A proposed crop insurance and risk management program that is commodity specific has received an enthusiastic greeting from American farm groups.
“It is quite significant that for the first time, a crop insurance program overseen by the government will cover livestock,” said the American Farm Bureau Federation.
Coverage would be available for hogs, sheep and cattle.
“There is agreement here in the United States that crop insurance is one program that needs to be thrown away or fixed,” said Dennis Stolte of the farm bureau federation in Washington.
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“This crop insurance fix is a real good start in making the crop insurance program more user friendly.”
Unveiled last week, the program proposes a larger federal government contribution paid to producers to help them buy insurance. No state participation is expected and farmers do not have to carry the insurance to obtain loans.
Traditionally, the higher the coverage, the higher the cost of the premium. Many producers opted for 50 percent coverage because it was the most economical.
The highest rates of government financial support of premiums will go to those who buy coverage for a greater percentage of their production.
There are also provisions for dealing with multi-year disasters with an average production history.
Producer income in the Dakotas, Minnesota, Texas and Oklahoma has dropped drastically three out of five years due to drought and unprecedented market dives.
“Their production history has lowered their possible coverage. This program would base the coverage on a longer term production history,” said Stolte.
Congress is also looking at introducing whole-farm insurance this year as a long-term fix.
In addition, a risk management plan is being offered to livestock producers.
The Farm and Ranch Risk Management Act would allow cattle producers to establish an easily accessible, tax-deferred rainy day fund that would provide a safeguard for revenue shortfalls in poor years, said the National Cattlemen’s Beef Association in a news release.
The farm bureau thinks the programs may be challenged under World Trade Organization rules because they are commodity specific.
Nevertheless the Americans say it is worth pursuing. If there is another weather-related crop disaster or livestock prices tumble, the government might be forced to give between $6 and $12 billion in ad hoc payments to farmers.
“Producers and policy makers in this country say that is a risk that is worth taking because we have such a terrible situation economically in commodities like pork, corn and soybeans,” said Stolte.
