Crop insurance industry educates farmers on new farm billSCOTTSDALE, Ariz . — Agents will need to explain the intricacies of the new commodity programs and crop insurance this year, even though the changes to crop insurance will not go into effect until next year, key industry officials said last week at the annual crop insurance convention.
By: Jerry Hagstrom , Agweek
SCOTTSDALE, Ariz . — Agents will need to explain the intricacies of the new commodity programs and crop insurance this year, even though the changes to crop insurance will not go into effect until next year, key industry officials said last week at the annual crop insurance convention.
Although the U.S. Department of Agriculture’s Farm Service Agency still has to develop rules for the new commodity programs, they will cover the 2014 crops while any changes to crop insurance will begin with the 2015 crop.
USDA’s Risk Management Agency has scheduled its first meeting with the crop insurance industry on implementation of the 2014 farm bill for Feb. 27, according to a key crop insurance industry leader.
The new farm bill requires crop farmers to make a five-year choice between the Agricultural Risk Coverage program, which covers the shallow losses that crop insurance does not, and the Price Loss Coverage program, which makes payments when payments fall below target prices.
The big issue is that if farmers choose ARC, they cannot add the Supplemental Coverage Option, another crop insurance program, a year later.
“If you elect ARC you cannot buy SCO. If you elect PLC you can add SCO,” says Tom Zacharias, president of National Crop Insurance Services.
NCIS is the crop insurance industry’s research group. The crop insurance industry has more personnel than ever before, with 2,000 to 2,500 employees on the staffs of the companies, 15,000 agents and 5,000 loss adjusters.
Keith Collins, a former USDA chief economist and chairman of the Federal Crop Insurance Corp. board who is now a consultant to NCIS, says he could not overestimate the importance of the agents in explaining the choices.
“There are more choices than in farm bills in recent years,” Collins says, noting that there are 296 million acres enrolled in crop insurance, more than at any time in the nation’s history.
And while FSA county office directors will explain the new programs to farmers, only the crop insurance agents will be able to explain the interaction of the programs with insurance policies, Collins says.
“Agents represent a tremendous capacity to teach farmers,” Collins says. “This farm bill has put crop insurance center stage.”
Zacharias notes that there are now 15,000 crop insurance agents nationwide, and says he is sure they can handle the job.
But some agents at the convention say they will have to work hard to explain that while ARC might provide more money in the short run to make up for the loss of the direct payments that crop farmers have been getting whether prices are high or low, that coverage could diminish over time if farm prices remain lower, and if they take ARC they cannot get SCO.
Collins says that the individual farmer’s choice of programs is likely to depend on his or her view of where prices are headed.
He also says he thinks the unprecedented farm prosperity of recent years has been dependent on the use of corn for ethanol and China’s soybean purchases, but he finds it difficult to predict future price levels.
With the Environmental Protection Agency set to make a decision on whether to reduce the Renewable Fuel Standard,and China not expected to increase imports at the same rates as in the past, prices could go down, Collins says. But the higher livestock prices could signal an expansion in that sector that would absorb commodities and keep prices up, he adds.
“Prices are coming down, but not as low as they were in the mid 2000s,” Collins says. “Farm income is down, but not down that much.”
Joe Outlaw, a Texas A&M University professor who served as a consultant to Congress on the farm bill, says the choice of programs will be “one of the most complicated decisions producers will be faced with.”
Outlaw, who advocated for farmers to be given a choice of commodity programs to make sure the programs work in all regions, says he has been shocked to have farmers now ask him “Why did they give us these choices?”