Crop insurers hope broader insurance will avoid ad hoc disaster aid
The Hagstrom Report
BONITA SPRINGS, Fla. — Though members of Congress and the Trump administration have taken credit for providing billions in disaster aid to help farmers and foresters cope with hurricanes, flooding, forest fires and other weather disasters in the last few years, it was clear at this year’s crop insurance industry meetings here the need for ad hoc disaster aid has congressional aides and crop insurers worrying about the future of crop insurance and looking for ways crop insurance can address those situations.
In addition, farm lobbyists worry critics will focus on the Trump administration’s use of the Agriculture Department’s Commodity Credit Corporation, a line of credit at the Treasury, to provide Market Facilitation Program payments and other trade aid totaling $28 billion to compensate producers for lost exports due to tariffs that other countries have imposed in response to President Donald Trump’s trade agenda.
“There is a lot of conversation about MFP and also ad hoc disaster payments. It shows where there are opportunities for crop insurance,” Matt Schertz, the Republican staff director on the House Agriculture Committee, said during a panel discussion about previous and future farm bills.
Schertz added he would “encourage” the crop insurance industry “to take ownership” of these issues.
The subject is a sensitive one. When the modern crop insurance program was created in 2000 in a bill written by Sen. Pat Roberts, R-Kan., now the Senate Agriculture Committee chairman, and then-Sen. Robert Kerrey, D-Neb., the argument was that crop insurance would mean that ad hoc farm disaster aid would never be necessary again. And until the last three years, there had been very little disaster aid.
Critics of farm spending in general are likely to take notice of both the disaster aid and the trade aid when the next farm bill is written in 2023.
As Ashley Hungerford, a USDA economist, put it as she showed a slide of the many disaster aid programs, “It’s fascinating how ad hoc (disaster aid) has evolved over the last several years.”
The Agriculture Department’s Risk Management Agency, which manages the crop insurance program that is delivered by private companies, even got involved in the distribution of what were called “top up” payments to farmers who could not plant their crops. Congress provided additional funds and, at RMA’s direction, the crop insurance companies delivered the money.
USDA Risk Management Administrator Martin Barbre, who spoke at both the Crop Insurance and Reinsurance Bureau annual meeting and the broader Crop Insurance Industry Annual Convention, took credit for RMA’s and the companies’ efficient distribution of the funds. Barbre said the idea of using RMA for the distribution came from Agriculture Secretary Sonny Perdue and was approved by Agriculture Undersecretary for Farm Production and Conservation Bill Northey.
RMA and the companies “got the money into producers’ hand faster and cleaner,” Barbre said.
But Barbre also announced a hurricane protection insurance program and a program called Nursery Value Select, a crop insurance option for nursery crop producers, including those growing hemp.
In an interview, Barbre noted that Congress has told RMA to try to develop crop insurance to cover more crops and more problems, and he added, “We’re working on it.”
But solving some of the problems that have been addressed by disaster aid is not easy.
RMA continues to look at ways to provide more coverage for prevented planting but doesn’t want to “encourage” farmers not to plant if they possibly can, Barbre said.
Representatives of commodity groups said on a panel they are hopeful about improving crop insurance in the next farm bill.
Reece Langley of the National Cotton Council said that the 2017 and 2018 hurricanes “exposed a gap in crop insurance” and growers “who had put everything into production” had needed the disaster aid. But the hurricane endorsement will help cotton, he said.
Robert Guenther of the United Fresh Produce Association, who represented the broader Specialty Crop Farm Bill Alliance, also noted, “Growers in the South didn’t have the tools they need.”
Guenther also said that the specialty crop industry has a lot of ideas on research and food safety but has struggled to come up with crop insurance products to encourage more participation.
Paul Bleiberg of the National Milk Producers Federation said that milk producers are “relative newcomers” to insurance and that he sees more opportunities in the future.
Bart Fischer, the former House Agriculture Committee Republican chief economist who is now a professor at Texas A&M, said he believes that the Whole Farm Revenue Protection crop insurance policies can be expanded to deal with many of these problems.
There have been proposals for a permanent disaster program, but Fischer said it’s unlikely Congress will approve such a program.
“We do have a model delivered by federal crop insurance,” Fischer said.
Scott Graves, a former Republican staff director of the House Agriculture Committee who is now executive director of the American Association of Crop Insurers urged the industry not to come with the idea of “this is how we can absorb cuts.”
Tom Zacharias, president and CEO of National Crop Insurance Services, which provides technical help to the industry, said that “going forward, the Hurricane Insurance Protection — Wind Index Endorsement and the Nursery Value Select pilot are examples of policies that strengthen crop insurance and stave calls for ad hoc. Approved Insurance Providers work hand-in-hand with RMA to continually strengthen the products offered and make even more policies available to more farmers in more states and counties across the United States.”
Zacharias also noted that the industry is focused on program integrity.
“If one examines industry efforts and resources that are devoted to compliance, data mining, policy review and program audits, one will find that program integrity is a priority for our industry and will remain so,” Zacharias said. “A lot of folks in rural America depend on us, and a lot of folks in America are watching us.” ❖
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