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Finally: A Reason to Like Congress

This Business of Farming

The private-public crop insurance partnership is one thing political leaders can be proud of

Published on: August 31, 2013

That headline is not a typo. And no, this is not an April fool's joke.

I'm about to describe one of your federal government's best success stories – a win-win-win for farmers, consumers and taxpayers (for the most part, anyway).

I'm talking about crop insurance.  In an age when "dysfunctional congress" appears in nearly every article describing our elected leaders, here's a story that makes us all happy, happy, happy, as Phil Robertson of Duck Dynasty might say.

The epic drought of 2012 proved it.

Of course, it wasn't always this way. Old-timers will recall that crop insurance was once just a depression-era experiment, until the Federal Crop Insurance Act of 1980 was passed. Even then most farmers still did not use it; after a series of ad hoc disaster programs passed in the late 1980s, leaving no one happy, the crop insurance program was vastly improved through the Federal Crop Insurance Reform act of 1994.

All of a sudden farmers had a decent safety net and risk management tool unique to their business needs.

These days over 80% of U.S. crop acreage is protected by crop insurance. For many farmers, it's a no-brainer. Did farmers en masse go out of business as a result of extreme drought in 2012? Did any farm group go begging Congress for a disaster payment?

No, and no.

Think about that, for a minute. After these past 18 months watching Congress try and fail and try again to pass a new farm bill – or pass any meaningful bill - what odds would you give passage of a disaster program in this toxic political environment?

Industry-wide there were a record number of claims on last year's crops, with $17 billion paid out to farmers who suffered loss. Coverage this year is expected to be upwards of 85%. Some of those 'self-insured' farmers wised up.

That $17 billion attracted its share of budget-cutter critics in Washington, but in typical years the federally-subsidized crop insurance program is a wash for taxpayers. Farmers pay in and farmers who suffer get payments back.

One reason it works is efficiency. That's a word they don't use much in Washington, but this unique private-public program administered by USDA has a set of rules that is then executed and managed by private companies. Those companies compete, and that's what allows the product to be delivered so efficiently.

If a new farm bill does get passed – again, these days that's a big if - we may see some adjustments to crop insurance. The senate bill had higher farmer premiums for anyone with adjusted gross income above $750,000. The Senate bill also coupled insurance with conservation compliance. The house bill did not have conservation compliance or an AGI limit but the Supplemental Nutritional Assistance Program (SNAP) was decoupled.

It's logical to assume it's easier to get urban legislators to agree on a farm bill if there's an acceptable SNAP bill attached. 

If you still don't see this as a success story, consider this: other countries covet what we have here. Brazil has an under subsidized revenue program; Brazil's politicians would love to reform their program so that it actually made sense for growers. Canada, India, The Philippines and Australia are looking to replicate the U.S. program.

In China, the second largest ag market in the world, crop insurance models are emerging as the country gets serious about feeding its massive population. Read more here.

At the recent Farm Progress Show held here in Decatur, Ill., streets were full, business was booming. You'd never know there was a devastating drought just 12 months ago. Those who were protected by crop insurance were back to kicking tires and looking at investments to make their farm production more efficient, and that translates to good things for a hungry population.

This program speaks to the value of a stable food supply. What's that worth? Did any American go hungry because of the drought?

Crop insurance is part of the mighty American Ag machine, an engine that might have sputtered to a halt after last year's drought had this program not been available. It's part of a rural economy stabilization program that will be very much in need as world population swells to 9 billion people in 30 years.

So, congrats to our political leaders. Whether they realize it or not, they gave American farmers and consumers a success story.

Let's just hope they know a good thing when they see one.