Farm Bill Principles and Crop Insurance

America’s abundance of affordable and nutritious food is the envy of the world. This is not an accident, as our long history of investment in agricultural infrastructure has made this possible. Underpinning this system is crop insurance’s modern public/private partnership that provides a safety net for farmers, helping them manage price and weather risks.

USDA’s Agricultural Outlook conference speech by Sen. Debbie Stabenow of Michigan, chair of the Senate Agriculture Committee, outlined her principles for the upcoming Farm Bill. She urged us not to look at the 2012 Farm Bill under the lens defined by budget cuts or specific programs but instead from principles like “creating the best safety net and the best tools possible for managing risk.”

Ask any Michigan farmer — or any American farmer — what fits this bill, and crop insurance will be among the first responses. Crop insurance provides protection to producers of the Great Lakes state’s lucrative specialty crops — like the well-known tart cherry crop — 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.

It is easy to see why crop insurance has gained so much popularity with farmers. In fact, 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.

Stabenow wants the Farm Bill to be based on the notion that farmers know better than anyone else what works for them. A major strength of today’s crop insurance program is that it allows farmers to create individualized risk management solutions tailored to their specific risks.

When catastrophe hits, the only thing protecting many producers from bankruptcy is crop insurance, which is streamlined by the efficiency of private sector delivery. And banks are increasingly relying on crop insurance, knowing fully that the money they loan farmers for food production is partially secured by this program.

Unfortunately, this risk management tool has been put under the budget-cutting microscope in recent years. Lawmakers in search of budget offsets for other, often non-farm priorities, have already substantially reduced funding.

Bill Murphy with USDA’s Risk Management Agency recently cited an agency report that indicated current investments in crop insurance are delivering a significant bang for the buck. The persuasive attributes of crop insurance, despite the funding reductions already taken, underscore a program that is cost effective and sustainable.
The U.S. agricultural sector is a source of deep economic strength and stability. As weather-driven crop failures globally cause price fluctuations and food shortages we should be heartened by our fiscally sound crop insurance policies. As Stabenow also noted, “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.” Indeed, crop insurance is attempting to meet this need not only in Michigan, but nationwide as well.