The House Ag Committee held a hearing Wednesday on the state of the rural economy. House Ag Chair Mike Conaway said economic conditions for many producers have changed dramatically since the signing of the 2014 Farm Bill – and the net effect of drought and other natural disasters was an estimated 43-percent decline in net farm income over the past two years. Conaway said the U.S. Department of Agriculture has been working hard to implement the farm bill and get producers assistance they need – but Conaway told Secretary of Agriculture Tom Vilsack he was disappointed to see the administration’s Fiscal Year 2016 budget proposal slash 16-billion dollars from crop insurance. Conaway said the proposed cuts would undermine the farm bill and make the inherently risky business of growing the nation’s food supply even riskier. He said now is precisely the wrong time to weaken crop insurance – with commodity markets plummeting and producers struggling to find financing.
National Crop Insurance Services announced Tuesday that the crop insurance industry’s rate of return on retained premiums for the four years since the beginning of the 2011 Standard Reinsurance Agreement has fallen to six-percent. Congress authorized USDA to renegotiate the SRA to save money and also reduced some payments to crop insurance companies to fund other farm bill programs – but Risk Management Agency Administrator Brandon Willis says the rate of return for individual companies is not public and hasn’t been calculated for 2014. NCIS Chairman Tim Weber says the industry will fight any attempts to cut the crop insurance program.
Economist Explains Part of Reasoning Behind Crop Insurance Proposed Cuts
Economists say it’s too early for Congress to tell which commodity program will be adopted most by farmers. National Crop Insurance Services Adviser Keith Collins says the Congressional Budget Office has calculated more farmers than expected will sign up for the Price Loss Coverage option than for the Agricultural Risk Coverage. Based on these decisions – and lower crop prices – CBO concludes those programs will cost 9.5-billion dollars more over 10-years than projected when the farm bill was written. CBO also calculates crop insurance will cost 2.5-billion dollars less over 10-years due to lower crop prices – which mean less value – and a lower cost to insure those crops. Collins says these numbers are what propelled the administration to propose crop insurance program changes for 16-billion dollars in savings to make up for increased costs of the programs.