By Tracy Sayler

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Prairie Grains is the official publication of
the Minnesota
Association of
Wheat Growers,
North Dakota Grain Growers Association,
South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

It’s an example of why 1999 crop insurance program adjustments are like "lipstick on a pig," as Rep. Earl Pomeroy (D-ND) recently put it, and why reform of federal crop insurance is high on the agenda of Congressional ag leaders this year.

President Clinton referred to reform in his State-Of-The-Union Address, although he did not include new funding for reform in his proposed FY00 budget. At the unveiling of the proposed FY00 ag budget, however, USDA Secretary Dan Glickman outlined plans to increase program participation by making higher-level crop insurance coverage more affordable and effective for farmers, and developing policies to cover multi-year as well as single year losses.

House and Senate Ag Committee leaders and other lawmakers are working on reform measures. Pomeroy announced last month that he will introduce a reform plan in the U.S. House, and Sen. Rod Grams, R-MN, has introduced a bill as well.

There’s no getting around the fact that improvements will require additional subsidies by the federal government, but that it’s either a "pay now or pay later" proposition, says Pomeroy.

"Without effective risk protection, Congress will continue to spend large sums on unpredictable disaster relief measures like last year," says Pomeroy. "It is less expensive and vastly preferable for farmers to have a solid risk management program in place."

Leaders of the National Association of Wheat Growers recently established the following five crop insurance priorities:

1) Increase federal funding of the crop insurance program at the farm level. That’s the first step to improving program coverage and affordability.

2) Fix the pieces of crop insurance that don’t work, rather than upending the program entirely. Foremost is fixing problems with APH. The NAWG is concerned about the possibility of livestock being added to the program, as this may dramatically increase program costs and dilute the effectiveness of the current program even further.

3) Expedite the development of enhanced risk management products. Continue to develop and evaluate whole farm or gross revenue coverage. Whole farm coverage, based on Schedule F tax returns, is a proposal that has merit, but potential caveats need more attention, such as controlling moral hazard, and how different farm tax methods farmers use, such as cash-basis-accounting, may be affected.

Further, consider boosting the subsidy of Crop Revenue Coverage, or restructure it to improve the product. For example, offer price risk protection under CRC, without production risk, particularly beneficial for new land with no crop history. A producer might have the option to build history and then add the production-loss component of CRC to his policy.

4) Regulatory reform. Including, streamlining the review process (which can take up to 18 months and involve as many as a dozen different layers of government) to make the program more responsive to producer needs. Also, the expense of developing new products. NAWG supports a royalty concept where the government or private companies would pay the developer of a new crop insurance product for the right to offer or sell it. A product surcharge or fee might be used to encourage development of products for minor crops or noninsured crops, but would be opposed by the NAWG otherwise.

5) Eliminate catastrophic (Cat) coverage. Cat was included in the 1994 Federal Crop Insurance Reform Act, partly as a replacement to ad hoc disaster, and also to improve crop insurance participation and buy-up coverage. Effectiveness has been mediocre at best, however. Although Cat is popular for fruit and vegetable growers in states such as Florida, California, and Texas (low-cost coverage of high-value crops), it offers little to major program crops. The NAWG favors eliminating Cat for better buy-up coverage.