WASHINGTON, January 25, 2012 -With direct payments as the “sacrificial lamb” for budget cuts in the next Farm Bill, crop insurance will become the main safety net for the nation’s growers, said Bill O’Conner, former chief of staff for the House Agriculture Committee who now serves as a senior adviser for McLeod, Watkinson and Miller.

“Farmers are receiving prices for their commodities the likes they’ve never seen before. But input costs are going up just as fast and they don’t go down that fast,” said O’Conner. “If something happens to the crop or the price, they’re in more trouble than ever before, because they have more invested. This makes crop insurance as important as ever.”

O’Conner, who was representing the American Association of Crop Insurers, Bev Paul of the American Soybean Association, and Tom Sell of Combest, Sell & Associates, spoke to Farm Credit Council members at their annual meeting Tuesday.

Crop insurance has grown three-fold in the last ten years, said Sell, with sales jumping from $37 billion to $114 billion. However, while crop insurance grows, it will increasingly become a target for budget cuts.

“There are not many defenders for ag spending,” said O’Conner. “This will be a semi-permanent problem until this $15 trillion deficit gets into some perspective that the government can deal with.” The three panelists agreed that the biggest challenges are education for agents and farmers regarding the complexities of crop insurance as well as the political challenge to defend the crop insurance program. 

“Premium subsidies are the biggest expense in the program,” said Paul. “If those are cut, it will go straight out of the pockets of our farmers.”

The speakers said crop insurance is more important to famers than ever before due to high input costs, weather and the potential elimination of direct payments. Indemnity payments surpassed $9 billion and payments made to farmers for damages to the 2011 crop will continue to rise.

O’Conner warned against damaging crop insurance while writing the Farm Bill this year.  A private delivery system is vital, but he said many plans to re-craft farm policy as well as the reorganization of the Farm Service Agency, may inadvertently harm crop insurance.



Original story printed in January 25, 2012 Agri-Pulse Newsletter.

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