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The White House Takes Shots at Crop Insurance

If crop insurance is a target, no one in Washington has figured out how to hit it, nor is anyone likely to stop trying. The 2018 farm bill – only a couple of years away – may be the best chance to revamp the federally subsidized program, much as reformers would like to score a bull’s-eye now.

Leaders of the Senate and House Agriculture committees rejected an $18 billion cut in crop insurance almost as fast as the White House broached it as part of its fiscal 2017 budget package in February. “Essentially dead on arrival,” says Senate chairman Pat Roberts of Kansas. Farm-state lawmakers dispatched the proposal as rapidly as they buried a $3 billion cut that was written into a budget bill last December.

With the Agriculture committees adamantly opposed to the idea, cuts in crop insurance are seemingly off the table this year. The budget deal between the Obama administration and the Republican-controlled Congress at the end of 2015 removed the impetus for broad-scale budget cuts this year. A couple of free-standing bills that would cut crop insurance by 25% have been sidetracked.

“Any crop insurance reform budget proposal now is, at best, a conversation starter,” says Ferd Hoefner of the small-farm group National Sustainable Agriculture Coalition. “It is an important conversation and one that will no doubt intensify as the next farm bill cycle approaches.” Hoefner says without “sensible reforms,” crop insurance will be vulnerable in a future round of budget cuts.

“That’s when you’ll see reform . . . when they need the money,” says economist Bruce Babcock of Iowa State University and a crop insurance expert. “Right now, there is no interest” among farm-state lawmakers because they don’t want to forfeit a bargaining chip for future negotiations.

The White House proposal was a sizable reduction – 10 percentage points – in the premium subsidy for revenue insurance policies. Included are:

  • The harvest price option, written on 80% of policies, estimated to save $16.9 billion over 10 years.
  • Reforms of prevented-planting coverage, including removal of optional buy-up coverage, estimated to save $1.1 billion over a decade. 

The harvest price option creates “the potential for ‘windfall’ profits,” say budget documents.

In a favorite description of lawmakers and farm groups, crop insurance is a partnership of growers, government, and insurers who share the risk and cost of agricultural production in unpredictable weather. Farm groups gave crop insurance their top priority in the 2014 farm law. “For crop insurance to be successful and to operate as intended, it must remain affordable and widely available to farmers, and that private-sector delivery must remain viable,” say crop insurers in faulting the administration proposal.

“We think in a partnership, it makes more sense to be closer to 50-50,” says Agriculture Secretary Tom Vilsack. The proposed 10-point cut would put the government’s share at slightly above half of the premium. Farmers would pay more.

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