Senators propose new caps on crop insurance premium subsidies

By Sara Wyant

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, April 2, 2014 - Less than two months after President Barack Obama signed a new farm bill into law, two U.S. senators are already eager to change it - including one who voted for the $956 billion package on Feb. 7.

Senators Jeanne Shaheen, D-N.H. and Tom Coburn, M.D., R-Okla., introduced legislation today that would cap crop insurance premium subsidies at $70,000 per farm each year. They say the new limit would resulting in savings that would reduce the deficit by approximately $1 billion over 10 years and would impact less than 1.3 percent of producers, according to a 2011 Government Accountability Office report

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“Crop insurance subsidies are yet another example of egregious government spending that needs to be reeled in,” Senator Shaheen said. “We need to protect taxpayers from footing the bill for a crop insurance program that benefits large companies that need it the least and at a level that is disproportionately more than what any New Hampshire farm receives.”

Sen. Shaheen voted for the farm bill, formally known as the Agricultural Act of 2014, this year, but Sen. Coburn did not.

Last year, New Hampshire farmers purchased only 92 policies covering about 9,000 acres, according to the Risk Management Agency's summary of business.

“Crop insurance premium subsidies should go to those who need assistance rather than those who don't,” said Senator Coburn, who has previously co-sponsored legislation with Sen. Dick Durbin, D-Ill, to apply means testing on crop insurance purchasers. “The way to address trillion dollar deficits is one billion - or million - dollars at a time. This reform takes us $1 billion in the right direction by ensuring that the wealthiest farm operations are not receiving unnecessarily large federal subsidies.”

Oklahoma producers purchased 41,084 crop and livestock policies in 2013, covering almost 7.3 million acres.

The Environmental Working Group (EWG), which frequently criticizes the public/private crop insurance system, welcomed the legislation.

“Congress missed an opportunity during the renewal of the last farm bill to fix the flawed crop insurance program by putting some limit on the amount of subsidies that farm operations can get to lower the cost of their insurance policies,” said Craig Cox, EWG's senior vice president of agriculture and natural resources. “The largest and most financially secure farm businesses harvest most of those subsidies, and this bill is a good start toward leveling the playing field.”

Unlike federal commodity programs - which are totally funded by taxpayer dollars, farmers pay to insure their risks at various levels of protection under the Federal Crop Insurance Corporation. Crop insurance premiums are subsidized at an average rate of 62 percent.

But farm organizations have long argued that transitioning to programs like crop insurance - where farmers have more “skin in the game” is a better form of risk management - for both farmers and taxpayers - than traditional “ad hoc” disaster programs which have paid out billions of dollars in previous farm bills.

During the current farm bill debate, a coalition of farm organizations and environmental groups partnered to keep payment limits away from crop insurance in the farm bill - in exchange for applying conservation compliance requirements on any grower who purchases a policy. They argued that it was good for farmers and good for the environment to keep any grower - regardless of size or income - in the crop insurance program.

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