship due to events out of their control.”

In a recent guest opinion article in the Traverse City (Michigan) Record-Eagle, Zacharias noted that it is easy to see why crop insurance has gained so much popularity with farmers, pointing out that more than 1.1 million policies covering 256 million acres across the U.S. were written in 2010 to deal with risks. “Nationally, this public/private partnership enabled the government to turn a modest investment into nearly $80 billion in protection in 2010,” he added.

Crop insurance was designed by lawmakers to combine the strengths of the government and private sector to best leverage taxpayer investment. The government’s main role is to regulate the business and subsidize farmer premiums making coverage more affordable and practical for farmers who greatly need tools to hedge their risks. Farmers purchase the policies and pay for a portion of the premiums out of their own pockets. The policies are sold by licensed agents and serviced by private insurance companies.

“Without the crop insurance program that we have in place today, U.S. agriculture could be facing a liability of $110 billion, should farmers get hit with a catastrophe in 2011,” noted Zacharias. “That would be unsustainable. Congress should be applauded for structuring a system that achieves so much return on investment,” he added.

Every dollar of investment achieved $20 of protection last year – a gap that should grow substantially in 2011. Zacharias says that he hopes Congress will consider this return on investment as it begins writing the 2012 Farm Bill.

Michigan Senator and Chair of the Senate Agriculture Committee, Debbie Stabenow (D-MI), recently outlined her principles for the upcoming Farm Bill, urging us not to look at the 2012 Farm Bill under the lens defined by budget concerns or specific programs but instead from principles like “creating the best safety net and the best tools possible for managing risk.” She added, “We need an effective safety net so that we aren’t watching family businesses go under because of a few days of bad weather or market factors outside of their control.”

Michigander and crop insurance agent, Mike Gaynier, echoed the importance of the farm safety net to the state’s diverse agriculture sector during a recent national radio interview. “Crop insurance provides protection to producers of Michigan’s lucrative specialty crops — like the well-known tart cherry crop, or important grains like corn, wheat and soybeans — should prices crash or Mother Nature deal an unwelcome blow. In fact, it is the only safety net tool available for most fruit and vegetable growers,” he concluded

NCIS Responds to Los Angeles Times Article

Below you will find NCIS’ response to the Los Angeles Times article “Farm Insurance Fraud is Cheating Taxpayers out of Millions” from February 6, 2011.

NCIS Response To the Editor: 
(These comments are based on letters submitted to the editor of the Los Angeles Times by Dallas Smith, former Deputy Under Secretary of USDA, and Keith Collins, former USDA Chief Economist and a crop insurance industry consultant, as well as other material.)



Beginning with its sensationalist headline, the Los Angeles Times misrepresents the occurrence of fraud in the Federal crop insurance program. The article fails to tell the success story that private insurers and their licensed agents now provide coverage on $80 billion of America’s agricultural production.

The industry shares the Times’ disdain for fraud, and has implemented effective and unprecedented measures to deter and identify false claims. The program has been a pioneer in the use of data mining, utilizes the large field staff of the Farm Service Agency to spot check questionable operations, employs over 4,700 certified crop loss adjusters and conducts numerous claim reviews. These measures have driven the incidence of program abuse far below other lines of property and casualty insurance.

The Times reports, without evidence, “a wave of scams sprouting across the nation.” Six cases are mentioned. One case, in California, was uncovered by USDA in 2001. Another case mentioned, in North Carolina, was uncovered in 2000. Many measures to prevent fraud and abuse have been implemented since these old cases were first discovered. Moreover, the Times fails to note that 13.3 million crop insurance policies have been sold since 2000. Again without evidence, the Times and Professor Bruce Babcock simply assert that companies have little incentive to fight fraud. To Babcock, it “makes sense.” In reality, the companies take on substantial risk and making unwarranted payments reduces industry profitability. The companies, along with their large, professional loss adjuster workforce, have every incentive not to make unmerited payments. The crop insurance industry, in partnership with USDA, has zero tolerance for fraud, and is making every effort to root it out and protect America’s farmers and taxpayers.

