U.S. farm bill | Proposed legislation would slash crop insurance spending and save American taxpayers billions
KISSIMMEE, Fla. — U.S. farm groups are determined to fend off attacks on the federal crop insurance program.
“It really is the cornerstone of the farm bill and risk management for growers,” said Pam Johnson, president of the National Corn Growers Association.
She shared a personal anecdote to illustrate why U.S. growers are drawing a line in the sand with Washington when it comes to defending crop insurance.
Johnson’s farm in Floyd, Iowa, was hit hard by the 2012 drought. She watched her crops wither in the field with the passing of each bone-dry week. The family prayed for rain until they realized it was too late.
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When all hope had evaporated, Johnson’s 82-year-old father gave her and her brothers a pep talk. He reminded them that the family had endured tough times in the past and had the grit to persevere.
“My son said to me, ‘Mom, I have a lot more than grit. Thank God I have crop insurance, ’” she said.
“That’s how important it is.”
U.S. farmers have received a record $14.7 billion in indemnity payments for the 2012-13 crop year, and another $1 to $2 billion is likely on the way.
Two-thirds of that money has gone to the nation’s corn growers, who were most affected by last year’s drought.
The record payments are a big reason why growers posted near record farm income in 2012, despite suffering through what the U.S. Department of Agriculture calls the “most severe and extensive drought in at least 25 years.”
Growers insured 86 percent of planted farmland in 2012, demonstrating the popularity of a program that has recently become a target of deficit-cutting politicians in Washington.
Republican House of Representatives member John Duncan and Republican senator Jeff Flake have tabled a bill that would reduce the government’s share of the federal crop insurance program to 37 percent from 62 percent.
“The crop insurance program has turned into a huge taxpayer-funded boon for some of the biggest multinational insurance companies and multimillionaire corporate farmers,” Duncan said in a news release.
“In a time of record deficits and an incomprehensible $16.5 trillion in debt, this program can no longer be justified in its current form.”
The Congressional Budget Office estimates the Crop Insurance Subsidy Reduction Act will save U.S. taxpayers $40.1 billion over 10 years.
The proposed legislation has the support of the Environmental Working Group, which says crop insurance is costing U.S. taxpayers far more than traditional ad hoc disaster relief programs at a time when the farm economy is thriving.
Farm groups are in no mood for cuts to crop insurance, and neither is the U.S. Department of Agriculture.
U.S. agriculture secretary Tom Vilsack told reporters at the 2013 Commodity Classic that crop insurance must remain intact in the next farm bill, particularly if, as expected, direct payments are removed from the subsidy package.
“I’d be a little reluctant to say that it’s too good a deal and I would be very reluctant to say that in the context of what I think is likely to happen, which is that direct payments are likely to be changed dramatically,” he said.
“It’s expensive. It’s really expensive to put a crop in the ground. And one or two bad years can take a mature operation under and it can clearly take a beginning operation under.”
Vilsack said crop insurance can be tweaked, but he is not in favour of wholesale changes to the program.
Johnson acknowledged that it may be tough to convince taxpayers to continue funding the program at a level that provides near record income during a once in 50-year drought.
She has lived through a lot of subsidy programs and none compare to the risk management system in place today.
“Farmers are in the best economic shape they’ve been in for a long time, even though they came through the drought,” she said.
Danny Murphy, president of the American Soybean Association, said Washington no longer has the wherewithal to fund ad hoc disaster programs.
“It’s really important that each grower takes it upon himself to make sure that he has the insurance coverage to protect himself,” he said in an interview at Commodity Classic.
Murphy said with historic high prices come historic high production costs. He shudders to think what would have become of growers last year if they didn’t have crop insurance to protect themselves from drought.
“Without that, I think you’d have seen widespread farm failures across the Midwest,” he said.
“It gives you the option to make sure that one bad crop doesn’t really put you out of business.”
