crop insurance risk management plan

Crop insurance critical part of risk management plan

• The federal crop insurance program remains strong and a critical part of farmers’ risk management plans. • Farmers and legislators must focus on improving and expanding the program. • Fraud, waste and abuse hurt farmers and jeopardize public support.

The federal crop insurance program remains strong and a critical part of farmers’ risk management plans, but to make certain it remains strong, farmers and legislators must focus on improving and expanding the program.

“We need to position crop insurance so that producers can rely on it for years to come,” said Brandon Willis, administrator, USDA Risk Management Agency.

Willis, speaking at the 56thannual meeting of Plains Cotton Growers last week in Lubbock, said crop insurance has already become a crucial aspect of U.S. farmers’ safety net.

Some 90 percent of U.S. cotton farmers enrolled in the crop insurance program last year and cotton growers received more than $1 billion in indemnities following losses for 2012. “For every $1 in premium, crop insurance returned $1.29 in indemnities,” Willis said.

To keep the program strong, the industry should focus on three areas over the next few years, he said.

The first is fraud, waste and abuse. “Program integrity is essential. Fraud, waste and abuse hurt farmers and jeopardize public support. We’ve already made progress with a data mining program that includes innovative weather tools.”

That program, Willis said, was responsible for identifying crop insurance fraud in North Carolina and resulted in more than $100 million in restitution.

“We will use all the resources we can to decrease errors and fraud and take away ammunition from crop insurance critics.”

A second focus point will be expanding crop insurance to more producers. “We know there are areas where insurance is inadequate or unavailable,” he said. He hopes to get the message out that crop insurance does more than “protect the bottom line. It also provides peace of mind. We’ve come a long way in expansion,” he said, “but we still have crops and enterprises that do not have adequate coverage — livestock, for instance.”

Organic production

Organic production is another area that needs more coverage. Organic agriculture included more than two million acres in 2011. “Very few were covered. It will be a challenge to expand that coverage but we need to do it. We need participation from coast to coast to keep crop insurance stable.”

Public education is another key issue, Willis said. “Crop insurance is important to farmers but it is also important to consumers. Taxpayers fund two-thirds of the cost.” Farmer contributions, he added, are also not insignificant accounting to more than $4 billion last year.

And taxpayers are not as aware of contributions farmers make or the challenges they face as was the case less than 100 years ago.

“In 1933, when the first program was devised to provide a safety net, 33 percent of the population lived on a farm. Now, some 16 percent of the population live in rural areas and less than1 percent derive their primary income from farming.”

He said farmers and other industry spokesmen have asked Congress to “do no harm” to crop insurance as they debate new farm legislation. “We need to illustrate how crop insurance benefits the public. And it does.”

American farms and ranches provide more than 85 percent of the country’s food supply and create more than 1 million jobs. Also, U.S. consumers pay less than any developed nation for food.”

He said crop insurance indemnities allowed rural communities to retain jobs and allowed farmers to make decisions for the future. “It also helps maintain a stable food supply.”

A strong crop insurance program, Willis adds, is crucial for the next generation of farmers. “We need the best and brightest to return to the farm. Without crop insurance, only those who can self-insure will be able to afford to farm.

“Crop insurance allows young people to return to family farm operations. Many farmers mortgage everything they have to continue farming for another year.”

Without a crop insurance safety net, few young men or women could take that risk.

“Willis said crop insurance over the past few years has been essential to protect agriculture and has done so without Congress needing to pass ad hoc disaster bills.

“Congress used to spend huge sums on ad hoc disaster bills. But following widespread drought, there have been no widespread calls for ad hoc disaster spending. We’ve only heard calls for help in areas that were not covered.”

U.S. Representative Randy Neugebauer (Texas 19th) is supporting a crop insurance program that will “give producers the ability to carry higher levels of coverage and to manage risk better. I hope that will be part of the next farm bill,” he said, also in remarks to the PCG annual meeting.

(To see Neugebauer’s comments, see Budget concerns loom over farm bill debate).

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