Farm families
across America are struggling. Crop prices are down. Farm incomes have
fallen drastically in the past several years and weather disasters have
hit farms in most parts of the country. And the pain is trickling down
to small businesses and communities throughout rural America. Yet,
some lawmakers are pushing proposals that will make it nearly impossible
for farmers to rebound.Senators Jeff Flake (R-AZ) and Jeanne Shaheen
(D-NH) and Rep. John Duncan (R-TN) recently introduced bills to
eliminate premium support for the harvest price protection component of
the Revenue Protection (RP) crop insurance policy. Revenue Protection
protects against a loss of revenue caused by low prices or low yields or
a combination of both. Revenue Protection has become a valuable risk
management tool for farmers across the United States and accounts for
more than 75 percent of the Federal crop insurance policies sold
today.One of the key components of the revenue policy is the utilization
of the fall harvest price, which allows a farmer to receive the greater
of the fall harvest price or the projected harvest price to insure
against revenue declines. The loss due to an increase in the harvest
price occurs when a farmer suffers a yield loss. Those lost bushels are
worth more when the harvest price increases and therefore the loss of
revenue is greater because the insured could not sell the bushels lost
at the higher price. The farmer automatically has harvest price
protection when buying an RP policy, but can choose to exclude it by
selecting the Harvest Price Exclusion (HPE). If the farmer opts to do
so, he or she will pay a lower premium rate.“This legislation
specifically targets crop insurance policies that farmers pay more for
out of their own pockets to provide some revenue stability amid price
declines and low yields,” said Tom Zacharias, president of National Crop
Insurance Services (NCIS). “For example, corn farmers in the Midwest
can pay more than 40 percent more in premiums for RP, depending on
coverage level, than if they choose to exclude the harvest price
protection. And because this is still an insurance policy, farmers face
upwards of a 30 percent deductible before an indemnity is even paid.”He
continued: “Amazingly, supporters of this anti-farmer proposal tout
taxpayer benefits as the justification for weakening the farm policies
that are so important today. This is disingenuous considering farmers
help pay for their own insurance protection and crop insurance
represents less than one-third of one percent of federal spending. It
is also worth noting that crop insurance is operating below budget
projections.”Zacharias also noted that, despite critics’ accusations,
revenue polices are not paying out frequently. In its current form, RP
has only been available since 2011. However, according to an NCIS
analysis of soybean and corn price movements, had RP been in effect
since 1990, the price component would only have triggered in 11 out of
28 years for soybean farmers and even less for corn farmers – only eight
out of the last 28 years.NCIS analysis also shows a drastic increase in
insurance costs for farmers if this proposal is enacted. A corn farmer
in Illinois who selects the highest level of coverage for an RP policy –
85 percent – would see premiums climb by almost 30 percent. Meanwhile,
premiums at the 75 percent coverage level would increase by a
staggering 98 percent.Such increases in premium would likely result in
dramatic declines in overall crop insurance participation. Farmers
would lose an essential risk management tool and be more inclined to
turn to Congress to pass expensive, taxpayer-funded disaster packages
when revenues plummet.Farmers all across America have repeatedly asked
Congress to protect crop insurance – to keep it available and affordable
for all farmers. Unfortunately, this proposal would do exactly the
opposite, leaving many without the means to weather these tough economic
times.
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