The Times also erred in stating that companies and agents “reap most of the benefits” of the crop insurance program. The article stated farmers received “$1.7 billion” in premium subsidies, implying insurance companies received more than farmers. In fact, farmers received $5.4 billion in premium subsidies in 2009. They received another $1.6 billion in delivery cost subsidies paid to companies on their behalf. Otherwise, such delivery costs would be built into premium rates, the practice in all other lines of insurance. In addition, farmers received the benefits of risk protection that enables farm survival in the event of catastrophe.

The article quoted Babcock as saying the industry keeps the most profitable customers and shifts the riskiest, least profitable customers to taxpayers. Unfortunately the Times failed to note that the companies retain risk on the vast majority of policies. Nor did the Times explain that while the companies can cede some policies to the government, the government sets premium rates, not companies, and companies must sell to any farmer wanting insurance. These regulatory requirements cause the companies to take risks over which they have no control and that explains why companies are permitted to cede some, and only some, of the risky policies to the government.
Original Los Angeles Times article can be found here.

NCIS Responds to Los Angeles Times Article

Below you will find NCIS’ response to the Los Angeles Times article “Farm Insurance Fraud is Cheating Taxpayers out of Millions” from February 6, 2011.

NCIS Response To the Editor: 
(These comments are based on letters submitted to the editor of the Los Angeles Times by Dallas Smith, former Deputy Under Secretary of USDA, and Keith Collins, former USDA Chief Economist and a crop insurance industry consultant, as well as other material.)



Beginning with its sensationalist headline, the Los Angeles Times misrepresents the occurrence of fraud in the Federal crop insurance program. The article fails to tell the success story that private insurers and their licensed agents now provide coverage on $80 billion of America’s agricultural production.

The industry shares the Times’ disdain for fraud, and has implemented effective and unprecedented measures to deter and identify false claims. The program has been a pioneer in the use of data mining, utilizes the large field staff of the Farm Service Agency to spot check questionable operations, employs over 4,700 certified crop loss adjusters and conducts numerous claim reviews. These measures have driven the incidence of program abuse far below other lines of property and casualty insurance.

The Times reports, without evidence, “a wave of scams sprouting across the nation.” Six cases are mentioned. One case, in California, was uncovered by USDA in 2001. Another case mentioned, in North Carolina, was uncovered in 2000. Many measures to prevent fraud and abuse have been implemented since these old cases were first discovered. Moreover, the Times fails to note that 13.3 million crop insurance policies have been sold since 2000. Again without evidence, the Times and Professor Bruce Babcock simply assert that companies have little incentive to fight fraud. To Babcock, it “makes sense.” In reality, the companies take on substantial risk and making unwarranted payments reduces industry profitability. The companies, along with their large, professional loss adjuster workforce, have every incentive not to make unmerited payments. The crop insurance industry, in partnership with USDA, has zero tolerance for fraud, and is making every effort to root it out and protect America’s farmers and taxpayers.

The Times also erred in stating that companies and agents “reap most of the benefits” of the crop insurance program. The article stated farmers received “$1.7 billion” in premium subsidies, implying insurance companies received more than farmers. In fact, farmers received $5.4 billion in premium subsidies in 2009. They received another $1.6 billion in delivery cost subsidies paid to companies on their behalf. Otherwise, such delivery costs would be built into premium rates, the practice in all other lines of insurance. In addition, farmers received the benefits of risk protection that enables farm survival in the event of catastrophe.

The article quoted Babcock as saying the industry keeps the most profitable customers and shifts the riskiest, least profitable customers to taxpayers. Unfortunately the Times failed to note that the companies retain risk on the vast majority of policies. Nor did the Times explain that while the companies can cede some policies to the government, the government sets premium rates, not companies, and companies must sell to any farmer wanting insurance. These regulatory requirements cause the companies to take risks over which they have no control and that explains why companies are permitted to cede some, and only some, of the risky policies to the government.
Original Los Angeles Times article can be found here.

