WASHINGTON, June 7 – Four U.S. Senators introduced amendments to the 2012 farm bill today that would reduce the amount of crop insurance premium subsidies that individual farmers could receive.
An amendment by Sen. Tom Coburn, R-Okla. and Sen. Dick Durbin, D-Ill., would reduce premium subsidies by 15 percent for farm businesses with adjusted gross incomes of more than $750,000. It would save about $1.2 billion over 10 years.
Sen. Jeanne Shaheen, D-N.H., and Sen. Pat Toomey, R-Pa., introduced a measure that would place a $40,000 cap on the amount an individual can receive in premium subsidies each year. It would save about $5.2 billion over 10 years.
In 2011, on average, taxpayers paid for 62 percent of farmers’ insurance premiums, with farmers covering the other 38 percent.
Although limits on crop insurance premiums are aimed at large farming operations, Nebraska crop insurance agent and farmer Ruth Gerdes pointed out during a recent House Agriculture Subcommittee meeting that farmers of all sizes have the potential to be adversely impacted by a $40,000 limit. For example, she cited a Nebraska farm that would max out (under a potential $40,000 cap) at 568 acres, due to the combination of levels of risk. If the same farm included all high-risk ground, it would max out at about 300 acres, Gerdes said.
For high-value specialty crops, a $40,000 limit could kick in on farms as small as 50 acres, according to a recent analysis by Dan Carothers, Personal Ag Management in Bakersfield, Calif.
Senate Agriculture Committee Chairman Debbie Stabenow, D-Mich., and ranking member Pat Roberts, R-Kansas, defended the crop insurance program during a press conference on the 2012 farm bill Wednesday.
Roberts noted that although there are critics of crop insurance, “it is the number one issue for farmers, ranchers and lenders across the country.” He explained that amendments to the crop insurance system could be considered, but said, “I remain confident that this will be the centerpiece” of the farm safety net.
“It is a public-private effort. It is very different from direct payments,” Stabenow added. “It is insurance. There is no payout unless you have a loss.”
However, the Environmental Working Group applauded the four senators for their amendments.
“The federal government cannot justify providing extraordinarily costly subsidies to the most profitable and financially secure farm businesses that can easily afford to share more of the cost of their crop insurance,” said Craig Cox, senior vice president of agriculture and natural resources at the Environmental Working Group (EWG).
In April, the Government Accountability Office (GAO) responded to a request from Senators Durbin and Coburn to look at the potential impact of a $40,000 limit on crop insurance premium subsidies.
USDA Under Secretary for Farm and Foreign Agricultural Services Michael Scuse wrote the Administration’s response to the GAO findings. Scuse argued that caps would affect different commodities and regions of the country differently and that USDA’s ability to track and control subsidy limits “would be virtually impossible,” he emphasized.
Agricultural lenders are also weighing in with concerns about changes in the affordability of crop insurance. For example, AgCountry Farm Credit Services is a farm lender and also provides crop insurance to farmers in 44 counties in eastern North Dakota and northwest and west central Minnesota.
According to Howard J. Olson, Senior Vice President for Financial Services at AgCountry, 37 percent of the farmers and 74% of the acres in their territory would be impacted by a $40,000 subsidy limit.
Without the full subsidy, crop insurance premiums in our area would increase to 14-16% of the cost of production, which is much more than farmers are willing or able to pay, Olson says.
“They would drop out of the crop insurance program or would insure only the highest risk crops. Low participation and adverse selection are detrimental to any insurance program. There will eventually be a disaster that would affect the uninsured crops, and then Congress will have farmers seeking ad hoc disaster programs once again.”
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