Ag Policy Blog

Plans to Cut Crop Insurance Got You Down? Let's Talk

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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As I opted today to grudgingly weigh in on the latest proposals to cut crop insurance, I consulted sources such as Psychology Today.

I thought about how to conduct a counseling session because there is apparently some residual trauma out there in farm country left over from the federal budget deal last week.

Close your eyes, breathe deep, exhale and understand that the crop-insurance industry is going to be OK. Yes, the budget deal has language in there about $3 billion in cuts to crop insurance --- hum and meditate --- that apparently won't really occur. Offsets have been promised to come elsewhere.

If your concerns can't be abated just by meditation, I would suggest brewing some Kava tea or Valerian root tea that have calming, anti-anxiety traits.

And as a someone with deep concerns about crop insurance, you should be proud of the way House and Senate aggies responded to the apparent threat.

In the House, the Ag Committee members last week came charging out of their offices and hearing room as if they were rescuing drowning puppies in their collective efforts to stave off that $3 billion insurance cut.

In the Senate, Sens. Pat Roberts, John Thune and John Cornyn held one of those Senate floor talking sessions -- a colloquy -- just to express how important it is to protect crop insurance in the upcoming spending bill. You can watch a video of it if you wish. http://dld.bz/…

If the tea doesn’t work for you, find a sofa and lay down for a few.

Now we get to the heart of this counseling session. I could sense the angst coming through the email today because Sen. Jeff Flake, R-Ariz., is introducing legislation in the Senate that is coupled with legislation introduced in the House by Wisconsin Reps. Ron Kind, a Democrat, and Jim Sensenbrenner, a Republican.

OK, before we go any further, if you are still stressed out, you may have to move to Colorado or Washington State. Meditation, tea and sofas are about the limits of my relaxation options for you.

So, Kind, Sensenbrenner and Flake proposed the "Assisting Family Farmers through Insurance Reform Act (AFFIRM Act.) Well, first of all, you have to give them props for the acronym. But the plan these guys proposed is a $24.4 billion cut in crop insurance over 10 years. Caps on premiums, means testing, elimination of the Harvest Price Option, and sticking with the lower 8.9% rate of return in the budget deal.

Whew, I mean, these guys are bringing it.

Put down the bottle! We're not done yet.

Here's a little secret to dial back the anxiety. These proposals, while fearsome in numbers, don't even merit comparisons to a football Hail Mary play. They are akin to the guy at the YMCA rock wall telling you he's now ready to tackle Everest.

In other words, you should take this proposal with a grain of salt.

Flake is one senator. Uno, as in singular. I just told you a little earlier about the Senate Ag chairman on the floor talking to the Senate leader and a couple of other key guys about protecting crop insurance from a far smaller threat. Now, if Flake has 20 co-sponsors, it might be worth perking up the eyes. If Flake were able to get a floor vote on his proposal, well it might be interesting to see where the numbers fall. You might even want to break out some Tums. But at the moment, he's performing a one-man play.

OK, on this point, I have to stand corrected. It turns out that Sen. Flake isn't flying solo in the Senate. Sen. Jeanne Shaheen, D-N.H., co-signed with him on the bill. However, the numbers still look pretty favorbably this bill isn't going anywhere soon. Now, if the bill starts gaining co-sponsors, we'll let you know when to start having an anxiety attack.

In the House, there are two sponsors. Sadly for Kind and Sensenbrenner, they are just 216 votes short of their bill being a serious idea. At this point, they don't constitute 1% of the House. It takes at least four congressmen to do that.

I know. They are picking on crop insurance. Why do they want to do that? But just because fewer than a handful of lawmakers throw out a plan to build a space station on the moon, that doesn't make it a credible proposal. Just because a couple of lawmakers well known for their decade-plus battles over farm programs put out a plan to cut crop insurance, that doesn't mean it should be taken seriously.

But if you go around out in the country getting bent out of shape because of this stuff, all it will lead to is high blood pressure. You don't need that kind of stress when you are banking all that corn in the bin right now.

So go outside, take a relaxing walk and admire what's left of the fall foliage. And forget about this crazy talk about massive cuts to crop insurance.

You'll feel better.

