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Crop insurance programs being revamped

Following “tumultuous negotiations” in the Senate over the past six to eight months, “some significant changes” have been made to the federal crop insurance program, says Craig Brown, vice president of producer affairs for the National Cotton Council.

“All 16 crop insurance companies have agreed to changes in the Standard Reinsurance Agreement (SRA) that would cut their subsidies by $6 billion over the next 10 years,” he said at the annual joint meeting of the Mississippi Boll Weevil Management Corporation and the Mississippi Farm Bureau Federation’s Cotton Policy Committee.

Premiums for farmers are not expected to change, the USDA’s Risk Management Agency (RMA) says.

The RMA had pressed for the reductions, contending the crop insurance companies were making excessive profits.

Of the $6 billion in cuts, the agency says, $4 billion will be applied to reducing the federal deficit and the other $2 billion will be used for risk management and conservation programs for farmers.

With the changes, Brown says, “There has been quite a bit of concern about how that will impact delivery of the insurance products.

“The National Cotton Council has been quite active in trying to improve the cotton policy, or policies that could be applicable to cotton producers. One of the things we’ve been focusing on is the need for an effective revenue program for crop insurance.”

Last year, Brown notes, the RMA decided to cancel Group Risk Income Protection (GRIP) policies on virtually all commodities, and particularly for cotton.

“A lot of growers may not be familiar with GRIP,” he says, “but it’s a countywide experience-based program that was being offered by one company out of the Midwest that had a fairly attractive revenue target.

“We’ve been working with some companies and the agency to try and get that program fixed, noting that we recognize that buyer coverage, particularly in the rain belt and particularly in the Mid-South, is not very attractive for cotton. It’s an actuarial system that, for the most part, just doesn’t make good business sense, and including buy-up insurance is hard to do.

“In a state like Texas, where there’s extensive use of buy-up insurance, it’s a different story, although they have their own set of problems with cotton policies.

“We believe we can get a GRIP-like policy put back in place,” Brown says, “and that it will be a good companion to whatever happens in the next farm bill.

“But, I emphasize that we do not support delivering farm program benefits through crop insurance — there are just too many institutional problems involved. Right now, we’re not convinced that it’s feasible, or a good idea.

“We do believe, though, that there are some crop insurance products out there that, if they’re built properly, can be beneficial and complementary to farm program risk management, even in areas where individual buy-up may not be feasible.”

The National Cotton Council is working with the agency and the insurance companies to try and get a product like GRIP reinstituted, Brown notes. “Some progress is being made, and we hope we can get it accomplished in a timely manner.”


TAGS: Management
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