As the Agriculture Committees in both the U.S. House of Representatives and the U.S. Senate prepare to mark up farm bill proposals this week, farmers and the commodity organizations that support them will watch closely to see where cuts are proposed, how deep those cuts are and what kind of safety net will be left after all the slicing and dicing is accomplished.
Crop insurance will be top of mind as the industry assesses the importance of what has become the key element of the farm safety net.
The National Association of Wheat Growers (NAWG) voiced concern this week over a proposal introduced in “an alternative conservation title bill,” that would limit government cost-share for crop insurance for crops produced on land that has been converted from sod grass or some wetlands.
“The bill would also tieconservation compliance to crop insurance, which NAWG strongly opposes,” according to a NAWG press release.
The organization expressed concerns that crop insurance would remain a target for legislators’ budget axes and expects “numerous proposals to weaken the crop insurance program. NAWG will continue to track such proposals and coordinate with state associations to combat them.”
Texas corn farmers also see crop insurance as an increasingly important aspect of protecting farmers against catastrophic losses.
“With the recently proposed farm bill from both the House and the Senate, crop insurance will be the tool farmers have left to provide risk coverage for their farm and to offer protection for the operating loans received from agricultural lenders,” says David Gibson, executive vice president for the Corn Producers Association of Texas.
The National Crop Insurance Services (NCIS), Overland Park, Kan., makes a good case for continuation of a strong crop insurance program and continued robust government support.
Tom Zacharias, in a recent editorial for Roll Call/CQ, explained that farmers, even with government assistance on crop insurance premiums, bear a significant burden and “shouldered nearly $17 billion in losses in 2012.”
Some $12.7 billion of that total came “before farmers saw a dime in crop insurance indemnity payments as part of their deductibles…. When combined with the $4.1 billion farmers paid out of their own pockets to purchase crop insurance last year, total farmer investment neared $17 billion,” Zacharias said.
Numbers are important
He said those numbers are important because of the ongoing assault on the “the men and women who put food on our tables and clothes on our backs” over their purchasing of crop insurance.
“Critics called crop insurance a farmer bailout and said things like farmers were ‘laughing all the way to the bank’ and were ‘praying for drought, not praying for rain.’ Farmers even have been compared to cheap drunks at an open bar and told to pay their fair share.”
The article points out some undisputed facts of what transpired after the worst drought in decades:
• Indemnities to farmers cost about $17 billion, but “thanks to crop insurance’s design, these indemnities were not completely borne by taxpayers because farmers and insurers picked up a major portion of the costs and sustained significant economic losses.”
• “This was the sixth time since 1983 that crop insurers lost money. Compare that to the property and casualty insurance industry, which has lost money only once as far back as data is available.”
• “When crop insurance premiums exceed losses, the government sees underwriting gains that help offset payments in bad years. In fact, the government experienced nearly $4 billion in gains from 2001-2010. Congress was not asked to fund an ad hoc disaster bill despite the historic devastation endured by our agricultural producers.”
Zacharias said, “Lawmakers and the American public deserve an intelligent conversation about the future of agriculture.”
And 2013 is shaping up to be another year that underlines the critical importance of crop insurance. A bi-weekly crop insurance update from NCIS highlights the ongoing drought.
“The 2012 drought — the worst this country has seen in decades — is now becoming the 2013 drought with 47 percent of the continental U.S. — including a good portion of the nation’s breadbasket — still in some stage of drought, compared to roughly 37 percent a year ago, according to the April 30, 2013 U.S. Drought Monitor.
“In other words, many farmers are starting off 2013 in worse shape than they were at the start of 2012.”
For instance, 77 percent of the state of Nebraska is experiencing “extreme” drought or worse. Nearly every county in Arizona, California, Colorado, Kansas, Nevada, New Mexico, South Dakota, Texas, Utah and Wyoming are either abnormally dry or in some level of drought.
With those alarming early-season trends, farmers are purchasing crop insurance policies to protect themselves against potential losses. As of May 6, 2013 more than 240,000 policies had been purchased, protecting nearly 88 million acres and representing nearly $20 billion in liabilities.
Farmers’ premiums totaled $800 million. These numbers will climb as the season progresses.
NCIS offers other pertinent facts, including:
• In 2012, farmers invested more than $4.1 billion to purchase more than 1.2 million crop insurance policies, protecting 128 different crops.
• Crop insurance policies protect more than 281 million acres, with insured acreage now equal to 86 percent of planted cropland in 2012.
• Farmers have spent more than $30 billion out of their own pockets to purchase crop insurance since 2000.
• To date, Kansas, Texas, California, Oklahoma, Nebraska and Florida lead the way in the number of crop insurance policies purchased.
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