Advertise in Print | Subscriptions
Published August 29, 2011, 05:30 AM

Peterson: Too soon to know impact of crop insurance program cuts

BRAINERD, Minn. — House Agriculture Committee ranking member Collin Peterson, D-Minn., said Aug. 15 in Brainerd, Minn., that there should be no changes to the crop insurance program in the 2012 farm bill.

By: Jerry Hagstrom, Special to Agweek

BRAINERD, Minn. — House Agriculture Committee ranking member Collin Peterson, D-Minn., said Aug. 15 in Brainerd, Minn., that there should be no changes to the crop insurance program in the 2012 farm bill.

“I am against making any cuts in crop insurance . . . any changes in crop insurance,” Peterson told the Minnesota Ag Leadership Conference, an event sponsored by Minnesota Corn, a growers’ group.

Peterson noted that in the 2008 farm bill, Congress cut back on the cost of the crop insurance program and authorized the Agriculture Department’s Risk Management Agency to renegotiate the agreement with the companies that govern the program, which had resulted in further savings.

Peterson defended those cuts, but said he thinks it is too early to evaluate the impact of those changes. “We need another year to know” what impact those changes have had, Peterson said.

The cost of subsidized crop insurance has increased along with the price of commodities to a total of between $8 billion and $9 billion this year, with about $7 billion going toward subsidizing about 55 percent of the cost of producers’ premiums. Those rising costs have led some farm lobbyists to note that crop insurance now costs more than any other farm program and may become a target for budget cutters and farm bill reformers.

Insurance executives and agents have complained about the cuts, but Peterson said that in the long run, “I think that (the changes) are going to be looked at as good.”

The changes, he said, were necessary to balance coverage between Iowa and a few other states where companies made most of their money and the Plains states such as North Dakota, Kansas and Texas, where they make the least.

Companies, he said, were paying agents in Iowa and southern Minnesota, for example, too much of the administrative and operating expense that the government pays.

Peterson said also noted that the Government Accountability Office had criticized the insurance program.

“Some things were not defensible,” Peterson said.

He noted that since the 2008 farm bill, Rep. Jim Cooper, D-Tenn., a key crop insurance critic, “has backed off.”

Crop insurance today, Peterson said, is much more politically acceptable than the direct payments crop farmers get whether prices are high or low.

‘Engaging’ Southern crops

In an interview after the speech, Peterson acknowledged that if Congress is to end the $5 billion direct payments program, crop insurance will have to work better for Southern crops. Cotton, rice and peanut growers have not put the effort into developing crop insurance programs that Northern farmers and their grower groups have, he said.

Noting that cotton “is engaged” and rice “is working” on a policy, Peterson said each industry has to ask USDA to develop policies that will work for their crops and put up some money for the writing and development of those policies.

The issue with rice is not yield, he said, but price and cost of production. Since rice fields are flooded, “rice will make a crop,” he noted, but the cost of production rises with the price of oil.

The peanut industry is “behind the curve,” he said, noting that peanut producers do not have mandatory price reporting and it is difficult to develop a policy without an independent source of information on prices.

Peterson said the crop insurance companies also are working on a proposal to manage agricultural disaster programs. Crop insurance executives have told him they think they can make payments in two or three weeks, which would be much faster than the federal government. The companies are supposed to present him a proposal this fall, he said.

Peterson also said he is opposed to proposals to require crop insurance program participants to comply with Swampbuster and Sodbuster provisions that currently apply to other farm programs but not to crop insurance.

“I am 110 percent against that,” he said.

Payment limitations on crop insurance would be “another disaster,” he said, because crop insurance is “a production support program.”

“Crop insurance for me is the bottom line,” Peterson said, adding that he fears that at some point it may be the only farm program left.

Tags: