Crop Insurance Dominates Farm Bill Hearing

Witnesses during hearing all talked about the importance of crop insurance as part of the safety net.

Published on: Mar 16, 2012

On Thursday the Senate Ag Committee held its final farm bill hearing focused on commodity programs and risk management. Chairwoman Debbie Stabenow, D-Mich., said that strengthening crop insurance and reforming farm programs are top priorities for her as the Committee works to develop strong risk management tools for farmers. She noted that one storm can wipe out an entire crop and jeopardize a farm in a matter of minutes.

Stabenow said that farm policy should focus on risk management that helps producers who have suffered a loss on the crops they actually grow.

"I have heard again and again from farmers and ranchers across the country that crop insurance is the most important risk management tool," Stabenow said. "It is absolutely imperative that we get these policies right."

The hearing featured testimony from a range of farmers, commodity groups, and other stakeholders unilaterally calling for strengthening risk management tools to continue producing a safe and affordable national food supply.

During his testimony, National Farmers Union President Roger Johnson took the opportunity to promote the Market-Driven Inventory System. MDIS, an agricultural commodity program that mitigates price volatility, is being promoted by NFU.

"It provides advantages to livestock producers and the biofuels industry," Johnson said. "In addition, it would reduce government expenses, increase the value of crop exports and maintain net farm income over time."

The central feature of MDIS is a voluntary, farmer-owned and market-driven inventory system based on recourse loan rates set at a level below total cost of production but above variable costs. The University of Tennessee's Agricultural Policy Analysis Center came up with the plan.

According to the study, during the 1998 to 2010 time period, actual government payments for the eight program crops totaled $152.2 billion, excluding crop insurance premium subsidy payments. If MDIS had been in place during this time, farmers would have received $56.4 billion from the government, in storage payments, while earning roughly the same net farm income. During that period, taxpayers could have saved nearly $100 billion.

ASA President Testifies

The president of the American Soybean Association, Steve Wellman, told committee members of the importance of passing a farm bill this year. He pointed to a comprehensive and revenue-based safety net, the integrity of crop insurance, and the critical need to maintain planting flexibility. The hearing comes as ASA's leaders gathered on Capitol Hill for the association's Washington board meeting.

"We recognize that deficit reduction is a national priority, and that agriculture should do its fair share in helping to bring down federal spending," Wellman said. "Last fall leaders in both the Senate and House Agriculture Committees committed to cutting $23 billion from the cost of the next farm bill. We believe this level of cuts will still allow the Committees to write new farm legislation that continues to provide an adequate safety net to producers. "

Cotton Wants Revenue Insurance

The U.S. cotton industry believes a revenue insurance program that supplements existing insurance products would provide an important and affordable tool - especially given the weather uncertainties and risks that farmers face. Recalling last year's variable weather, National Cotton Council Chairman Chuck Coley told the Senate Ag Committee on Thursday, that they have to have access to crop insurance, risk management tools and even emergency assistance programs to survive and recover from these natural disasters.

"The availability of effective risk management tools like crop insurance is important even in so-called normal years because cotton producers need to recover a portion of lost revenues if their crop is damaged after they have invested in the inputs, technology and equipment necessary to produce and market a crop," Coley said. "In those areas where cotton growers have not had access to adequate coverage we want to continue to work - to improve and increase the products that are available to our growers."

The Council's risk management program proposal, Coley said, makes a significant change in the cotton program structure, but, a necessary one. He said the risk management program has been estimated to significantly reduce outlays compared to previous years and is at least a 30% spending reduction compared to extending the existing cotton program.