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    Friday, April 20, 2012

    Keith Good Farm Policy: Don’t Cut Crop Insurance, Ag Groups Plead


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    Farm Bill: Policy Issues

    DTN Ag Policy Editor Chris Clayton reported yesterday (link requires subscription) that, “With the Senate Agriculture Committee expected to release Chairwoman Debbie Stabenow’s proposed bill as early as Friday, eight major agricultural groups wrote senators on Thursday asking them to avoid cuts in crop insurance and stay away from hikes in target prices.

    “Stabenow, D-Mich., and Ranking Member Pat Roberts, R-Kan., are expected to release a joint bill on Friday with anticipation that the Agriculture Committee will debate and pass a bill next week. Still, no official word has come down from the committee regarding a mark-up for the bill.

    “The farm groups credited the Senate Agriculture Committee for sticking with the $23 billion in cuts proposed in the failed supercommittee talks last fall. President Barack Obama and leaders in the House Budget Committee have pushed for higher cuts.”

    Mr. Clayton noted that, “While championing a strong crop insurance program, the groups acknowledged other farm organizations don’t support a revenue system, or shallow-loss program, as the basis of a safety net. The letter states that changes should be made to crop insurance to improve it for other commodities or produce.”

    “The farm groups also want to keep the marketing loan program and oppose any changes to current payment limits or income eligibility. They also reiterated opposition to tying conservation compliance to crop insurance.”

    Mr. Clayton also pointed out yesterday in the DTN article that, “The Environmental Working Group [EWG] is countering the costs of private insurance with a report by Iowa State University Professor Bruce Babcock showing $18.5 billion in savings over 10 years by going to a ‘free’ insurance program.

    “The premise of the plan is that the federal government would provide revenue support up to 70% of a whole farm’s revenue. Farmers could buy private crop insurance coverage beyond that, but it would not have federal premium subsidies to insurance companies.”

    Also on the EWG report, George C. Ford reported on Wednesday at The Gazette (Cedar Rapids, Iowa) Online that, “A proposal to reform the nation’s crop insurance program by offering it free to farmers as a new safety net is expected to be stamped “dead on arrival” should it ever reach either house of Congress.

    “The Environmental Working Group on Wednesday released a report that recommends changing the existing crop insurance program into a free insurance policy that would cover 70 percent of average yield and 100 percent of the market price for the lost crop.”

    The Gazette article indicated that, “‘If farmers were charged a small fee to cover administrative costs, taxpayers would save $10.4 billion over 10 years and cover every acre planted with corn, cotton, rice, soybeans and wheat in 2011,’ according to Babcock. He claims the savings would grow to $18.5 billion over 10 years if only the acres insured in 2011 were covered by the proposed crop insurance program.

    “‘The reality that giving away free insurance would actually save money underscores how inefficient the current system is,’ Babcock wrote in his report.”

    Jim Webster reported yesterday at Agri-Pulse Online on the EWG report and noted in part that, “Subsidized underwriting gains for crop insurance companies would be eliminated by having USDA’s Federal Crop Insurance Corporation pay claims directly.”

    Meanwhile, Dr. David Graves, Manager of the American Association of Crop Insurers (AACI), provided additional background on this issue in a statement yesterday (“To Ignore History Is to Repeat History: Government Delivery of Crop Insurance Has a History”) which contained this analysis:

    Whether some current agriculture policy “experts” know it or not, accept it or not, or care or not, Federal government delivery of crop insurance has a distinct and recorded history.  It is not a success story.  It is not an experience farmers are longing to relive.  It is not a path Congress should desire to travel—again.




    It is a history that ended about 25 years ago in absolute failure.  In fact, in the 1980s when farmers were given a choice between government-delivered crop insurance and private sector-delivered crop insurance, it took them only a few short years to almost completely abandon the government-delivered option.  Why?

    Well, it was not really tough, complex issues that doomed the government-delivered option.  To the contrary, it was essentially two of the simplest factors in the insurance world—policy service and claims processing.  The private sector applied its superior knowledge of insurance and worked long hours, often late into evenings and weekends, to help make sure farmers were making appropriate purchasing decisions.

    Additionally, the private sector was acutely aware of the business advantages of both timely and accurate claims processing and it applied this knowledge in a highly skilled manner.  Interestingly, more than 25 years later, the private sector is still living by these two key standards and farmers, more loudly than ever, are calling for its continuation—without change or harm to it—according to all published testimonials.

