An industry group called crop insurance a key part of the financial safety net for farmers, and asked lawmakers to reject a proposal to slash the program by one-fourth. Tom Zacharias, president of National Crop Insurance Services (NCIS), said the 2014 farm law, which included the federally subsidized insurance program, “is a five-year contract between farmers and lawmakers. The bill introduced … by the usual opponents of farm policy breaks this contract, jeopardizes the livelihoods of America’s producers, and sends a message to those who live and work in rural America that they don’t matter.”
The bill, filed by Wisconsin Reps. Jim Sensenbrenner and Ron Kind, would get its largest savings, $19 billion over 10 years, by eliminating the premium subsidy for revenue insurance that includes the “harvest price option” (HPO). Those policies are purchased for two-thirds of the insured cropland in the country and generated 80 percent of payments from 2012-14. The industry likens the policies to homeowners insurance that is based on replacement cost of property. “It enables the producer to acquire the lost production at its replacement cost,” says an NCIS website—-important for growers who must pay cash to make up for grain they contracted to deliver to a buyer, and livestock farmers who lost a crop and need to buy feed.
Critics call HPO “Cadillac” coverage that is excessively costly to taxpayers when other, less expensive coverage is available and would carry growers through a crop failure. Those policies cover yields or market prices rather than the HPO policies that respond to both factors. HPO gets its name because it pays indemnities based on the harvest-time price of a commodity if it is higher than the price that was guaranteed when the policy was purchased at planting.
Kansas State U economist Art Barnaby, author of the concept that became revenue insurance, ridiculed the idea that the Sensenbrenner-Kind bill would impose no out-of-pocket expense on farmers. “Farmers have been buying the HPO because it replaces insured bushels at current market prices,” Barnaby wrote in a KSU blog. The policies allow growers to use the futures markets to hedge their risk and protect their incomes, he said, while traditional farm subsidies, based on commodity prices, provide little or no help to growers who lost a crop.
A mixture of left- and right-wing activists are behind the proposal to slash the privately run crop insurance, said Barnaby. The left would prefer a government-run program that excludes large operators and imposes more environmental rules, he said, while the right believes there should be no safety net.
“It will require a coalition of both Democrats and Republicans to prevent these proposed policies from becoming law,” said Barnaby. The first test, he said, will come shortly as Congress writes a government funding bill for the rest of this fiscal year. Republican leaders have promised to remove $3 billion in crop insurance cuts that were part of the budget deal enacted in late October.