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Crop Insurance Still A Battleground

Prospect of farm bill conference has groups continuing to take sides on crop insurance

Published on: Sep 25, 2013

While the dust begins to settle on the House's Sept. 19 decision to approve steep cuts to nutrition programs, a few ag and environmental groups are looking towards the next battleground: crop insurance.

While it may be just one of a plethora of issues Congress will have to sort out before moving on a five-year farm bill, groups on both sides of the issue are making their opinions heard.

National Crop Insurance Services this week released a new video with commentary from NCIS President Tom Zacharias, touting the program's partnership between private insurers and farmers. Zacharias says this system is what allows the program to operate efficiently.

"Over the last decade, overall taxpayer spending on farm policy as a whole has steadily declined," Zacharias said. He explained that the decline is due to strengthening crop prices and a shift to insurance systems that eliminate the need for traditional subsidies, known as direct payments.

Prospect of farm bill conference has groups continuing to take sides on crop insurance
Prospect of farm bill conference has groups continuing to take sides on crop insurance

Even with the elimination of direct payments, Zacharias says crop insurance offers another benefit – reducing the need for ad-hoc disaster assistance.

"Since 1989, 42 pieces of legislation totaling $70 billion in unbudgeted dollars were passed to help farmers following a disaster," he explains. "Those days are over. Farmers and private insurance companies now share in the risk."

While NCIS makes its case for crop insurance benefits, groups like the political think tank American Enterprise Institute and Environmental Working Group are countering those claims with comments of their own.

AEI's Vince Smith earlier this month released a working paper on the topic, "Costly Farm Bill: New Analysis of Crop Insurance's High Price." In the paper, Smith contends that the higher prices for crops that farmers have enjoyed recently could keep the price loss coverage program, for example, working at the proposed cost of $1.1 billion. Take those prices away, however, and Smith argues that the cost for crop insurance could balloon to $18 billion annually – four times the cost average cost of direct payments.

And, Smith says, if crop prices remain high, taxpayer costs under the PLC and supplemental coverage options would cost taxpayers $20 billion per year.

But NCIS' Zacharias says that's not so. Citing Congressional Budget Office numbers, he says taxpayers are projected to pay $9 billion per year, less than past farm policies. He noted also that each farmer must pay the premium for their individual policy, and when disaster occurs, the billions paid in premiums by farmers help offset the cost of the insurance.

"Farmers have paid $30 billion of their own money on crop insurance protection to buy this coverage," Zacharias says, adding that the government has collected $4 billion in underwriting gains from 2001-2010.

Much of the disagreement on the program centers not only on who pays what, but also on how much is paid out. That's an argument Reps. Tom Petri, R-Wis., and Ron Kind, D-Wis., got behind earlier this month at a rally against the program, when they revisited the idea of placing caps on crop insurance.

The two proposed earlier this year to limit crop insurance subsidies to producers with an adjusted gross income of under $250,000 – a proposition Rep. Frank Peterson, R-Okla., chairman of the House Ag Committee strongly opposed.

Zacharias adds that if cuts were to move forward, that would result in lower crop insurance participation, thus shifting risk away from farmers and insurance companies and back to taxpayers.

Watch the NCIS video at the link on this page.