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Production insurance on hold at RMA

A proposal to offer producers federal crop insurance to cover from 70 percent to 90 percent of their costs of production is languishing at the USDA's Risk Management Agency in Kansas City with chances dwindling each day that it will be offered for the 2002 crop season.

Members of the Coalition of American Agricultural Producers (CAAP), which is made up of farmers and Farm Credit System lending institution members, have been pushing for a pilot program for the 2002 crop season based on the new COP program.

“Never has there been a time more important than today to get a workable cost of production insurance program on the market,” said Earl Williams, president of the California Cotton Growers Association. “The type of package that has been developed by AgriLogic would be a tremendous risk management tool for producers and lenders to hang their hats on in these tough times.”

“This type insurance, we believe, is needed throughout American agriculture,” said Ray Young, a consultant and farmer from Wisner, La. “It's needed for sure in our area of the Mid-South.”

Young and other members of the CAAP have been working for nearly two years to bring the cost-of-production insurance to reality. CAAP is a non-profit organization whose members are farmers and directors of AgFirst Farm Credit Bank, Farm Credit Bank of Texas, Western Farm Credit Bank, Ag America Farm Credit Bank and commissioners of state departments of agriculture.

AgriLogic is a Texas-based consulting firm made up of executives with more than 50 years of combined experience in risk management agriculture, which has developed the package after meeting with producers throughout the country.

The plan, according to Young, Williams and AgriLogic would enhance producer's ability to survive not just weather disasters, but economic crises not caused by disasters.

However, this plan does not allow producers to “lock in profits,” through revenue enhancing insurance programs such as Crop Revenue Coverage (CRC), according to Joe Davis, CEO of AgriLogic.

“The originators of this concept wanted to remove the financial incentives of ‘farming the insurance program,’” said Davis. “While the majority of crop producers do not abuse the current program, there are a sufficient number who do, causing the program to received repeated calls for reform.” Davis said no program can be abuse-proof, but “it will be harder to abuse this concept.”

Williams said the cost of production insurance program has considerable support from across the U.S.

“Ag credit banks funded the development of this concept because they recognized the need to develop something that fits the needs of most farmers,” said Williams.

“It is terribly disappointing that after two years of work, we still do not have a package. The federal government has thrown $8.8 billion at crop insurance reform and California producers and many others are still left out in the cold without a good, workable crop insurance program.

RMA can take as few as 15 days to review different phases of the proposal, but Williams says the agency took a full 30 days to review the first phase of the program. “And, there is a second phase under review, plus the office of general counsel has to review the final product.

“The proposal could be expedited, but at this point the bureaucracy has chosen not to,” said a frustrated Williams. “Hopefully, we can get a better indication of where we stand for 2002 in the next 30 days.”

“We are applying considerable pressure to get the job done.”

The initial phase of the pilot program would cover not only the major commodities like upland cotton in many counties across the Cotton Belt, but would also include almonds, soybeans, corn, nectarines, onions, peaches, rice, sugarcane, wheat, cranberries and apricots.

The program would cost producers from 4 to 8 percent of their verified production costs.

Davis expects the federal government to pick up 50 percent of the premium costs. Producers can elect the coverage they want in each of three categories: variable costs, fixed costs and land costs.

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