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Farm bill debates and votes bring change to crop insurance

Despite working through the witching hour May 2, farm bill conferees were unable to conjure up a final farm bill.

The six-hour negotiating session did put some titles to bed. However, some of the most contentious issues — including payment limits and income eligibility for commodity payments — remain unresolved.

“We need something that will quit all the maneuvering that's going on between staffs and members and everything else,” said Collin Peterson, House Agriculture Committee chairman, at the outset. “It's time to get this settled. I'm tired of playing whack-a-mole.”

Conferees then tackled the research, forestry and specialty crops before running into a major debate on the crop insurance title. All but two of the 34 crop insurance items were agreed to prior to the conference.

The first open item “would require moving the billing date up for farmers paying crop insurance premiums for spring-planted crops by about six weeks,” said Sen. Tom Harkin, Senate Agriculture Committee chairman.

“That would generate savings from the timing shift between fiscal years of $1.322 billion. This may represent a slight inconvenience for some farmers, but we must recall that most lines of insurance require payment of premiums before the policy actually takes effect.”

The provision wouldn't take effect until the 2012 insurance year.

The second open item “would reduce the federal premium subsidy for area policies such as the group risk plan, the group risk income protection, by 4 percentage points at each coverage level. These subsidies aren't set by statute.

“I believe that the methodology chosen by the RMA (Risk Management Agency) sets them at too high a level. Under this provision, the premium subsidies for a given area policy would be at least as high, if not higher, than for the comparable individual or revenue policy at the comparable coverage level. This saves about $187 million over 10 years.”

Kansas Rep. Jerry Moran said in order to save $1.2 billion, “we're shifting the burden from the federal taxpayers to the farmers who will be paying their premiums in advance of harvest. This is a significant concern for cash-strapped farmers who are generally financing their operations. Harvest is an important time when they garner enough cash to pay those premiums.”

Others also weren't keen on the premium payment proposal. “I think we're lulled to sleep because of high commodity prices,” said Texas Rep. Randy Neugebauer. “Quite honestly, the crop insurance programs we have don't give producers enough flexibility. Folks are focused on the high commodity prices. But when you suffer a disaster and you don't have a commodity (to sell), then high commodity prices don't do any good.”

Neugebauer pointed out that to remain competitive in a global market, agriculture has had to increase scale of operations. As that has occurred, risks have increased as well. Add increased crop input costs and “the cost of producing crops in the last couple of years has increased 25 percent.

“The efforts to go in and raid crop insurance, or raise premiums, are counterintuitive to what we need to be accomplishing in the farm bill. We ought to be putting dollars into a crop insurance program that provides an effective risk management tool. I'm telling you … some of the coverage levels crop insurance provides for many producers hardly cover the cost of getting a crop (planted), much less nurturing it through harvest.”

The fiscal reality is there is no extra money for crop insurance, said North Dakota Sen. Kent Conrad. “Maybe this is a good time to deliver a message that all of the conferees have had to wrestle with …. I know that the press writes about big increases (in spending) here and there. But if you go back to the 2002 farm bill and look at the baseline available compared to this one, there's $58 billion less.”

The current crop insurance program “isn't perfect but is effective and efficient,” said Kansas Sen. Pat Roberts. “Without crop insurance — along with direct payments — I don't know how on earth many farmers in the High Plains could have come through recent years. We must be very careful on how we change this program — especially if we haven't done our homework.” Two programs remain at base levels, Roberts pointed out. One is direct payments and the other is crop insurance.

“For some reason, both are looked at (dubiously) …. Now, we're assuming the crop insurance program should contribute $5.753 billion dollars to the greater farm bill cause. Some of this is through timing shifts. This was about the only way we could get this done under the circumstances and make it as easy as possible.

“But (such changes) do have real-life consequences. Don't let anyone say they don't.”

A farmer will have to travel to the bank “to see if he can get credit to pay the premiums earlier and receive the reimbursements later. The crop insurance title gives up more funding to complete this bill than any other title — nearly twice as much.

“Let me remind everyone that the House would cut crop insurance by $5.9 billion and the Senate cut it by $5.1 billion …. True compromise would have put the framework at $5.5 billion. Yet, here we are again looking to cut more.”

Roberts made it “very clear” he's unhappy with the cut “and my continued support is contingent on what the final number looks like …. Separate the crop insurance program from the farm bill. Don't use it as a bank and let's not use the timing shifts without the realization that they'll cost farmers money.”

Harkin warned that while crop insurance decisions were difficult, the truly tough decisions were still to come. “We haven't even gotten to some of the real painful stuff yet.”

The Senate conferees then passed the Harkin proposals.

In response, Neugebauer countered with an amendment of his own. “Basically, my amendment would amend the crop insurance programs and allow producers to put a GRP (Group Risk Plan) policy — or cover the gap between their underlying APH (Actual Production History) policy. So if someone was carrying a 60 percent APH policy, they could put a 40 percent GRP policy on top of that.”

Why is that important? “Because it's getting more and more difficult for producers to carry the upper level of the APH premiums.

