House Ag Hearing: Crop Insurance Has Limits, We Need Disaster Aid

Battle for Disaster Aid 051019
"When things are then handed off to people at Office of Management and Budget, who consider the American farmer and the American farm family nothing but subsidy sucking freeloaders, there's a disconnect in what is actually coming out of the administration, and what the administration is telling us they're going to do.” ( Farm Journal )

A pending disaster aid bill dominated talk at a House agriculture subcommittee hearing on the farm economy Thursday. Farmers told the panel the aid package, covering natural disaster damage from 2017 through this spring’s flooding, is needed because of holes in crop insurance and other existing farm protection programs.

Of the $17 billion package which is expected to be considered by the House this week, $3 billion is allotted to help farmers throughout the country who suffered loss from hurricanes, wildfires, droughts and floods. Unfortunately, the damage to farms, orchards and fisheries exceeds that $3 billion. 

As two of the farmers who testified in the Subcommittee on General Farm Commodities and Risk Management hearing both suffered hurricane damage this year, much of the discussion centered on holes in crop insurance coverage and the need to push disaster aid through as soon as possible. 

Rep. Austin Scott of Georgia explained that the storm hit Georgia in mid-October. He was attending the Sunbelt Expo when Vice President Pence arrived to assess damage and encourage farmers.

“Let me say to all the farmers gathered here today. In the wake of Hurricane Michael, we are with you. And we will stay with you until we rebuild and recover better than ever before,” Pence said at the time. 

There was a big applause, Scott said. Most Georgia farmers in the path of the hurricane lost more than half their crop, but some lost everything. Scott then read a statement from the Office of Management and Budget following their review of the pending disaster aid package which said: “The administration does not support the $1.1 billion provided for crop and livestock losses. Existing USDA safety net programs, including crop insurance can provide this assistance to producers.”

“I appreciate the Vice President's comments. I appreciate the President's favorable comments about agriculture and the agriculture community,” Scott said. “But when things are then handed off to people at Office of Management and Budget, who consider the American farmer and the American farm family nothing but subsidy sucking freeloaders, there's a disconnect in what is actually coming out of the administration, and what the administration is telling us they're going to do.”

Natural Disasters Expose Crop Insurance Holes

Texas farmer Matt Huie outlined problems he had with crop insurance in the wake of Hurricane Harvey, including limitations of the 2017 Wildfires and Hurricanes Indemnity Program (WHIP). 

“We had a giant crop in the field, much larger than what our historical production was and if any portion of that was harvested then it ruled out crop insurance, and therefore ruled out the WHIP program,” he said. “So, there was no system in place to get any assistance as evidenced by the fact that it didn't spend any money. It was appropriated at 2.6 billion and spent $1 billion.”

Similarly, Georgia farmer Bart Davis said crop insurance still leaves a significant amount of risk on the table for most farmers. 

“With crop insurance, the highest coverage we can normally afford to purchase is 85%,” he said. “So, we're left to incur significant costs before crop insurance coverage triggers to help offset our losses.”

Crop insurance also did not cover the full magnitude of the losses he experienced or compensate for the full crop potential before the storm hit. 

“We're insuring based on historical yields that don't always keep up with the pace of production due to improved practices and farming technology,” he said. 

Crop insurance payments are calculated based on a 10-year Average Production History. He said that’s not a fair assessment because farmers continue to improve yields. Farmers in Davis’ area can spend anywhere from $15 to $60 in premiums on irrigated cotton and still lose $100 to $200 per acre following a natural disaster, he said. 

“When I started farming 1982, you could take $100,000 and work a lot of land. I’ve borrowed hundreds of thousands of dollars. Now, we borrow millions of dollars,” he said. “It's costing me, on my farm, between $900 and $1,000 an acre to grow an irrigated acre of peanuts or cotton. “And if I can only insure at 85%, you do the math. That's what happened to me last year. We had the maximum insurance and I'm not gonna say the figure here, but it was several hundred thousand [dollars] we still lost on our farming operation last year.”

Additionally, farmers explained there’s issues to be worked out about who owns the crop and whether it’s even covered by crop insurance. 

“Once it has a tarp on it, theoretically is owned by the gin or is part of the gin’s insurance, so long as the gin has insurance,” Huie explained. “However, if you've got cotton sitting out in the field and part of the field is harvested, part of it belongs to the gin, and the rest of it still belongs to the farmer and part of it goes against crop insurance and part of it doesn't go against crop insurance. Those are where you run into all these issues with WHIP.”

All in all, he said it is important farmers realize crop insurance won’t “make you whole.”

“Crop insurance in this environment is not going to make you whole,” he said. “Best case scenario in Texas is you buy 70% crop insurance and if your breakeven is 110% of your actual production history, and you buy 70% crop insurance, and you collect on it, then you have a 40% loss. And that's a pretty tough pill to swallow.”

Several lawmakers underscored the need for disaster aid passage quickly. Some even hoping it will be in place before the end of the month.  

“We've been sitting here for what almost six months. People say, ‘why is this place so dysfunctional?’” Georgia Rep. Rick Allen asked. “We can't do what's right for the American people, particularly for our farmers, they're so critical. This is sad, truly sad. And hopefully we can fix it this week.”

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