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Farmers, insurers concerned over crop insurance premiums

Published on December 31, 1969 3:01AM

Last changed on September 9, 2013 7:29AM


Capital Press

A vote in the U.S. Senate on Thursday to reduce the federal crop insurance premium subsidy for large producers is concerning to grower groups and crop insurers.

In its farm bill debate, the Senate voted 59-33 to reduce the government's share of crop insurance premiums to growers with an average annual adjusted gross income in excess of $750,000.

The amendment, offered by Sens. Dick Durbin, D-Ill., and Tom Coburn, R-Okla., would reduce the level of premium support for those growers by 15 percent. They argued there is no justification for the government to continue providing 62 percent of premiums for the wealthiest farmers.

"We're really concerned," said Brooke Shupe, director of government affairs for risk management for National Association of Wheat Growers.

While a $750,000 income is a lot of money, all income, on and off the farm would be counted. That would include the income of anyone having ownership in the farm, including siblings who have nothing to do with the farm's operation or farms that are supporting several families, she said.

"Farms are set up in many different ways," she said.

In addition, when farmers pencil out the new, higher premiums, they might decide insurance isn't worth the money for an insurable event that is likely to occur infrequently, and that would narrow the risk pool, she said.

"With crop insurance, you want the risk pool to be as large as it can be to make it more affordable for everyone," she said.

If large farmers leave the program, it could make premiums more expensive for everyone, she said.

"We have a lot of concerns. It could dramatically shape the way federal crop insurance works," she said.

Even with last year's worst drought since the 1930s, there wasn't a single call from any commodity group for ad hoc disaster assistance. That shows the current crop insurance works, she said.

Growers who would be affected by the Senate's action are very concerned, said David Graves, manager, secretary for the American Association of Crop Insurers.

"It's class warfare," he said.

The Senate has singled out certain-sized farms. It's discriminatory, and federal crop insurance has never operated on a discriminatory basis, he said.

"It's an interesting twist in policy designed to assist farmers with events they have no control over. We think it's terrible policy," he said.

Disaster does not discriminate on the basis of farm size, and crop insurance shouldn't either, he said.

"I'm sure all the large farmers in the Corn Belt last year would have liked to have a break (from the drought) because they have large farms," he said.

Until now, crop insurance has worked on an equal basis, with USDA setting premium rates that vary across crops and geographical areas. And growers pay hard-earned money for that risk management, he said.

Idaho's grain growers are against the proposal, even though it won't impact most of the state's grain growers, said Kelly Olson, administrator of the Idaho Barley Commission.

Crop insurance is an effective risk-management tool with public-private cost share, and it is beneficial to keep those large producers in the program, she said.

Insurance rates are adjusted annually and risk calculations are extremely complex, but losing large farmers from the program would certainly alter the risk pool.

"We don't want all the risk to fall to certain classes of farmers. We want producers of all sizes and geographic locations so the pool is large enough to cover the risk," she said.

Durbin and Coburn estimate the proposal would impact the wealthiest 1 percent of all producers, 15,000 to 24,000, and would save nearly $1.1 billion annually.

They said those wealthiest farmers, on average, receive $220,000 in annual crop insurance premium support, while 80 percent of farmers not affected by the proposal receive an average of $5,000 annually.

Calls to other commodity groups and insurers were not immediately returned on Friday.


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