    For those interested in knowing how well the private sector-delivered crop insurance program is working, go to the USDA Risk Management Agency’s (RMA) website and look at the array of participation and coverage numbers recorded.  They present a picture of risk management success.  And speaking of pictures, while on RMA’s website, take a look at the county- by-county map of indemnity payments made for the 2011 crop year—over $10.5 billion broadly distributed across the nation.  This map is the best picture of just how effective the private-sector-delivered option has been for farmers.

    Now, some “experts” have suggested government delivery of Federal crop insurance would cost less.  Well, here they go again either ignoring or failing to know history.  When farmers had a choice of both delivery options, an independent analysis concluded it cost the government twice as much to sell and service policies as it did the private sector.  And this was for a product farmers did not prefer.

    However, you can almost always spend less on what you buy.  The question is, do you get what you most need.  Farmers have cast their vote.  They know what they need and they are shouting about their interest in keeping it.  We believe the members of the congressional agriculture committees have heard the farmers and understand their position.  We encourage others to listen to farmers, who are trying to make a living producing our food and natural fiber, which is a highly risky investment of their time and money.

    Farm Bill: Nutrition

    Michael M. Grynbaum reported in today’s New York Times that, “It is an innovative, intuitive and increasingly common way to ensure that food reaches the mouths of hungry children from low-income families: give out free breakfast in the classroom at the start of each school day.

    “The results, seen at urban districts across the country, are striking. Without the stigma of a trip to the cafeteria, the number of students in Newark who eat breakfast in school has tripled. Absenteeism has fallen in Los Angeles, and officials in Chicago say children from low-income families are eating healthier meals, more often.”

    The Times article noted that, “But New York City, a leader in public health reform, has balked at expanding the approach in its own schools, and City Hall is citing a surprising concern: that all those classroom Cheerios and cheese sticks could lead to more obesity.

    “Some children, it turns out, may be double-dipping.

    “The city’s health department hit the pause button after a study found that the Breakfast in the Classroom program, now used in 381 of the city’s 1,750 schools, was problematic because some children might be ‘inadvertently taking in excess calories by eating in multiple locations’ — in other words, having a meal at home, or snacking on the way to school, then eating again in school.”

    Damian Paletta reported yesterday at the Real Time Economics Blog (Wall Street Journal) that, “The Congressional Budget Office said Thursday that 45 million people in 2011 received Supplemental Nutrition Assistance Program benefits, a 70% increase from 2007. It said the number of people receiving the benefits, commonly known as food stamps, would continue growing until 2014.

    “Spending for the program, not including administrative costs, rose to $72 billion in 2011, up from $30 billion four years earlier. The CBO projected that one in seven U.S. residents received food stamps last year.

    In a report, the CBO said roughly two-thirds of jump in spending was tied to an increase in the number of people participating in the program, which provides access to food for the poor, elderly, and disabled. It said another 20% ‘of the growth in spending can be attributed to temporarily higher benefit amounts enacted in the’ 2009 stimulus law.”

    Senate Appropriations

    David Rogers reported yesterday at Politico that, “With the blessing of top Republican leaders, the Senate Appropriations Committee gave quick approval Thursday to spending allocations for the coming year—consistent with the August debt deal but also significantly higher than the levels set by the House GOP for domestic programs.

    “Senate Minority Leader Mitch McConnell (R-Ky.) and Sen. Lamar Alexander (R-Tenn.), also a veteran of the GOP leadership, joined in support as members of the committee. Two freshman Republicans, Sens. Jerry Moran of Kansas and Ron Johnson of Wisconsin, dissented, but the 27-2 bipartisan roll call was a boost for Chairman Daniel Inouye (D-Hawaii) as he tries to make some headway before the November elections.

    “The path ahead is still not easy given the potential for filibusters and delays on the Senate floor. But the greater issue is the House’s decision to break with appropriations targets set out in the Budget Control Act last summer.”

    Mr. Rogers explained that, “Instead of allowing for up to $1.047 trillion in discretionary spending, the House budget resolution sets a lower cap of $1.028 trillion—about $19 billion less than the budget act assumed and $15 billion below what has been appropriated already for the current fiscal year ending Sept. 30.

