Association Opposes Proposed Crop Insurance Cuts
Crop insurance is essential. Without it, most American farmers could not afford to manage the enormous financial risks they face with every planting and harvest, and therefore could not continue farming. In 2014, approximately 90% of planted cropland was protected by crop insurance, for which farmers paid $3.8 billion. They bought more than 1.2 million policies that protected nearly 294 million acres of crops valued at more than $110 billion.
President Barack Obama’s proposed budget for the 2016 federal fiscal year, sent to Congress on Feb. 2, proposes cutting crop insurance subsidies to offset commodity programs. The Obama Administration would like to cut crop insurance spending by $16 billion over 10 years, or $1.6 billion a year, from a program that currently costs about $9 billion annually. Quoting the budget proposal directly: “Overly generous benefits have almost eliminated the risk in farming at a cost to taxpayers in the billions.”
While cuts in federal spending are long overdue, it’s important to remember that many programs important to production agriculture were sacrificed in the 2014 Farm Bill, in exchange for help with the cost of crop insurance. Agriculture has clearly already done its part when it comes to cutting federal programs.
The Association opposes the proposed cuts and earlier this month, published the following statement on our website (FarmEquip.org/CropIns) as an open letter and sent it to House and Senate Budget Committee Chairs and Ranking Members:
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Open Letter to House and Senate Budget Committee Chairs and Ranking Members The agriculture community is committed to the belief that balancing the Federal budget is important, which is why the industry supported the passage just last year of a farm bill that was estimated to reduce the deficit by $16.6 billion. In addition, crop insurance has contributed more than $1.2 billion a year towards reducing government spending since the 2008 Farm Bill. Therefore, we strongly oppose the President’s budget proposal to make crippling cuts to crop insurance. Attacking farmers’ most important risk management tool only weakens the farm safety net in the bipartisan farm bill that Congress carefully crafted after years of deliberation and more than 40 hearings. The farm bill places greater emphasis on risk management than did previous farm bills. Each year, farmers spend approximately $4 billion of their own money to purchase insurance from the private sector, which is far more efficient and effective than government-run crop insurance delivery systems. Crop insurance products and protection levels can be tailored to the individual farm, making it so effective in managing risk that more than 90% of eligible farmland is currently protected. This popularity enabled the country to face back-to-back years of wide-scale natural disasters, including the historic drought of 2012, without a single ad hoc disaster bill introduced for cropland. Such unbudgeted disaster bills were commonplace before crop insurance provided the depth and breadth of coverage that it does today, and taxpayers fully funded them. Budget levels currently in place for crop insurance ensure the affordability and availability of risk protection, while maintaining the viability of private-sector delivery. Arbitrary funding reductions only weaken the system and ultimately shift risk exposure back to taxpayers. As the House and Senate develop their own budget proposals we urge you to protect crop insurance and recognize its central importance to farmers, to lenders and to all of rural America. Sincerely,
Vernon Schmidt, Executive Vice President |