Mike Gaynier Awarded the Crop Insurance Industry Outstanding Service Award


FOR IMMEDIATE RELEASE
February 15, 2011

OVERLAND PARK, KAN… Mike Gaynier, Spartan Crop Insurance, Ithica, Mich., is the recipient of the 2011 Crop Insurance Industry Outstanding Service Award in recognition for outstanding service and outreach to small, limited resource, and socially disadvantaged farmers. Steve Harms, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2011 Crop Insurance Industry Annual Convention.

Mike grew up in southeast Michigan and graduated from Central Michigan University. He began his career as an agricultural loan officer with the Farm Credit Services of Southeastern Michigan and soon became the branch manager for Monroe County. During this time, Mike realized how well crop insurance worked with the other services the Farm Credit System provided. He became a leader in promoting crop insurance and became a key person in the Michigan “A” Team – a team comprised of the five Farm Credit Associations chartered in Michigan, traveling throughout the state to promote crop insurance.

In 1997, Mike left the Farm Credit System and purchased a partnership in the Spartan Crop Insurance Agency to devote his full time to promoting crop insurance. Over the next few years under Mike’s leadership and the help of his partners Scott Crumbaugh and Eric Cook, the agency grew to servicing business in eight states, and they have developed relationships with other organizations providing services and products for area farmers. This model continues to expand and has allowed Mike and his affiliates to become one of the largest crop insurance agencies in their operating area.

One such relationship is with The Andersons, a regional grain company located in Maumee, Ohio. In addition to originating grain, The Andersons provide many products that assist farmers in putting together a marketing plan allowing their customers to achieve a better price for their commodity and to achieve a profit for their farm enterprise. Mike has always promoted that crop insurance and a good marketing plan allow farmers to be more profitable. He has conducted many seminars with thousands of farmers, assisting them in understanding how this concept can provide the best opportunity to be profitable over time.

Mike lives in an area that has many specialty crops such as tomatoes, cabbage, perennial crops, and organic crops are common in this area as well. Mike and his affiliates work with specialty crop groups to make sure they understand the crop insurance products that are available. He and his affiliates conduct seminars with the groups and then follow up with each individual to make sure they understand what products are available and how they work.

Mike stays active with his state legislators to ensure they all understand current crop insurance issues and the importance of crop insurance. He is well acquainted with his U.S. Representative, John Dingell. It is not uncommon for Mike to receive calls from the Congressman’s staff concerning crop insurance issues. This personal relationship allows him to speak directly to the Congressman if the issue is one that needs his attention.

Mike is married to his high school sweetheart, Wendy and together they share two children, Matthew and Lindsey. Matt is also a graduate from Central Michigan University and Lindsey a graduate from Michigan State University. They live in Monroe, Mich.

Mike was nominated for the award by Agro National, Inc., Council Bluffs, Iowa.

###

NCIS Response to Chris Clayton

Farmers buying crop insurance as enterprise units get increased federal subsidy
Chris Clayton, AgFax — November 3, 2010

Tom Zacharias, newly-named president of National Crop Insurance Services, said enterprise units have expanded the opportunity for farmers to manage their risk. “I would say, in general, it has been very well-received,” Zacharias said. “There is evidence enterprise units have moved producers from CAT (catastrophic) to buy-up coverage,” Zacharias said. Zacharias said he has heard insurance representatives say that about 40 percent of their business is enterprise units. In the Corn Belt, it looks as if there is more uptake for enterprise units on single-crop ground. There have even been increased sales in other regions of the country, such as the Mississippi Delta. More acres and more diversification reduce the likelihood of a payout, so it reduces the premium substantially, while it increases the premium subsidy. “It provides a pretty good discount,” Zacharias said. “The benefit to the producer is reduced premium.” The benefit to the insurer is reduced risk….

NCIS Response to Chris Clayton
Thank you for the recent discussion we had regarding the status of the crop insurance program which focused on the recent experience with the new enterprise unit pilot program authorized by the 2008 Farm Bill. I appreciate the article you released on November 3 calling attention to this new and popular feature of crop insurance.

