Crop Insurers Win as Congress is Poised to Pass Farm Law
Crop insurers successfully lobbied to keep several proposals out of the farm bill set to pass the U.S. Congress today -- such as a requirement that would have forced farmer-lawmakers to disclose benefits they receive.
Negotiators left out of the almost $1 trillion bill a House measure to require members of Congress and the president’s cabinet to report what they receive in crop insurance aid. Also omitted was a Senate-backed provision to limit premium subsidies for the wealthiest farmers.
Congress “once again chose to increase unlimited subsidies to the most profitable and financially secure farm businesses,” Ken Cook, president of Washington-based Environmental Working Group, said in an e-mail. He said the crop insurance program is “already bloated.”
Lawmakers are betting that government-backed private insurance will be better than the program being replaced: a direct-payment system that distributed $5 billion a year based on acreage. Supporters of the change say payouts based on losses is more cost-effective and targets farmers in need.
“There’s an ideology that believes that private enterprise can do things better than the government, and that’s helped crop insurance grow,” said Harwood Schaffer of the University of Tennessee in Knoxville.
The Senate is set to pass the much-delayed bill today. The House cleared the measure last week with a coalition of rural Republicans and urban Democrats overcoming objections about subsidy spending and food-stamp cuts. President Barack Obama has said he would sign the bill, which will cost $956.4 billion over a decade.
The bill to reauthorize all U.S. Department of Agriculture programs governs farm subsidies, which lowers costs by encouraging the planting of soybeans, cotton and other crops by commodity processors including Bunge Ltd. (BG)
Insurance trade groups hailed the legislation, saying support for the programs show the effectiveness of their risk-management tools.
“There is a strong consensus among lawmakers that crop insurance should be enhanced and serve as the centerpiece of the farm safety net moving forward, which underscores the success the policy has seen over the years and the popularity it enjoys among farmers,” a coalition of groups including National Crop Insurance Services of Overland Park, Kansas, said in an e-mail last week.
The legislation also funds consumer purchases at Kroger Co. (KR) and other grocers using food stamps, its biggest cost, and subsidizes crop-insurance premiums provided by companies such as Wells Fargo & Co. (WFC), which owns the largest U.S. crop-insurer, and Ace Ltd. (ACE)
The crop-insurance program sells government-backed policies from private companies to help farmers manage the risks of weather and price swings. It has become the biggest aid program, with a record $17 billion paid after the 2012 drought.
As costs for the insurance program soared, watchdog groups including Environmental Working Group, a conservation advocate, pushed lawmakers to require disclosure of the policy holders, as well as setting limits on subsidies to wealthy farmers.
Their efforts failed.
The bill dropped a provision that would have required federal lawmakers and cabinet members, as well as their immediate families, to disclose any subsidies received from the crop-insurance program. Shielding the names encourages participation needed for stability, said Michael Torrey, executive vice president of the Crop Insurance and Reinsurance Bureau in Washington, which lobbies for the industry.
“Few federal programs release individual information on participants,” Torrey said in an e-mail. “There is no reason to single out crop insurance.”
Debbie Stabenow, the Michigan Democrat who chairs the Senate Agriculture Committee, said the language didn’t get into the final bill because financial disclosure for lawmakers falls outside the jurisdiction of the agriculture panels, and such aid already falls under the personal financial disclosures top government officials are required to file.
“We already have financial disclosure forms as to where we get our income,” said Stabenow in an interview for C-SPAN’s “Newsmakers” program. Stabenow said she was open to wider disclosure should other committees decide to take up the topic.
Representative Virginia Foxx, a North Carolina Republican behind the plan, said additional transparency is necessary to keep the program honest.
“It’s a common-sense thing to do,” Foxx, who voted against the House bill, said in an interview. “We need all of these programs to be as efficiently and effectively run as possible.”
The final bill also lacks the Senate-backed language reducing premium subsidies to 47 percent from 62 percent for growers with adjusted gross incomes over $750,000 a year, a step that covers about 20,000 producers nationwide.
Wrapping up negotiations on the five-year bill will encourage financial stability for companies, Gary Schnitkey, an agricultural economist at the University of Illinois at Urbana-Champaign, said in an interview. One unknown is the cost of falling commodity prices, which may cut premiums and payouts.
Prices for corn, the most-valuable U.S. crop, fell 40 percent last year, the biggest drop since at least 1960. Wheat fell 22 percent, while soybeans declined 8.3 percent.
Crop insurance has never been a chief means of support when crops are in surplus and prices fall, cutting farm income to less than production costs, said Carl Zulauf, an economist at Ohio State University.
While lower payouts may make cash-strapped farmers avoid the policies, banks may require insurance coverage to qualify for loans.
“The trade offs are fascinating,” Zulauf said. “There are a lot of moving parts, and we’ve never been in this situation before with crop insurance.”
The farm bill is the third bipartisan deal reached by the current Congress, which passed a budget in December and cleared a $1.1 trillion spending bill on last month.
The farm legislation reduces overall USDA spending by $16.6 billion over a decade, with about half of those savings coming from the food-stamp program, according to the Congressional Budget Office.
To contact the reporter on this story: Alan Bjerga in Washington at email@example.com