Follow me on Twitter @ChrisClaytonDTN

Comments

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CRAIG MOORE
11/19/2015 | 9:55 AM CST
Jay, if you are such a successful farmer, what the hell are you doing on Obamacare. At least that is what you are indicating. And all the good people here in Montana are having their rates go up from 24 to 38% for their ACA premiums. And haven't you noticed yet the huge deductibles Obamacare requires? And I am still waiting for you to bring that little electric car out here to Montana in January to see how far your cure all will make it down the highway.
Raymond Simpkins
11/19/2015 | 6:34 AM CST
Perfect example Jay,Criticize everyone and not know what your talking about. Obama had nothing to do with oil prices,I didn't complain and you should not have either since you don't use any. My total fuel cost were less than my health ins. premiums for the year. That is his fault. He is also going to let hundereds of terroist into your state because we have to be compassionate!!I'm with France.But then I don't know how much money the gov. has given you so probably that is why you love him. And who cares about you stupid electric car? America has alot bigger problems than the enviroment.
Jay Mcginnis
11/18/2015 | 9:58 PM CST
Raymond, you must have had a substandard health insurance policy, mine went from $700 to $500,,,, so what is the GOP plan to replace Obama Care with? You blamed Obama for the high price of oil didn't you? Now that oil is down I don't here peep from the Insanity Hannity crowd! HIstory will prove you wrong Raymond, sorry, just saying it doesn't make it true. Hey Craig, 40,000 all solar produced electric miles,,,, YES WE CAN!
CRAIG MOORE
11/16/2015 | 8:34 AM CST
Jay, how can you come close to construing that I endorse Trump. I think he is doing what he is because he is a showman and he wants a lot of the PC BS left out of politics. Just like I think Bernie is just a foil for Hillary as she campaigns, he is running just to make her look good.
Raymond Simpkins
11/16/2015 | 8:07 AM CST
Everyone is quick to criticize but no one can answer the real questions.
Raymond Simpkins
11/13/2015 | 7:04 AM CST
Jay,Hold on to your ass then because our health ins. went from 234.00 a month to 701.00 under Obama. Great job right? Our premium jumped 40 precent this year with Obamacare,with higher deductibles and all. Affordable my hind-end!!You can love him if you want but he is the worst pres. We ever had. We surely don't want another democrat in office. Not to sure about the republicans either. You don't think you made more because of Obama do you?He had nothing to do with the price of grain.
Jay Mcginnis
11/12/2015 | 10:42 AM CST
Well I made far more in the past 6 years farming then ever before, maybe the job creators are paying all that extra money in taxes so we aren't being trickled on? And Craig, I guess Trump is just a poor guy unlike Obama, Pelosi, Reid and Rangel?
CRAIG MOORE
11/11/2015 | 10:14 AM CST
And the Democratic party has made sure that over the last 7 years that the rich will get richer. Remember, Obama, Pelosi, Reed and Rangel are all 1%'ers and they will make sure they get theirs.
andrew mohlman
11/11/2015 | 7:55 AM CST
Jay there is no way you farm thinking farms are making so much with Obama in office. You are right about farm program but everybody feeds off of farmers and this country's land.
Jay Mcginnis
11/10/2015 | 11:40 AM CST
So its nice to see Raymond admit the economy is as good as ever, I can say that the farmers have never made so much as under Obama then any president before and the economy is doing well. However how much have the prices in the super market fallen in the past 2 years? How much has grain prices fallen? This year there is a 13.5 billion bushel crop, corn farmers are getting $3 less per bushel which means someone is making over $40 billion dollars (doesn't include soybeans and wheat) and its NOT found in savings for the consumer! Farm programs are developed by lobbyists, like ADM, Cargil ConAgra, lets get real people no matter what the market does the big boyz get rich at the farmers being paid by the government! The 1% get the profit on the backs of the workers, same old story.
Freeport IL
11/9/2015 | 2:16 PM CST
The question of the changes in federal crop insurance, in the long run, comes down to how much risk the Government wants to place on land values and Ag lenders. Along with reduced subsidize, there is a desire to eliminate the harvest option. As a reminder, the harvest option is a feature of the policy that provides a higher insurance price if the fall price in higher than the spring. This only helps the policy holder when fall yields are below the trigger yield (APH X % Coverage Level). But this coming cropping year, 2016, it appears - from our projection for corn on a Northern Illinois Farm, there is about 3 times (21% of the time versus 7%) the likelihood of a RA (Revenue Assurance) product triggering an indemnity than the HE RA (Harvest Exclusion Revenue Assurance) when yields are below the trigger yield. Policy prices moving higher with the harvest price option keeps the guarantee high enough for the indemnity. The natural hedge (the strong tendency for prices to move higher when our yields are lower) of this area keeps prices high enough so that the HE RA policy does not payout like RA does. Every year is different. This coming year, as of today, it looks like HE RA could pay out about 25% of the time with an average indemnity of around $35 per