'Work in progress'FARGO, N.D. — The federal crop insurance program enjoys widespread, growing support as a risk management tool, officials say. They also say the program must continue to evolve to meet the needs of agricultural producers.
By: Jonathan Knutson, Agweek
FARGO, N.D. — The federal crop insurance program enjoys widespread, growing support as a risk management tool, officials say.
They also say the program must continue to evolve to meet the needs of agricultural producers.
“There have been some successes, there have been disappointments. We all certainly understand it’s a work in progress,” said North Dakota Agriculture Commissioner Doug Goehring.
Goehring was among the speakers Jan. 16 in Fargo, N.D., at the annual North Dakota State University Extension Service Crop Insurance Conference. About 225 people, most of them associated with the crop insurance industry, attended.
The federal crop insurance program, administered by the U.S. Department of Agriculture’s Risk Management Agency, seeks to protect crop producers from “unavoidable risk” associated with bad weather, crop disease and insects, according to information from the federal government.
Crop insurance policies are sold and serviced through private companies. The federal government subsidizes the program to keep it affordable.
Federal crop insurance has become increasingly important, both nationally and regionally.
In 2011, the value of insured crops totaled $113 billion, up from $78 billion in 2010.
In 2011, the total insurance premium was $11.9 billion, with the premium subsidy totaling $7.4 billion. Those numbers were up from $7.6 billion and $4.7 billion, respectively, in 2010, according to the Risk Management Agency.
Of the $8.6 billion in claims paid so far on the 2011 crop, North Dakota accounted for $1.5 billion. That reflects the extremely wet spring in the state that prevented many fields from being planted and caused crop insurance to kick in.
ND has big stake
North Dakota grows 39 crops, which makes crop insurance especially important but also more difficult to implement, Goehring said.
One of the biggest challenges facing the federal crop insurance program in this area is prevent plant, he said.
Such insurance provides coverage when extreme weather conditions prevent planting.
Trouble is, most prevent plant provisions “were designed under a drought scenario,” Goehring said. “It wasn’t well thought out.”
North Dakota has been in a wet cycle since 1993, and some long-soggy fields no longer qualify for prevent-plant coverage.
The Risk Management Agency isn’t unsympathetic to farmers with fields that don’t qualify for the coverage, said William Murphy, the agency’s Washington, D.C.-based administrator who also spoke at the Fargo conference.
But prevent plant is an insurance program and not meant for fields that “year in and year out” can’t be planted, he said.
What’s ahead for program?
The growing federal budget deficit is causing Congress to take a harder look at cutting spending, and the federal crop insurance program is a potential target. The U.S. farm bill, the federal government’s main agricultural and food policy tool, is up for reauthorization in 2012, increasing speculation about how much money will be allocated for federal crop insurance.
Murphy said the program enjoys broad support on Capitol Hill.
Insurance is a concept understood, and accepted, by people with little knowledge of agriculture, he said.
Murphy also said the Risk Management Agency is constantly looking for ways to improve and enhance federal crop insurance.
Currently, corn and soybeans account for two-thirds of the value of U.S. crops covered by crop insurance, with wheat accounting for another 9.1 percent.
Getting more crops into the program is important, Murphy said. He noted that insurance recently has become available for several crops, including pistachios and camelina, an oilseed.
Federal crop insurance, created in 1938, has seen many changes through the years, including being temporarily discontinued in the 1940s.
In 1980, federal crop insurance was reformed into a public/private partnership.
Another big change came in 2000 with passage of the federal Agricultural Risk Protection Act, which gave more ag producers access to risk management tools. Since then, federal crop insurance has played an increasingly important role, officials say.
But farmers shouldn’t rely too heavily on crop insurance, said Dwight Aakre, NDSU Extension Service farm management specialist, another speaker at the Fargo conference.
Crop insurance provides a less-effective safety net when costs rise and crop prices decline or stay flat, he said.
Crop insurance also is more effective covering risk for individuals and less effective on “systemic” risk, or declines in the market price of crops, he said.
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