I do, however, have a concern regarding the final portion of the piece, and apologize for not contacting you sooner. Your article ended with the following statement attributable to Professor Bruce Babcock: “Of the $13 billion in support for crop insurance, more than $7 billion went to the companies. Farmers received $6 billion in net indemnities,” Babcock testified. “Crop insurance failed the cost-effectiveness test, because it simply makes no sense for taxpayers to spend $13 billion to deliver $6 billion in net payments to farmers.” I take exception with these statements for two reasons: (1) the supposed “efficiency/effectiveness” metric does not accurately measure either efficiency or program benefits and costs and (2) the numbers reported are for 2008 and 2009; they look backward at only two selected years and do not reflect recent program changes and future expectations.

Issue (1). The metric — $7 billion “to the companies” compared with farmers receiving “$6 billion in net indemnities”— does not accurately portray the underlying economics of crop insurance. Let me explain why it is misleading and not a useful comparison.

Farmers’ net income (indemnities less farmer premium) is being compared to company gross income (A&O payments plus underwriting gains). A&O is a producer subsidy paid to the companies on behalf of the producer. The appropriate comparison would be net income to net income. That comparison shows farmer net income for 2008 and 2009 of $6 billion and company net income of, at most, $3.4 billion (assuming A&O payments equal delivery expenses), not $7 billion. In fact, company income would be less than $3.4 billion, as actual delivery expenses for 2008 exceeded A&O payments (this can be found in the Grant Thornton analysis on company profitability). Final expense data for 2009 is not yet available, so company net income cannot yet be determined exactly.
Benefits of crop insurance should not be inappropriately measured as net indemnities to farmers. Farmers buy and benefit from insurance even when indemnities are zero. As you are aware, crop insurance provides farmers with the opportunity to better manage their marketing plans and obtain financing from year to year. Although these types of benefits are difficult to measure explicitly, they are of value and Babcock fails to acknowledge them.

Issue 2. Using only two years, 2008 and 2009, to judge the program is also inappropriate. Because prices and yields vary greatly from year to year, crop insurance premiums and performance are better judged on long-term experience. Moreover, while 2008 may have been a typical year, 2009 had the third lowest level of losses relative to premium in the 29 year history of the program. It was a rare year, which distorts Babcock’s metric. The metric also does not reflect the changes in the new Standard Reinsurance Agreement (SRA), which reduced company funding by $6 billion over 10 years as compared to expected funding prior to the new SRA, nor does his data fully reflect the cuts made in the 2008 Farm Bill. If premiums remain at this year’s level of less than $8 billion, and RMA’s estimates of the expected company rate of return on retained premium for 2011-2015 are used, then future expected net income (net underwriting gains) of the companies would range from $1.0 to $1.2 billion per year, about 30% less than the level used by Babcock. In addition, A&O payments are capped in the new SRA at about $1.3 billion per year, again about 30% less than the level used by Babcock.

I certainly have no issue with articles that comment on crop insurance program costs. My only hope is that such articles make meaningful comparisons and use relevant data.

Thanks again for the recent interview, and please feel free to contact me if I can answer any questions you may have in the future.

Regards,

Tom Zacharias
President
National Crop Insurance Services

Major Crop Insurance Changes for 2011 Crop Year – Combo’s Product Released for 2011 Crop Insurance Year

After several years of planning, the Risk Management Agency will release the COMBO product for use in insuring crops for the 2011 cropping year. The first experience many producers will have with the Combo product will be when insuring wheat for 2011. The COMBO product is meant to simplify crop insurance choices, replacing many individual farm-level products with one product: the COMBO product. The release of the COMBO product does not impact county level plans such as Group Risk Plan (GRP) or Group Risk Income Plan (GRIP).

Everyone Wins With a Strong Crop Insurance Policy

It’s no great surprise when a well-funded libertarian think tank full of Washington policy wonks pushes for the belief that the federal government should not be involved in crop insurance and other key farm policies. But those of us in farming know better. All we need to do is to remember the recent floods, droughts and other natural disasters that, without some government help, would’ve left our towns, our jobs, our economy and our lives in ruin. The simple fact is that everyone wins with a strong crop insurance policy. It’s good for farmers because we’re not faced with losing our farms every time a natural disaster occurs. But it’s also good for consumers, particularly those in urban areas who rely on others to grow all of their food.

Everyone Wins With a Strong Crop Insurance Policy

It’s no great surprise when a well-funded libertarian think tank full of Washington policy wonks pushes for the belief that the federal government should not be involved in crop insurance and other key farm policies. But those of us in farming know better. All we need to do is to remember the recent floods, droughts and other natural disasters that, without some government help, would’ve left our towns, our jobs, our economy and our lives in ruin. The simple fact is that everyone wins with a strong crop insurance policy. It’s good for farmers because we’re not faced with losing our farms every time a natural disaster occurs. But it’s also good for consumers, particularly those in urban areas who rely on others to grow all of their food.

Crop Insurance Industry Testifies Before House Committee on Agriculture Hearing Comes on Heels of Crop Insurance Companies Signing SRA, Industry Remains Concerned About Preserving Farm Safety Net

FOR IMMEDIATE RELEASE

July 22, 2010

OVERLAND PARK, KAN, July 22, 2010… Bob Parkerson, president of National Crop Insurance Services (NCIS), testified today on behalf of the crop insurance industry before the U.S. House Agriculture Subcommittee on General Farm Commodities and Risk Management.

“The federal crop insurance program is the largest part of the federal farm safety net, protecting $80 billion in America’s agriculture production,” said Parkerson. “It’s the best and most effective risk management tool available to farmers, and we continue to be committed to providing producers and ranchers with a sound and effective crop insurance program.”

“Yet, in light of the recent Standard Reinsurance Agreement (SRA), the uncertain and lingering financial impact of the 2008 Farm Bill, and current deliberations on the 2012 Farm Bill,” he added, “we think it’s critical to lend our perspective to these deliberations and raise awareness of the challenges we face as an industry due to these budget cuts, particularly how they could potentially disrupt the program, and diminish the level of service and coverage to farmers.”

An Arduous SRA Negotiation: A Predestined Outcome
Member companies of the crop insurance program recently signed the SRA after a long and, at times, challenging negotiation with USDA. The new agreement calls for a $6 billion cut from the program over 10 years, which can be added to a $6.4 billion reduction from the 2008 Farm Bill.
Parkerson testified that the SRA process started in 2009, with the industry entering discussions with USDA’s Risk Management Agency (RMA) in the spirit of open and fair negotiation, as deemed by Congress in the 2008 Farm Bill.

-more-
He testified that the industry created working committees and provided detailed comments to each of RMA’s first two drafts, yet the two sides emerged from the negotiations with several issues still unresolved. Data requested by the industry, for example, was never provided by RMA, and there were wholly new concepts introduced by the Agency in the final draft that were never submitted for public, or industry comment.

“We share the same goals of Congress and the Administration for deficit reduction and a cost-efficient program,” said Parkerson, “and we have contributed toward meeting these goals for the industry and production agriculture.”

Parkerson asked the Committee and Congress to carefully consider the recent SRA negotiation process and give adequate recognition of these cuts as the 2012 Farm Bill hearings continue, with the understanding that the industry is still trying to determine how to manage reductions from both the SRA and the 2008 Farm Bill without any control on setting premium rates – something that is unique to crop insurance as compared to other types of insurance.

He added that companies have tough choices to make with respect to major operational changes as a result of these financial concessions, including possible consolidation and less investment in technology. Many companies will also have to consider the feasibility of regional offices and re-evaluate whether they can continue to develop innovative peril products, which some companies created for farmers to cover crops or perils not currently covered under the federal program.
The industry is also concerned about delayed service and payments to farmers due to the possibility of having fewer adjusters.

“Something has to give, and we don’t want it to be at the expense of the farmer,” Parkerson said. “But I don’t know how we’ll replace service to those who might be impacted by consolidation,” he said.

Parkerson vowed that the industry will remain committed to the program. “Our industry can’t, and will not walk away from farmers and our responsibility to provide them with an effective farm safety net. We will continue to work with Congress through the farm bill process to preserve the industry’s private delivery system, which has proven so effective throughout this program’s public-private partnership.”

