Covering crop insurance
Convention panel discusses threats to farmers' safety nets
By Trista Crossley
Folklore says things happen in threes, so perhaps its no surprise that an expert in defending crop insurance has identified three areas where the program is likely to come under fire.
Tara Smith, vice president of federal affairs with Michael Torrey & Associates, a governmental affairs firm in Washington, D.C., that represents the crop insurance and reinsurance bureau, said private sector delivery, means testing and cuts to the premium discount are the areas she expects to see targeted in the coming year.
“I think as we look at the budget process and the appropriations process next year, we see three big buckets where you could end up seeing attacks to crop insurance, because, for better or worse, this isn’t our first rodeo. We’ve seen these attacks on crop insurance in the past, so we sort of know where those hits are going to come,” she explained.
Smith was part of a panel answering questions about crop insurance at the 2016 Tri-State Grain Growers Convention in November. Also on the panel were Rick Williams, senior risk management specialist at the Risk Management Agency’s (RMA) regional office in Spokane, Wash., and Marva Ulleland, vice president of insurance services at Northwest Farm Credit Services. The panel was led by Chandler Goule, CEO of the National Association of Wheat Growers.
When it comes to cuts in crop insurance, Smith said the farm bill isn’t the only place where the knife can hide. She pointed to the incident in October 2015 when a $3 billion cut to the program was included in a federal budget bill. After a groundswell of grassroots protest, that cut was fixed in a later transportation bill.
“Crop insurance can come up in the unlikeliest of places,” she explained. “We do have an annual budget and appropriations cycle in Washington, D.C., and those are both opportunities for folks to take jabs at crop insurance, so we really need to be diligent.”
Also taking aim at crop insurance are organizations on the far right, such as the Heritage Foundation, and on the far left, such as the Environmental Working Group (EWG). Both of those particular groups have called for cuts to the farmers’ safety net. Even newer members of Congress have expressed concerns with premium assistance, which, Smith reminded the room, was put in place to encourage participation in crop insurance in order to move away from ad hoc disaster assistance.
“It worked,” Smith said, “And now that it’s worked, everybody wants to go backwards, because a lot of those folks on the Hill now weren’t around in 2000 when these discussions were had the first time. We’ve been there before, and the grass isn’t always greener on the other side.”
Education backed by solid facts is the way to counter this kind of thinking, Ulleland added. She said all of the commodity groups need to stick together and be strategic in their approach to 2018 Farm Bill negotiations.
“These groups (speaking of Heritage and EWG) are using less than statistical information to tell their story, and I think that’s one of the lessons we learned through the last farm bill negotiation. The planes that land don’t make news. People want to hear the scary part, the bad part. That’s what makes the news. Farming has a great, great story to tell, and we need to get better at telling that,” Ulleland said.
According to Williams, in the mid-1980s, development of most crop insurance programs was turned over to private companies, with RMA assuming a more administrative role. Once a crop insurance program is approved by the federal crop insurance board of directors, RMA works with private insurance companies to sell and service it to farmers. Besides educating both crop insurance companies and consumers about existing and future programs, the agency also works within the ag industry to make sure the programs are working.
“It’s always been our office policy that we get out and do as much as we can to help the growers understand what these products are, plus it gives us a boot on the ground,” Williams said. “We are out there and can see how the programs are working.”
In the Northwest, more than 70 commodities are covered by crop insurance. Williams said that as of November, RMA has paid out almost $14 million in losses to Washington wheat producers for the 2016 crop year. Low falling numbers (FN) is almost certainly responsible for some of those claims, and Williams was asked how RMA addresses a quality problem like FN. RMA implemented FN coverage in 2011 after Pacific Northwest grower groups approached the agency and asked for it to be included in wheat policies under quality protection. Because FN is a problem in other areas of the country, the coverage was implemented nationwide. Williams acknowledged that there are some challenges with the FN coverage, such as discount tables, which are set a year in advance of harvest and often don’t match elevator discounts. Another concern with many growers is the fact that a quality issue can impact yield.
“With FN discounts, you are covered right at the 299 and below level. That covers even shallow losses, and maybe that’s something we need to look at, because once you are covered for a peril, you have to report any adjustment that peril may have cost your production,” Williams explained, adding that other perils generally don’t kick in until damage levels are much higher. “So if you experience those little losses that aren’t covered, we aren’t adjusting your APH (actual production history). Maybe that’s one thing as a group that we need to really sit down and look it. Where do we really need to start covering FN? If the FN is 250 or higher, maybe you as a producer can take on that risk, and we start discounting at something below that.”
Another question that was directed at Williams involved how certain types of fire losses are handled for APH purposes. Currently, if a farmer experiences a combine fire that results in damage to a field, the loss isn’t covered by crop insurance because it isn’t considered a naturally occurring event.
“So if you lose your field, not only do you not get a payment because it isn’t a covered peril, but you still have to report the loss, and if it burns your entire field, you get a big fat goose egg on your APH. That’s a tough one to swallow. It wasn’t a covered peril, yet you have to report your production, so it could have a negative impact on your APH,” Williams said. For the past few years, RMA has been working on a procedure to address the situation but has been unable to implement it due to federal regulations. Williams said there is a possibility that some of that procedure could be put in place by 2018, but there was no guarantee.
Photo caption: (From left) Chandler Goule, CEO of the National Association of Wheat Growers, moderated a panel on crop insurance at the recent 2016 Tri-State Grain Growers Convention that included Marva Ulleland, vice president of insurance services at Northwest Farm Credit Services; Rick Williams, senior risk management specialist at the Risk Management Agency’s (RMA) regional office in Spokane, Wash.; and Tara Smith, vice president of federal affairs with Michael Torrey & Associates.