Options In Crop Insurance

The crop insurance industry has been in an uproar over USDA’s proposed $6 billion cuts to the Standard Reinsurance Agreement (SRA) under federal crop insurance. But as of July 12, the battle is over, with USDA’s Risk Management Agency (RMA) receiving signed SRAs from all 16 private insurance companies who participated in the federal crop insurance program during the 2010 crop year. This formalizes the negotiation process that has been underway since last December. The SRA is a contract between the government and private industry that dictates terms of insurance policies for five years.

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According to USDA, the new SRA is projected to achieve $6 billion in savings over the next 10 years, two-thirds of which will help pay down the federal deficit while the remaining third will support high-priority risk management and conservation programs.

“The new agreement lays the foundation for a more sustainable federal crop insurance program, reduces the federal deficit, and improves the farm safety net for producers by providing incentives for companies to sell policies in all areas so farmers across the country can access these critical risk management tools,” said Agriculture Secretary Tom Vilsack in a July 13 release. “USDA appreciates the efforts of the companies to negotiate a new agreement in good faith, with straightforward and constructive dialogue to develop an agreement that works for the companies, producers, and taxpayers.”

These cuts come in addition to the $6 billion in cuts to crop insurance sustained in the 2008 Farm Bill, some of which have yet to be implemented, including the looming problems of delayed compensation to companies and early payment of premiums by producers, according to the Crop Insurance Professionals Association (CIPA), a national organization of agents.

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The good news is that vegetable growers may find that more crop insurance money is available to them, according to Tom Sell with CIPA. Sell says crop insurance availability to vegetable growers has grown within the last 10 years, and in part, the design of the new SRA is to move money from large, profitable row crops to less served areas of agriculture, such as vegetables.
One area of concern is that the SRA was successful in getting rid of catastrophic insurance policies, on which fruit and vegetable areas often rely, Sell says. USDA has been trying to reduce these policy agreements for years and the new SRA makes it hard to deliver catastrophic policies, but offers new options instead.
USDA is also introducing a new combination crop insurance policy and land identification program that will require new training and extensive new requirements for agents and growers. Sell says essentially the program aims to increase efficiency over the next four to five years, but in the short term will incur more cost and paperwork. “The combo plan combines a number of policies and because this is a private industry/government partnership, each policy has its own set of procedures that go along with them, related more to field crops,” he says. “In theory, it sounds good to combine policies, but it’s a tremendous undertaking that adds another layer of required change to the industry, in addition to absorbing $6 billion in cuts. The new deal is complicated and messy, but private industry is good at being efficient and creative, so that is what makes us
optimistic that we can do this.”

CIPA Concerns

 
 
 

 

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