AMES, IOWA, July 19, 2012 – As the drought continues to worsen and more and more lawmakers are making the case for passage of the 2012 farm bill, the Environmental Working Group (EWG) is still trying to hit the “reset” button on the federal crop insurance program.
“We have a gold-plated disaster program that is called crop insurance,” explained EWG’s Vice President of Government Affairs Scott Faber during a briefing with reporters on Thursday. “The idea that Congress has to act this year to pass this flawed farm bill in order to help farmers suffering from this drought is simply incorrect.”
“What is happening this year is compelling evidence – if more evidence was needed – that farmers need a safety net,” explained Craig Cox, EWG Senior Vice President for agriculture and natural resources.
“The government should step in when farmers suffer potentially crippling losses because of bad weather or other circumstances that are out of their control. Crop insurance could and should be that safety net. But the dramatic structural changes Congress made to crop insurance in 2000 will threaten the fiscal and political sustainability of crop insurance as this drought highlights the serious unintended consequences of those changes,” Cox said.
Iowa State University Professor of Agricultural Economics Bruce Babcock made the case that, if corn prices stay at the current price of $8/bushel or higher going into the fall, farmers who lose large portions of their crop and purchased crop insurance revenue policies based on harvest prices could receive large insurance indemnities
“When payouts during droughts return greater revenue than would have been earned during normal weather, something is amiss with crop insurance rules,” added Cox. “We fear that is exactly the situation we now face.
Babcock declined to predict the exact size of the crop losses this year or the total level of indemnities, but he does expect crop insurance companies to have a loss this year, the first year since 2002.
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