Crop Insurance Cuts Still Slated

June 15, 2010 05:00 PM
USDA's Risk Management Agency announced its final draft of the Standard Reinsurance Agreement, which controls the amount of subsidies farmers receive and the payments crop insurance companies receive for delivering crop insurance.
It will "save” $6 billion in the next 10 years, according to RMA. Of that, $2 billion will be invested in farm bill programs, including releasing approved risk management products, such as the expansion of the Pasture, Rangeland, and Forage program; providing a performance discount or refund, which will reduce the cost of crop insurance for certain producers; increasing Conservation Reserve Program (CRP) acreage to the maximum authorized level; investing in new and amended Conservation Reserve Enhancement Program initiatives; and investing in CRP monitoring. The other $4 billion will be used to reduce the federal deficit.
It will generally maintain the current administrative and operating (A&O) subsidy structure, but will cap payments to companies to avoid spikes caused by high commodity prices. An inflation factor and consideration for new business is included so that the maximum payment may reasonably increase over the length of the agreement.
Meanwhile, RMA will increase the return in historically underserved states to provide additional financial incentives for companies to write business in those states.
The crop insurance industry was vehemently opposed to an earlier proposed $4 billion, five-year cut (see March 2010 Top Producer "Top Talk”).
It is no happier with this cut. "Some of USDA's proposed financial terms are far more complex than would appear from its side-by-side comparison and will take some time to analyze,” according to National Crop Insurance Services (NCIS), an industry organization. "The new SRA creates new financial risks and severely undermines the stability of the crop insurance industry,” says Bob Parkerson, president of NCIS.
RMA argues that its new "combo policy” and other changes to crop insurance offerings will reduce education and recordkeeping costs for companies. RMA will meet with representatives of the crop insurance industry June 18.

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