###

Crop Insurers Signing on to Contract With $6 Billion in Cuts; Agents Object to Caps

This week, U.S. crop insurers will have to sign the latest long-term contract with the federal government — a deal that slashes billions from the long-standing public-private partnership. The U.S. Department of Agriculture must have the 16 companies-signed forms by July 12, leaving just a few days for the insurers to put signatures on the latest Standard Reinsurance Agreement, which cuts the federal program by $6 billion over the next 10 years.

Crop Insurers Signing on to Contract With $6 Billion in Cuts; Agents Object to Caps

This week, U.S. crop insurers will have to sign the latest long-term contract with the federal government — a deal that slashes billions from the long-standing public-private partnership. The U.S. Department of Agriculture must have the 16 companies-signed forms by July 12, leaving just a few days for the insurers to put signatures on the latest Standard Reinsurance Agreement, which cuts the federal program by $6 billion over the next 10 years.

Crop insurance companies offered a new reinsurance agreement

USDA Risk Management Agency Administrator Bill Murphy said June 30 that his agency has sent crop insurance companies a revised final offer of a new standard reinsurance agreement and gives the companies until July 12 to sign it. The original deadline was June 30. After a Senate Agriculture Committee hearing Murphy said that he had made concessions to the companies on the structure of the agreement, but not made any changes in the proposal to cut $6 billion in the program or to put restrictions on agent commissions.

Crop Insurers Will ‘Withstand’ Severe Subsidy Cuts

Crop insurers said late Thursday the industry and the crop insurance program will be able to “withstand” the severe cuts in subsidies imposed on the program by the Agriculture Department. “Our hands are tied. The companies have no choice but to sign this new Standard Reinsurance Agreement,” said Bob Parkerson, president of National Crop Insurance Services, which represents the 16 crop insurers involved in the program. “If they don’t, they cease operating and the safety net that America’s farmers and ranchers rely on so heavily would be disrupted,” he said.

Crop Insurers Will ‘Withstand’ Severe Subsidy Cuts

Crop insurers said late Thursday the industry and the crop insurance program will be able to “withstand” the severe cuts in subsidies imposed on the program by the Agriculture Department. “Our hands are tied. The companies have no choice but to sign this new Standard Reinsurance Agreement,” said Bob Parkerson, president of National Crop Insurance Services, which represents the 16 crop insurers involved in the program. “If they don’t, they cease operating and the safety net that America’s farmers and ranchers rely on so heavily would be disrupted,” he said.

Negotiations May be Complete, but Industry Remains Vexed By the Funding Reductions in Final SRA

FOR IMMEDIATE RELEASE
July 1, 2010

OVERLAND PARK, KAN… The crop insurance industry and the program will withstand the $6 billion reduction in funding handed to them by the USDA’s final Standard Reinsurance Agreement (SRA) contract released on June 29, 2010.  Companies have until July 12th to sign the agreement.

“Our hands are tied,” said Bob Parkerson, president of National Crop Insurance Services.  “The companies have no choice but to sign this SRA because, if they don’t, they cease operating and the safety net that America’s farmers and ranchers rely on so heavily would be disrupted.”

Although the industry feels the negotiation process was generally handled reasonably well by USDA, there were terms and conditions added to the agreement very late in the process that gave companies very little time to react and negotiate a contract that was fair to all parties.  Constraints on legal recourse of companies and agents are particularly problematic.

“I think our definition of ‘negotiate’ was very different from USDA’s,” said Parkerson.  “They made a few concessions to some of the technical aspects of the agreement, but they didn’t budge on the $600 million a year cut in funding, despite the damage it will do to the financial foundation of the program.”

The private insurance companies will now need to evaluate how reductions will affect the quality of service they provide to producers, and scramble to maintain the financial reserves mandated by the SRA.

“I remember early on in this negotiation process reading that Secretary Vilsack said this is an easy product to sell,” said Parkerson.  “It reminds me of a quote from Dwight D. Eisenhower when he said …Farming looks mighty easy when your plow is a pencil, and you’re a thousand miles from the corn field.”(Dwight D. EisenhowerSeptember 11, 1956)

###