WASHINGTON -- Farm groups have expressed concern that the Obama administration's negotiations with crop insurance companies to cut their subsidies could produce budget savings that would reduce the amount of money available for the next farm bill, but a spokesman for Agriculture Secretary Tom Vilsack said April 12 the administration is willing to work with Congress to address those concerns.
Reacting to a letter from a coalition of farm groups sent April 9 urging Vilsack to stop the negotiations and let Congress handle the issue, Justin De Jong, a Vilsack spokesman, said in an e-mail, "USDA remains open and willing to engage with the relevant congressional committees to achieve crop insurance reform in a way that addresses the baseline concerns expressed by the signatories of the letter."
Ag budget concerns
In the letter, the American Farm Bureau Federation, the National Milk Producers Federation and eight comm-
odity groups noted that in its March budget baseline, the Congressional Budget Office assumed $3.9 billion in savings over 10 years from the negotiations, but that the congressional ag committees would not get any credit for these savings in any budget reconciliation because the negotiations are conducted by the executive branch.
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"These reductions in the federal crop insurance program may undermine this component of the farm safety net and will sharply reduce the agriculture budget in the advent of a baseline budget farm bill," the groups said. "It would make a potential budget reconciliation process next year extremely difficult. We urge you to stay the ongoing (standard reinsurance agreement) renegotiations, reinstate the current SRA and allow Congress to address this issue legislatively in order to preserve the budget baseline."
The National Farmers Union in a separate statement said it was concerned about the depth of the cuts, but it did not suggest stopping the negotiations.
Congress authorized the negotiations in the 2008 farm bill, and USDA Risk Management Agency officials have said the companies could afford a cut because payments for delivering insurance have risen along with commodity prices from $1.8 billion in 2006 to $3.8 billion in 2009 and profits are beyond appropriate levels. The companies have said they are willing to make cuts, but that the administration's proposed cuts are too high. In his fiscal year 2011 budget, President Obama proposed an $8 billion cut in payments to the crop insurance companies over 10 years, but RMA has since released a second proposal that would reduce the cuts to $6.9 billion.
Cuts too much?
Both the crop insurance industry and congressional farm leaders said April 15 that they are concerned about the size of the proposed cuts, but none backed the farm groups' proposal that the negotiations be stopped.
"It is important to state that the industry is negotiating with RMA on the SRA and is not delaying the process," Keith Collins, a consultant to National Crop Insurance Services, said in an e-mail. But he added, "Clearly, Congress authorized RMA to negotiate a new SRA, but it a reasonable question whether Congress had in mind the structural changes and the large cuts envisioned by RMA."
A spokeswoman for Senate Agriculture Committee Chairman Blanche Lincoln, D-Ark., said Lincoln thinks the current draft of the agreement "goes too far" and "is also concerned about the adverse impact on the farm bill baseline, especially in the current budget environment." A spokeswoman for Senate Agriculture Committee ranking member Saxby Chambliss, R-Ga., noted that a group of senators wrote RMA Administrator Bill Murphy they are concerned "about the magnitude of proposed program cuts and a matter of putting the cart before the horse -- cutting the program before fully understanding program delivery costs."
House Agriculture Committee ranking member Frank Lucas, R-Okla., said, "It does not surprise me that USDA has continued down this path given the administration's obvious priority to cut programs that provide our producers with a viable safety net. This issue is extremely important and I will continue to closely monitor it."
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House Agriculture Committee Chairman Collin Peterson, D-Minn., has said the proposed cuts are too large, but he did not comment on the farm groups' letter.
