By MICHELE F. MIHALJEVICH
LOUISVILLE, Ky. — Proposed cuts to crop insurance could negatively impact farmers and rural America, said an official with Farm Credit Mid-America (FCMA).
Under President Trump’s proposed budget for fiscal year 2018, nearly $29 billion would be cut from federal crop insurance programs over the next 10 years.
Crop insurance premium subsidies would be capped at $40,000 for producers with an adjusted gross income of $500,000 or less. Currently there is no limit. Producers above that income level would lose their premium subsidies, said Jason Alexander, FCMA’s vice president of crop insurance.
“Every single producer who buys crop insurance would be impacted,” he cautioned. “It might be a small number of farmers who would be impacted by a cap, but every single producer in the program would be indirectly impacted. If there’s a cost increase, people will buy less (insurance). That would change the risk pool.
“As the pool becomes more risky, premiums for every farmer would likely increase. We’re not just talking corn, soybeans and wheat. We’re also talking about the higher-risk crops such as fruits, vegetables and organics. They’d be paying more in premiums.”
Federal crop insurance was first approved by Congress in the 1930s to help agriculture recover from the Great Depression and the Dust Bowl, Alexander said. In 2016, 1.2 million crop insurance policies were sold for more than 130 crops on more than 290 million acres, according to National Crop Insurance Services. The crops had an insured value of $100 billion.
Crop insurance is the cornerstone of risk management, he noted. “No one’s getting rich on crop insurance,” Alexander said. “It’s so you can sleep at night knowing you’ll make enough money to farm the next year. “When you step back and look at the cuts, it doesn’t make sense. With the (economic) downturn, the last thing we need are more cuts. Farmers are barely breaking even. If the (insurance) policy doesn’t guarantee a break-even price, it could be detrimental to a lot of farmers who can’t afford to put a crop in the ground.”
Similar cuts were proposed by previous administrations, he said. “They were dead on arrival. It seems as if we’re going down the same route they’ve gone before, but this version has more teeth in it.” Alexander is particularly concerned about the budget’s impact on young and beginning farmers. In order to access credit, they must have a good risk management plan and good crop insurance.
“Their margin is so thin,” he noted. “One bad year and they’re done. Everyone is well aware of how hard it is to start faming. This would add to that. It might make them question if they wanted to get into farming.”
The current crop insurance format is working, he said. “We want rural America and small towns to stay afloat by reinvesting in their own economies. Farmers purchase inputs and hire labor in their communities. Without a good policy, all of that could change.”
Organizations such as the American Farm Bureau Federation (AFBF) and the American Soybean Assoc. (ASA) have spoken out against the proposed cuts to crop insurance. The proposal “would gut federal crop insurance, one of the nation’s most important farm safety-net programs,” said Zippy Duvall, AFBF president. “Farm income is down substantially since Congress passed the last farm bill.
“AFBF will work with the House and Senate Agriculture, Appropriations and Budget committees to protect programs that are critical in managing risks inherent to production agriculture and maintain programs that are vital to rural communities.”
The budget is a “blueprint for how to make already difficult times in rural America even worse,” said Ron Moore, ASA president. “(Crop insurance) exists to sustain farmers who suffer catastrophic losses. Coupled with the arbitrary caps the budget would impose on premium subsidies, it’s clear that this budget was written without input from farmers who would be severely affected.”