acre. The maximum indemnity is around $65 per acre. So this product (HE RA) does not provide the calamity coverage of RA which has a maximum indemnity of around $380. (This is where the added premium cost is and also the desire to remove this option.) The HE RA product should cost around $8.75 per acre (25% X 435 = $8.75) for a breakeven type of long term goal. Last year HE RA at 85% coverage after subsidize would have cost $16 to $17 per acre. So if the harvest option goes away and the harvest exclusion product does not change in cost, there will be little need in this area to buy the insurance. The risk, if insurance is not purchased, will fall on the farmer directly but our bankers indirectly. The lending parameters would change. Landlords will be required, in the longer run, to make room for added risk. Land price will also change to reflect this change in risk level. Calamity can remove individual farmers from the industry but surviving growers will push on land cost to keep their businesses farming. So we contend, as a group, landowners and banker have more interest in keeping the current crop insurance program going then do the farmers. Individually all three of us might have an interest in keeping it near current levels. Freeport, IL
andrew mohlman
11/9/2015 | 9:27 AM CST
O I thought you think there should be lower prices hoping for it even raymond
Raymond Simpkins
11/9/2015 | 6:33 AM CST
Andrew, These prices are real and going to be around for a while. The economy is not hurting,Look around everyone drives new cars and trucks barns are full of new equipment and new houses all over. You need to change if you are going to be farming in 5 years. Oh and by the way I paid 10 percent on that land contract.
andrew mohlman
11/7/2015 | 12:06 PM CST
Nothing. A young person would have a hard time doing that now with inputs soaring that is why lower prices are not real for extended time without damage to economy for all. Must of been a sweet contract.
Raymond Simpkins
11/6/2015 | 6:56 PM CST
I had farm income all though high school and drove truck for 8 years before farming. Bought farm on land contract and have never had a mortgage. Never had a operating loan,only had crop insurance for three years and collected one time. Have not had any part time job since farming, payed cash for two kids collage ed. I will agree with you on one thing,We were better off with fewer government programs. There like Craig said anything else you need to know.
andrew mohlman
11/6/2015 | 6:30 PM CST
Raymond I don't know where you got the money to buy your farm borrowing from a bank they would not have let you borrow with out crop insurance you are very windy I dont believe your story. My income was insured not a crop failure price to low. You sound like you should not be farming if you really are.
Raymond Simpkins
11/6/2015 | 3:48 PM CST
That did not print right. Crop insurance has saved a lot of guys who should not be farming. And no silver spoon here bought my home farm when I started.
Raymond Simpkins
11/6/2015 | 3:42 PM CST
Crop insurance has saved a lot should not be farming. of guys who
andrew mohlman
11/6/2015 | 1:01 PM CST
I believe you had a silver spoon in your operation Raymond. You missed it was 20+ of farming I sold a lot of 1.80 corn myself. Farm program is for consumer not producer wake up my payment is a reflection of how bad I was ripped off in that year. When program was not in place prices were high sleeping if you didn't notice that.lucky family has been good to me not cause I am so great. Crop ins saved me last year old fella
Raymond Simpkins
11/6/2015 | 9:38 AM CST
Andrew you sound like a pilgrim. I see you only been farming 20 years. Well you best be able to farm with these prices for years to come. You haven't gone though lean years yet! We farmed though a lot tougher times than this. In 88 we had 70 bu. corn and 1.80 prices. I don't think the government is going to bail anyone out! They better not anyway. Look how much they give you now!We farmed for 30 years with no crop insurance before I ever bought any. May not buy any next year don't know yet. Markets are not going to be the same here on out foreign countries are getting less dependent on U.S. crops.
andrew mohlman
11/6/2015 | 8:37 AM CST
Looks like farms will end up like car industry huge corporations that will end up needing a bail out we are heading in wrong direction markets are a failure to many theives
Raymond Simpkins
11/6/2015 | 4:04 AM CST
Thats not even news worthy. Would not effect what you would see in a payment at all.
LeeFarms
11/5/2015 | 8:27 PM CST
Maybe we should have let the insurance companies take the small hit and called it good! I hate the way the $$'s in these cuts get reported -- that is $300 million/year not a $3 billion one-time cut! And, where can you (or we farmers) get a GUARANTEED rate of return of nearly 15%! The lower rate seems pretty good since it is GUARANTEED! Did farmers having angst understand all of that? Or did the self-righteous indignation of our lobbying organizations simply crank out emails with a definitely slant to get the phones and emails going?! I know the truth because I received a few! The truth, as we are now finding out, is that the supposed cuts in the last farm bill, by eliminating direct payments, will likely be surpassed by the added safety net that was added, due to the lobby efforts of the crop insurance industry, bankers, ag industry, and farm organizations. OK, now I need to find some blood pressure pills! Paul Overby