    “Within these limits, the House resolution departs significantly from the internal caps set for defense and non-defense spending. The result is that Democrats and President Barack Obama would be left with about $28 billion less for domestic and foreign aid programs than had been anticipated.”

    Recall that Rosalind S. Helderman reported earlier this week at the 2Chambers Blog (Washington Post) that, “President Obama has threatened to veto any appropriations bill adopted by Congress that would cap agency spending at lower levels than agreed to in the bipartisan deal to raise the nation’s debt limit last summer.”

    An update posted yesterday at the National Sustainable Agriculture Coalition Blog yesterday stated that, “On Thursday, April 19, the Senate Appropriations Committee approved discretionary spending allocations for the coming 2013 fiscal year.  The size of the total spending pie was completely consistent with the levels set by law in the Budget Control Act of 2013.

    “The agricultural appropriations slice of the pie was set at $23.357 billion, nearly the same as the fiscal year 2012 level.  About $2.5 billion of that total will likely go to the Food and Drug Administration, with most of the balance to USDA.”  [Related link from Senate Appropriations Committee].

    Also yesterday, the Senate Agriculture Appropriations Subcommittee held a hearing on the FY13 Food and Drug Administration budget where Dr. Margaret Hamburg, the Commissioner of the Food and Drug Administration testified.

    In part, Dr. Hamburg noted that, “In the area of food safety, the most sweeping reform of our food safety laws in more than 70 years was signed into law by President Obama on January 4, 2011 – the FDA Food Safety Modernization Act (FSMA). We issued an interim final rule describing the criteria for administrative detention of food when there is reason to believe the food is adulterated or misbranded, and we have used this authority several times. We met the one year FSMA mandate for inspections of foreign facilities, and are well on the way to meeting the 5-year inspection frequency mandate for high-risk domestic food facilities. We also issued an updated guidance for the seafood industry on food safety hazards. We anticipate issuing several proposed rules called for in FSMA shortly. We post regular progress reports on implementation milestones on our web site.”

    Budget Issues

    Ramsey Cox reported yesterday at The Hill’s Floor Action Blog that, “Senate Budget Committee Chairman Kent Conrad (D-N.D.) on Thursday morning defended his decision not to propose his own budget or hold a vote on President Obama’s fiscal commission plan in committee Wednesday.

    “Instead of introducing his own budget, Conrad held a hearing to debate the plan proposed by former Clinton chief of staff Erskine Bowles and former Sen. Alan Simpson (R-Wyo.). But the committee didn’t take a vote after debate, which led to sharp criticism from Republicans who claimed Democrats were ducking the issue.”

    Yesterday’s update added that, “Conrad said the commission’s plan was unlikely to pass ahead of the 2012 elections.”

    “He also rejected GOP criticisms of the failure of the Senate to pass any budget for the last three years, and repeated his argument that the Budget Control Act, passed last year, sets a budget for three years.”

    Mr. Cox stated that, “Unless stopped by lawmakers, at the end of this year sequestration cuts from the Budget Control Act will take effect, in addition to the repeal of the Bush tax rates. Conrad indicated that if he can find the support, he would propose the Bowles-Simpson budget as an alternative during the lame-duck session.”

    To listen to an excerpt from Chairman Conrad’s presentation on the Senate floor yesterday, just click here (MP3- 2:25).

    Animal Agriculture

    In policy developments regarding animal agriculture issues, Reuters writer Emily Stephenson reported earlier this week that, “The Humane Society of the United States filed a legal complaint asserting that a national campaign that portrays the pork industry as ethical and humane is misleading consumers because of practices such as confining breeding pigs to small crates.

    “The complaint, filed with the Federal Trade Commission, charges that the National Pork Producers Council’s We Care campaign and its Pork Quality Assurance Plus program obscure practices such as keeping breeding sows in so-called gestation crates, the Humane Society said in a press release on Wednesday.

    “Gestation crates are a 7-ft by 2-foot metal enclosure, in which a breeding pig, or sow, is kept for most of her adult life. Pork producers say the gestation crates are needed because sows that are housed together will fight.”

    The Reuters article added that, “According to the Humane Society, about 70 percent of breeding sows in the United States are confined in these crates.

    “The group said major food companies such as McDonald’s, Wendy’s and others have pledged to eliminate gestation crates from their supply chains. Smithfield Foods and Hormel Foods will end the use of gestation crates by 2017, the Humane Society said.”


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