Policy Journal

February 26, 2010 11:40 AM

NCGA Speaks Against Climate-Change Bill

After holding its fire for months, the National Corn Growers Association (NCGA) finally blasted away against H.R. 2454, the House-passed version of climate-change legislation. Citing a study prepared by Informa Economics, NCGA president Darrin Ihnen says the group "has no choice” but to oppose the package.

A key issue, he says, is that the bill would place an "unnecessary burden” on corn producers in the form of higher energy prices. Plus, he notes, the potential for benefits depends largely on the ability of corn farmers to adopt practices that capture carbon. With continuous no-till expected to be the main way for farmers to capture carbon credits, NCGA says, those who can't go no-till will "experience serious economic hardship.”


Online Calculator for SURE Available

USDA's Farm Service Agency (FSA) has a new Web-based tool to help farmers who suffered losses during the 2008 crop season. The new tool is aimed at those who are trying to determine what kind of benefits they could receive under the Supplemental Revenue Assistance Payments program (SURE).

The calculator collects information about planted acreage, actual production, insurance coverage data and other federal disaster payments to determine SURE benefits.

This online tool will only help determine what you may qualify for under SURE—you still have to go to your FSA office to file an application. To check out the tool, go to www.fsa.usda.gov/sure. Click on the link "Access the SURE Producer Calculator Version 1.0a” to download the file; you'll need to have Microsoft Excel software.


Ensuring the Future of Crop Insurance

As farmers finalize their planting decisions, which include choosing risk management options, the crop insurance industry is working to ensure the future of insurance programs.

Every five years, a new standard reinsurance agreement (SRA) is hashed out between USDA's Risk Management Agency (RMA) and the crop insurance industry. The SRA sets the terms by which the nation's 15 crop insurance companies deliver products to farmers. The new SRA takes effect with the 2011 reinsurance year, which starts July 1, 2010.

After combing through the proposed SRA earlier this year, crop insurance industry officials met with RMA to review the proposal.

Bob Parkerson, president of National Crop Insurance Services (NCIS), and Keith Collins, former chief USDA economist and now a crop insurance consultant, say the administration's proposals would cut funds $800 million to $900 million per year during the next five years. The more than $4 billion cut would be in addition to the $6.4 billion cut mandated by the 2008 farm bill.

"Those are dramatic cuts based on little or no supporting research or data,” Parkerson says. The crop insurance industry wants RMA to "be far more transparent” about the information used to draft their proposal.

"We have asked RMA for information and data so we can run our own models, etc., but the administration is not sharing much information,” Parkerson says. RMA has signaled that it would be willing to share more with NCIS, however.

On the chopping block. A top concern with RMA's proposal is the cut in administrative and operating expenses—nearly $400 million to $500 million.

NCIS and the crop insurance industry also suggested a reduction in administrative and operating expenses. However, after a Washington, D.C., law firm indicated the cuts would violate the provisions of the 2008 farm bill, NCIS withdrew the suggestion.

NCIS informed RMA of the legal finding, Parkerson says, and the issue has been forwarded to USDA's Office of General Counsel.

"If we're being told it's illegal,” Parkerson says, "then I certainly won't recommend our companies sign something that's illegal.”

Parkerson said that his group surprised RMA by proposing a $100 million per year cut in its subsidy—the first time, he said, that the industry had offered to make cuts in its own budget. But that proposal focuses solely on reductions in underwriting gains. The RMA proposal already includes $300 million to $400 million in underwriting cuts.

"We know we have to do some things [in terms of reductions], and we're willing to take some cuts,” Parkerson says.

In addition to the proposed cuts, Parkerson says that based on a preliminary estimate, the crop insurance industry would have to come up with more than $100 million for new program initiatives from RMA, including technology requirements.

The proposed cuts and increased costs would "likely lead to more consolidation in the already shrinking industry and cause many of the 18,000-plus jobs associated with the industry to be lost,” he says.

Another concern of the crop insurance industry: Less coverage in some areas of the country and producers having to travel further to talk with an agent, who has less time to talk about options.

Parkerson also criticized the RMA proposal for using capped reference prices, such as $2.56 for corn and $6.36 for soybeans, throughout the life of the SRA. The system is based on the simple average of the 1999 to 2008 crop prices, capped at those levels. Those price points are used to calculate the
premiums for computing administrative and operating expenses.

The initial proposal from RMA is not the final word. A second draft should be released soon. Then, there will be more sessions between RMA and the crop insurance industry before a final SRA is put in place by the end of June. 

Fast Facts

Six goals were outlined by the Risk Management Agency relative to its standard reinsurance agreement draft:

  • Maintain producer access to critical risk management tools.
  • Align the administrative and operating subsidy to insurance companies so that it is closer to actual delivery costs.
  • Provide a reasonable rate of return to insurance companies.
  • Protect producers from higher costs while equalizing reinsurance performance across states to more effectively reach underserved producers, commodities and areas.
  • Simplify provisions to make the standard reinsurance agreement more understandable and transparent.
  • Enhance program integrity.
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