“The other thing is that gap becomes a big one for many producers. When you talk about taking money from crop insurance and put in another area, we must understand that's part of the safety net. We have a safety net for prices and we must have a safety net for producers who don't make the crop. What my amendment does for the insurance program is take two products, or policies, offered and, for the first time ever, allows them (to be combined).”

This approach has been embraced by the Bush administration, said Neugebauer, and “also provides producers with a lot of choices on the amount of risk they're willing to take and the trigger they're willing to take. So, really, this 30 or 40 percent of the top GRP policy actually is like putting a disaster program on top of their APH, or general policy.”

If his amendment were adopted, Neugebauer claimed, the Harkin amendment's premium increase and timing shifts would be unnecessary. It would also cover some commodities that currently aren't insured.

“Being able to take some dollars from commodities that already have crop insurance available and moving those dollars over to this new program would cost about $565 million.

“We also scored some other funding efforts — such as the direct payments (cut $316 million) — that had to be cut from the commodity programs. We could increase EQIP by $312 million. We can do things for food banks at the $300 million level. We could also create some specialty crop funding for $40 million.”

At the same time, “instead of taking money out of crop insurance, we'd make crop insurance a better program for many producers. It would give them flexibility and more coverage.”

Neugebauer also pointed out that only about 24 percent of the 2002 farm bill funds “went to those that actually grow something. What we must understand — and it isn't to diminish the importance of some of these other programs — but only about 12 percent of this bill (is dedicated to actual farmers). You can't have a nutrition program without agricultural products to sell. If there's not an appropriate safety net and we lose that infrastructure … we end up in the same boat we are with energy.”

Picking up on the misinformation theme, the press came in for another bashing, courtesy of Conrad. “These disaster provisions reflect reform. I'm amazed at what I read from some editorial writers about this disaster program. I read an editorial in the Washington Post criticizing these disaster provisions. It's very clear they never read them and have no idea what they're writing about.

“In the editorial they said it wasn't good budget policy. Oh, really? I thought it was good budget policy to actually budget for something. And that's what we're doing here. Instead of waiting for ad hoc disaster relief — which isn't budgeted for, not paid for — we're budgeting and paying for it. That's good budgeting!”

Why is it true reform? “Because we're not going to make payments to people who have a loss in a particular commodity but on their whole farm they didn't suffer a loss. Under this program, we're looking at the whole farm income. If someone hasn't had a loss over the whole farm, they're not getting paid. That's a huge reform.

“I'm amazed at some of the things I read in the news media. You'd think all this money was all just going to farmers and ranchers. Everyone at this table knows that 67 percent of the money in this farm bill is going for nutrition. Twelve percent is to support farmers and ranchers.

“That's down dramatically from the 2002 farm bill. And when we wrote the 2002 bill, we thought that three-quarters of 1 percent of the federal budget would go to support commodities. In this bill, we're down to one-quarter of 1 percent of the federal budget! That is real reform.”

Conrad said he didn't support the Neugebauer amendment “because it's an area-wide, county-based policy. That means it doesn't reflect yield variability within a county and, to me, the thing that (tips the balance) is it doesn't require a loss by a farmer in order for him to get a payment. If you're in an area of the county that's done well but there's an area-wide loss, you'll get a payment. Frankly, that would be a black eye for the disaster program.”

Also opposed to the Texan's amendment was Peterson. “With the last ad hoc disaster, we required crop insurance. I think that kind of snuck up on people. They didn't really know that had gotten in. When it got out, it caused quite a commotion.

“Now, we've built on that. We have a permanent program requiring crop insurance. That was a big reform and something that should've been done long ago ….

“The current proposal (addresses a) whole-farm disaster. This is something else we should've been doing. There's no sense in letting someone game the system. If they lose money on one crop and make a lot with the others, why should they get a payment? We don't have that kind of money.

“Now, it's pay as you go, get the money up front. The reality is — and I've looked at this closely — that the money (in the bill) is enough to fund (the program) … for four years. If you take this money down, that won't work.

“The reality is what we're doing with crop insurance in this bill misses the opportunity to make the kind of changes we should be doing. There are states with an increase in premiums of 213 percent since 2005. Other states have premiums that have stayed the same …. What sense does that make? I ask the people here — the ones who make speeches about crop insurance — what sense does it make? What we'll do is leave some crop insurance agents getting a 200 percent increase while others get a cut based on the crop they insure.”

At a time when there's much less money than was available for the 2002 farm bill, “it seems now isn't the time for us to decide we have almost $4 billion to provide permanent disaster,” said Moran. “Since I've been in Congress 12 years, year after year there have been ad hoc disaster (payments) …. In Kansas, it's been year after year after year of drought. I too thought a permanent disaster program was appealing. I'd like to put to an end the coming to colleagues to help farmers on the verge of going out of business.”

What Conrad calls good budgeting “has a consequence to our ability to fund other things we feel are equally, or more, important. From my perspective, crop insurance is one of those. While I'd like to see permanent disaster develop, the time is such that we don't have the money except at the expense of a program that's so important to the survival of those us representing high-risk farming states.”

Amidst ayes and nays, the Neugebauer amendment failed and the Harkin amendment passed.

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