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 http://pianet.capwiz.com/pianet/issues/alert/?alertid=15150501&type=CO.

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?

*Photo obtained from: http://insurance.yoursfree.biz/crop_insurance.htm

Program supports development of U.S. producers

Earlier this month, the United States Department of Agriculture (USDA) implemented a new support program to help America’s farmers hurt by the recent economic crisis. USDA Sec. Tom Vilsack introduced the Trade Adjustment Assistance for Farmers Program, also known as the TAA for Farmers Program.

"As we work to help rural America recover from the worst economic crisis since the Great Depression, the Trade Adjustment Assistance for Farmers Program will create new opportunities for producers hurt by import competition," said Vilsack. "Eligible producers will receive much-needed technical assistance and cash benefits to help them adjust to the current economic environment."

Farmers receive financial assistance after meeting eligibility requirements and upon completion of stringent training and education courses that can last up to three years.

According to USDA, the TAA for Farmers Program helps producers of raw agricultural commodities and fishermen adjust to a changing economic environment associated with import competition by means of technical assistance and cash benefits.

It’s not another subsidy, said Kevin Klair, extension economist at the Center for Farm Financial Management at the University of Minnesota.

“Congress was very intentional when structuring this program. Important management and competition issues were considered to make it most effective,” said Klair.

The American Recovery and Reinvestment Act of 2009 (ARRA) reauthorized and modified the TAA. The Act includes measures to modernize the nation's infrastructure, enhance energy independence, expand educational opportunities, preserve and improve affordable health care, provide tax relief and protect those in greatest need, according to the Obama administration.

Eligibility

• The commodity on which the farmer claims losses must qualify for the program as determined by the USDA (notifications issued in Federal Register notices).
• Farmers must have experienced a greater than 15-percent decrease in the national average price, the quantity of production, value of production or cash receipts of the commodity compared to the average of the three preceding marketing years, and imports contributed importantly to this decline.
• Applicants must complete a series of workshops/education sessions.
• Farmers can apply until April 14.

The public had the opportunity to weigh-in about program procedures and eligibility criteria in August. Most public commentary centered on payment limitations with consideration to adjusted gross income and specialty crops, a well as consideration to the length of intensive training about how to use the program. There is an additional 30-day period for public comment commencing March 1.

Farmers may receive $4,000 in assistance after an initial series of free technical-training classes. Klair said farmers are eligible to receive an additional $8,000 after writing an approved long-term business-adjustment plan to aid them in their future operations.

“It teaches farmers how to be more-efficient U.S. producers,” said Klair, who said the program has received numerous inquiry calls.

Klair said the “downside” to the program is its strict qualification requirements.

“It would be great if everyone could qualify,” said Klair.

Farmers can appeal a denied application.

To learn more about the intricacies of the program, visit http://www.fas.usda.gov/ITP/TAA/taa.asp or http://www.taaforfarmers.org/.

Should the federal government take more or less of a role in financially assisting farmers? How can farmers relay the significance of this program to media/the public if criticized?