Crop Insurance Needs Tweaks

12/13/2013

By Barb Baylor Anderson
Progressive Farmer Contributing Editor

ST LOUIS (DTN) -- The federal crop insurance program can be stronger, Brandon Willis, administrator for USDA's Risk Management Agency told attendees at the National Grain and Feed Association's Country Elevator Conference in St. Louis this week.

"Most (farm bill) titles will see cuts," Willis said. "The one with an increase is crop insurance. We will continue to shift our focus to offering new products to customers. Farmers should have skin in the game, but there is room for tweaks to allow farmers to produce with a safety net and to respond to the market."

Federal crop insurance has come under fire for its costs to taxpayers. Some critics have even suggested crop insurance be capped like direct farm payments. Willis cites a Government Accountability Office audit completed about a year ago that suggested crop insurance be capped. The RMA pointed out differences between federal crop insurance and direct payment programs, noting the involvement of the private insurance sector. RMA told the GAO that capping crop insurance payments would not be a good idea.

"After the farm bill is in place, we can discuss the next five years," Willis said. "The government pays 60% and farmers pay 40% right now. We have more participation than ever. We can discuss how the future breakdown might be."

Willis said 25% of acres were covered by crop insurance in 1988. Today, 85% to 90% of crops are covered, accounting for about 300 million acres. He also noted that in the 2002 farm bill, the cost for Title I (Commodity Title) was $85 billion. Crop insurance costs were $33 billion. That has changed; spring crop insurance estimates were $85 billion vs. $76 for Title I, Willis said.

"Crop insurance has grown tremendously in the last 10-20 years. From 1989 to 2009, Congress passed ad hoc disaster bills worth $20 billion to $60 billion," he said. "Eighteen months ago we saw devastating fruit crop losses from frost and then the 2012 drought. There was no call for ad hoc assistance. The only disaster assistance in the farm bill will be for livestock."

Willis said RMA is focused on three areas to help improve the program -- integrity, expanding coverage and education.

In the area of fraud, waste and abuse, Willis said the program has a tremendous track record. "We look for anomalies in the data, and investigate any anomalies we find," he said. A recent tobacco case led to prosecutions.

Despite adding coverage for new crops in recent years, "There are still crops and farming practices with no coverage," Willis said. "Only 10% of acres for haying and grazing are covered with insurance, so we are working to improve policies to attract more coverage. We want to do our best to make sure crop insurance works for everyone all over the country," he said.

To maintain a viable program, RMA has to do more to educate the nonfarm public. "We have seen a lot of bad headlines. The truth is we have a defensible program. Farmers sign up, they pay a premium commensurate with the risk and receive timely payments for losses," he said. He added a University of Nebraska study shows off-farm benefits of the crop insurance program, including saving jobs and allowing producers to invest in technology that makes them more efficient producers.

(ES/CZ)