Reforms need to be made to the Federal Crop Insurance Program for it to be more effective and useful as a risk management tool for peanut growers, say representatives with the Georgia Peanut Commission.
During a recent USDA Risk Management Agency listening session in Valdosta, Ga., Commission Executive Director Don Koehler said that while the peanut program changed significantly with the 2002 farm bill, the Federal Crop Insurance Program changed only slightly.
Under the old program, said Koehler, crop insurance at a rate of 75 percent essentially covered out-of-pocket costs and provided meaningful protection for farmers. Now, however, the 75 percent coverage doesn’t “come near” covering the out-of-pocket expenses of peanut producers, he says.
“The commission suggests that coverage be increased on peanuts to allow for coverage at the 80 to 90-percent levels under the new program,” says Koehler. “This will allow farmers to more nearly cover the risk they have in out-of-pocket costs.”
Under the old program, the coverage was based on a peanut government support price of $610 per ton. Coverage now is based on $355 per ton, while out-of-pocket expenses have changed little, he contends.
Another issue of concern, he adds, involves those peanut producers who are located in new areas of peanut production. Koehler says those producers who wish to plant peanuts in counties without a production history aren’t able to obtain crop insurance, because a yield history doesn’t exist in many of these production areas.
“The commission favors providing some level of crop insurance coverage in new production areas in a state until the time that yields may be proven,” he says.
Commission Chairman Armond Morris also expressed concern at the meeting that there is no differentiation made in the current crop insurance program between irrigated and non-irrigated fields. This creates a problem, he says, because a farmer actually is penalized for using good cultural practices such as irrigation to manage his risk and, thereby, the risk of the program.
“Producers need to be allowed the option to insure their crops on a field-by-field basis,” suggests Morris. “This will allow farmers to manage their coverage and be protected from the variations of weather, as well as reaping the reward of instituting risk management components such as irrigation.”
Another major concern of the commission, says Morris, is that the disaster years which are beyond the control of the grower are counted against him in calculating the actual production history on the farm.
“The actual production history of a farm should not include yields from disaster years in the calculation if the county where the farm is located is declared a disaster area for that year,” says Morris.
Another issue mentioned by commission representatives is that planting date restrictions for loss of coverage have been complicated in recent years as the recommended planting dates from the Cooperative Extension Service have been shifted later in response to the Tomato Spotted Wilt Risk Index, developed to help combat the potentially devastating disease.
Finally, the production of Segregation 2 and Segregation 3 peanuts is largely due to weather and currently is beyond the control of the producer, say commission members. “There needs to be some reform of the program to allow the farmer who has a weather-related Seg. 2 or Seg.3 to be protected from financial loss on those peanuts,” they says.
The commission recommended to the Risk Management Agency that the following changes be made to the Federal Crop Insurance Program for peanuts:
• Producers need to be allowed the option to insure their crops on a field-by-field basis. This will allow farmers to manage their coverage and to be protected from the variations of weather. In addition, growers can reap the rewards of instituting risk-management strategies such as irrigation.
• Coverage needs to be increased on peanuts to allow coverage at the 80 and 90-percent levels under the new program. This will allow farmers to more nearly cover the risk they have in out-of-pocket costs.
• Discounts on Segregation 2 and Segregation 3 peanuts need to be covered by crop insurance on a case-by-case basis.
• The APH of a farm should not include yields from disaster years in the calculation if the county where the farm is located is declared a disaster area for that year.
• Coverage for price assurance should be considered for years when production would be so low that counter-cyclical payments would not be triggered and yet production is significantly reduced, thereby reducing the overall income on the farm.
• The planting date restrictions need to be shifted to later, until the end of May from the current restriction of May 25.
• Some mechanism needs to be established in new production areas in a state where peanuts already are being grown to provide some level of crop insurance coverage until the time that yields may be proven.