The Senate proposal to place a $50,000 cap on premium subsidies for farmers buying crop insurance “could potentially impact participation” in the program, says Agriculture Secretary Tom Vilsack. The government pays an average of 62 cents of each $1 of premium, although the subsidy rate is as high as 80 percent on some policies. During a tele-conference, Vilsack said, “We don’t want to go back to the days of ad hoc (disaster relief) legislation. That could potentially be much more expensive.”
Congress raised the premium subsidy in 2000 to encourage sales and to end reliance on multibillion-dollar disaster bills whenever damage was widespread enough to get lawmakers’ attention. The 2014 farm law made crop insurance the mainstay of U.S. farm supports. Farmers enrolled some 294 million acres of crops last year. The program is projected to cost roughly $9 billion annually in coming years.
Sens. Jeanne Shaneen, New Hampshire Democrat, and Patrick Toomey, Pennsylvania Republican, say the cost of the program has doubled since 2000. Shaheen says the cap is “a common sense reform” to save an estimated $2.2 billion over 10 years by restricting subsidies to the largest 2.5 percent of operators. Toomey says some operations benefit from $1 million in premium subsidies – “This open-ended entitlement needs to be reined in.” A similar cap was proposed during drafting of the 2014 farm law.
The White House floated different reforms for crop insurance on Tuesday, targeting prevented-planting coverage and revenue policies that use harvest price triggers for indemnities. “The safety net is solid and still there” with those changes, Vilsack said.
The small-farm advocacy group National Sustainable Agriculture Coalition says a cap on premium subsidies is “one very important piece of a larger, much-needed crop insurance reform agenda.” NASC says crop insurance is skewed in favor of big farmers and producers who focus on widely grown crops such as corn, wheat and soybeans. “It is high time for crop insurance, a tiny program in the 1970s but for many years now the largest and most costly of all the farm subsidy programs, to join the ranks of all the other entitlements, with appropriate subsidy limits,” the group says.
Also during the tele-conference, Vilsack said, “A relatively small percentage” of farmers, around 75,000-80,000, have told USDA which crop support they want under the 2014 farm law. The deadline is March 31 to decide whether to enroll in the insurance-like Agricultural Risk Coverage program or the traditionally designed Price Loss Coverage program. ARC vs PLC is “an important decision. It will govern activities for the life of the farm bill,” the secretary said.
Vilsack said USDA hopes to complete work “in the next several months” on a new definition of who is “actively engaged” in farming and eligible for crop subsidies. However, a farm activist says the new rule may not take effect until the 2016 crop year, and could have limited scope because Congress doesn’t want the new definition, which will spell out who provides farm management, to affect family-run farms.