Insurance cuts worry farm industry

In a time of national financial stress, Congress is trimming its monetary-assistance programs whenever it can.

America’s crop-insurance industry is the latest business sector to experience insurance cuts – six billion in target crop insurance cuts throughout the next 10 years to be exact.

The 2008 Farm Bill provided funding for crop insurance and permanent disaster relief programs to benefit farmers nationwide. But in February, the Obama administration announced plans to amend the safety-net provisions specified in the Farm Bill.

The Obama administration estimates $2.26 billion can be saved throughout a 10-year period by reducing federal farm payments to "wealthy farmers," while $8 billion can be saved by reforming the crop insurance program to end what it calls "huge windfall profits" for insurance companies, according to a Corn & Soybean Digest article.

Federal crop insurance is sold and serviced by means of private insurance companies. A portion of the premium, as well as the administrative and operating expenses of the private companies, is subsidized by the federal government. The Federal Crop Insurance Corporation re-insures the companies by absorbing some of the losses of the program when indemnities exceed total premiums.

The United States Department of Agriculture released its final Standard Reinsurance Agreement (SRA) contract June 29, outlining the details of the $6 billion cut:
  • Lowers the projected long-term return for insurers to about 14.5 percent by modifying the terms under which the Risk Management Association provides re-insurance
  • Phases out federal crop subsidies to people with more than $250,000 in adjusted gross income (AGI) from off-farm sources or more than $500,000 in on-farm AGI
  • $2 billion will be used to “strengthen successful, targeted risk-management and conservation programs
  • $4 billion is intended to reduce the national deficit
  • Imposes a cap on commissions at 80 percent of the administrative and operating (A&O) subsidy to carriers under the program and a cap of no more than 100 percent of A&O when profit sharing is included
Insurance companies have 30 days to respond and make technical corrections.

In a letter to members of the Senate Committee on Agriculture, Nutrition and Forestry July 2, Roger Johnson, president of the National Farmers Union (NFU) said:

“The fact that the number of farmers has declined is not a reason to weaken the farm safety net. The population of our country - the people fed by American farmers - continues to grow. We must work together to provide sufficient federal investment in domestic food production.

Since the last farm bill was enacted, many farmers have endured some of the most difficult economic conditions in decades,” said Johnson. “The next farm bill must address the new realities we face: extreme volatility in market prices for commodities, extended periods of extraordinarily high energy costs and the ongoing exodus of young people and job opportunities from our rural areas.”

The National Association of Crop Insurance Agents also wrote to Congress to express its members’ concern about proposed legislation.

“While the farm economy is currently strong, we should be careful to avoid doing anything that could undermine the financial infrastructure of rural America. Although farm prices are generally up, farm input costs have risen even faster in many cases. This makes crop insurance even more important to farmers who need credit in order to plant a crop.”

Individuals may write to his/her respected legislator to offer opinions at

Do you feel that the USDA should resume its intent to cut funding? Are there other ways to contribute to the national deficit? Do farmers deserve federal safety nets?

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