Ag Policy Blog

Groups Ask Senate Leaders to Defend Crop Insurance

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Forty nine organizations have written Senate leaders asking them to stick to the farm bill and not implement cuts to the rate of return on crop insurance.

The budget deal approved at the end of October includes plans to cut the rate of return for crop insurance companies from 14.5% to 8.9%, a cut of roughly 38% on the rate of return that translates into $300 million a year or $3 billion over 10 years.

At the time the budget deal was passed, House and Senate leaders vowed they would find other places to cut that $3 billion in the expected omnibus spending bill that lawmakers will need to pass sometime in December.

Bankers, crop insurers, farm lobbies, equipment dealers and even wildlife organizations joined the letter to Senate leaders asking them to "unwind both the policy and the cut to crop insurance in the omnibus."

The various groups maintain they support balancing the federal budget, but agriculture cut its spending in the farm bill. Additionally, rate of growth in crop insurance was cut in the 2008 farm bill as well as during the last talks on the Standard Reinsurance Agreement between USDA and crop insurers.

The farm bill blocked USDA from negotiating a new SRA with insurers that translated into any net savings. The budget agreement essentially dropped that language by requiring USDA to negotiate a new contract that would lower the rate of return.

The groups wrote this change in the budget deal imperils the crop-insurance industry. "The inevitable result of this provision would be increased industry consolidation, reduced choice in insurance providers for all farmers, and a dramatic decline in the availability and service of policies. This cut would ultimately end private sector delivery of crop insurance."

The groups ask Senate leaders to "uphold the promise to make the crop insurance program whole again without re-opening the farm bill."

The underlying issue, however, is finding $300 million a year somewhere else in the federal budget to cut. Other groups aren't going to like their ox being gored, either.

The letter and the groups who signed on can be found at…

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