Why Farm Revenue Protection Matters
What adds insult to injury for Barnaby is the idea that growers are cashing in on a subsidy from the taxpayers. He points out that for many growers, this may be the first time they have collected in 20 years or more of paying for crop insurance. Perhaps it would be more appropriate to refer to crop revenue coverage subsidies as co-insurance, with growers paying a portion to protect their potential revenue and taxpayers paying a portion to protect against large disaster payment programs.
THE FUTURE OF CROP INSURANCE IS UNCERTAIN
That said, any subsidy or government program, especially one in agriculture, is under threat in the current Washington mentality of chop first and issue regrets later. Critics suggest a variety of options as related to crop insurance generally and CRC/RC specifically. One is eliminating the Harvest Price option, without which the drought would have required a disaster program on top of crop insurance, according to Barnaby.
Other suggested options include squeezing growers, insurance companies and insurance agents. Growers have indeed benefitted in recent years, as their share of premiums has dropped from 60 percent in 2000 to 38 percent today. Catastrophic insured growers have benefitted even more as 100 percent of their premium is subsidized.
"Insurance providers could have rates cut, while insurance agents could have their commissions reduced," explained Barnaby. "However, insurance agents in the Midwest already had their commissions cut in half in 2012."
One of the arguments being presented is for insurance to be eliminated altogether, to be replaced by disaster programs administered by USDA Farm Service Administration (FSA) employees as in the past. Barnaby argued that this could be a problem with current staffing, both at sign up and also in claims adjusting. While private companies have systems in place to move adjustors around from state to state as needed, no such system is in place for USDA FSA workers.
Barnaby suggested that should the Harvest Price option be eliminated, demand for insurance will likely fall, reducing interest from insurance companies. This could result in a strictly government-run program. A government-run program also raises the question of pricing versus free (known as universal, single payer in health insurance parlance) coverage. Free coverage, Barnaby argued, would likely result in means tested payment caps and limiting coverage to base acres. Neither option would be good for larger or expanding growers.
"The best option would be for growers and the insurance industry to find solutions and present a united front," said Barnaby.
Whatever the solution, the retention of CRC/RP with a Harvest Price option is important to growers as well as full-service input suppliers and service suppliers. It covers yield and potential income loss and creates a more secure environment for producers planning their inputs and marketing. This, not incidentally, creates a more secure environment for their input and service providers as well.