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AFBF: Crop Insurance Works, but Improvement Possible

WASHINGTON, D.C., April 22, 2009 – The federal crop insurance program generally works well for most producers and is a popular risk management tool, but there is room for improvement in areas such as duplicate procedures, efficiency and integration with other federal agricultural programs, according to AFBF President Bob Stallman.

In testimony today before a House Agriculture subcommittee, Stallman urged Congress to push the Agriculture Department to complete work on the Comprehensive Information Management System project. Once complete, that system would lead to more procedural efficiency for farmers and greater coordination among federal agriculture and crop insurance programs, he said.

Stallman said completion of CIMS, a system of computer programs and databases used to administer programs of the Federal Crop Insurance Corporation and Farm Service Agency, is vital for various government agencies to reconcile commonly used data.

“This would reduce duplicate efforts required by both producers and governmental office personnel,” Stallman testified. “Reducing the workload of federal employees by eliminating duplicate efforts would demonstrate efficient use of taxpayer money. In addition, reconciling data between FSA and FCIC would help guard against fraud and abuse. Farmers feel strongly about maintaining their well-deserved image of being considered good stewards with high integrity.”

In his testimony, Stallman said the federal crop insurance program generally works well for most producers.

“Participation in the program hovers at about 80 percent of eligible acres,” Stallman said. “In addition, about 85 percent of the insured acreage is now covered by a buy-up policy rather than simply a catastrophic policy. Our farmers and ranchers are annually provided more than $90 billion in risk management protection – up from $31 billion in protection just 10 years ago.”

Stallman said the safety net works fairly well if a producer suffers a catastrophic crop loss because the producer doesn’t have to pay expenses, and crop insurance covers the majority of the loss. However, he said improvements are needed in what are called “shallow loss” crop insurance provisions. He called for increased support so that producers who experience shallow losses on a fairly regular basis can still afford the premiums.

“Crop insurance doesn’t work as well for those producers who lose 25 percent to 30 percent of their yields for three or four years in a row,” Stallman said. “Most growers purchase coverage at the 65 percent to 75 percent coverage levels. This means they must lose about a third of their yield before they receive any crop insurance indemnities.”

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Contacts: Tracy Taylor Grondine
(202) 406-3642
tracyg@fb.org
John Hart
(202) 406-3659
johnh@fb.org