To improve risk management: Crop insurance needs more refining
May 1, 2003 12:00 PM, By Ron Smith Farm Press Editorial Staff
Despite 20 years of changes and improvements, crop insurance programs still need tweaking to provide farmers better risk management tools, says a USDA spokesman.
Ann Jorgensen, director of external affairs for the USDA Risk Management Agency, says crop insurance has grown from a $5 billion a year program to $40 billion in coverage in the last 20 years.
“And 50 percent of the farmers who buy crop insurance select coverage at 70 percent or higher. It has become an important risk management tool, but we need to strengthen the program.”
Jorgensen identified some of the weaknesses and farmers informed her of a few more during an open forum following her presentation recently to the Plains Cotton Growers, Inc., annual meeting. The PCG meeting was held in conjunction with the Texas Ginners Association Conference and Expo recently in Lubbock.
Jorgensen said the mission of the Risk Management Agency is to assist farmers in economic decisions. “We try to identify under-served producers and make certain they understand what's available.”
She said crop insurance should be a key element in a farmer's risk management program. “Insurance improves a producer's ability to obtain crop loans and provide financial protection. But we want to continue to refine the program to provide an even better safety net.”
She said a cost of production insurance program could help.
“A cost of production product is difficult to develop,” she said. “A proposal is in the works but has been sent back to USDA to resolve some issues.”
She also noted that “prevented planting” provisions in crop insurance may provide more relief than many farmers realize.
“Most farmers find they are covered better than they thought.”
She also discussed inequities in the Agricultural Assistance Act of 2003, which may penalize farmers who have a higher level of insurance coverage. “We hope to address most of the concerns raised about the issue,” she said.
“We hope a minimum penalty for farmers who prudently added higher levels of insurance will mitigate these concerns.”
She said USDA received some 210 sets of comments during a public comment period and each set included multiple concerns. “Respondents addressed more than 2000 provisions, and it is taking longer to address these concerns than we would like.”
In response to a question, Jorgensen said USDA is aware of concerns of dryland farmers who have withstood a long period of drought and depressed prices.
“Everything the crop insurance offers is tied to yield,” one farmer said. “Dryland farmers have dealt with drought for years, so our yield has decreased significantly. Insurance doesn't cover production costs any more, so we can't afford to insure a dryland crop. Why not tie insurance coverage to a dollar amount instead of yield?”
Jorgensen said if the cost of production program goes through, it will answer many of the dryland producer's concerns.
“These are challenging times for the world and for U.S. agriculture,” Jorgensen said. “We understand that farmers have problems with the crop insurance program and we are looking for solutions. We may not all agree on the best solutions, but we will continue to promote crop insurance and provide better risk management tools to provide a farm safety net.
“RMA encourages farmers to prepare for continuation of the drought and increase their level of insurance coverage.”
She pointed farmers to the RMS website, www.rma.usda.gov, as a source of information about various programs.
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