The Independent Community Bankers of America (ICBA) and other agricultural advocates are calling on the Senate during the farm bill debate to maintain current funding levels for federal crop insurance and to avoid amendments that result in less participation, lower premiums or a weaker delivery system. In a joint letter to senators, the coalition wrote that federal crop insurance provides an effective risk management tool to farmers and ranchers of all sizes and reduces taxpayer risk exposure.
"Crop insurance is the cornerstone of most farmers' risk management portfolios," the coalition wrote. "After a very challenging 2011 crop year, and with increasing demands for food, fiber, feed and fuel worldwide, it makes little sense to reverse the great progress Congress has made in providing crop insurance protection to producers."
Efforts to weaken the crop insurance program will ultimately hurt small producers because higher rates will drive producers from the program, which will lead to fewer premium dollars paid in to support it. The crop insurance program has already had billions of dollars in cuts in recent years. Congress was able to avoid another costly ad hoc disaster program last year despite a severe drought in Texas and surrounding states because of the effectiveness of the crop insurance program and its broad coverage levels. "But reducing participation and causing rates to increase on remaining program participants is a path backward toward periodic, multi-billion-dollar ad hoc disaster programs," stated Mark Scanlan, ICBA's senior vice president of agriculture and rural policy.
Farmers do not receive subsidy checks for crop insurance but rather receive discounts on the checks they write to pay premiums and buy insurance from private sector providers. Producers often pay premiums for years without collecting anything and only receive payments in the event of a loss. Congress should maximize participation to ensure the lowest rates possible for all producers in the program, which only occurs when risks are pooled across as many farmers as possible.
In addition to proposed crop insurance cuts, ICBA also opposes amendments to reimpose term limits or restrict access to USDA guaranteed farm operating loans and amendments to restrict or prohibit USDA guaranteed loans. Such approaches would needlessly force thousands of farmers and ranchers out of the program; cut off farmers' income stream; inhibit their ability to repay lenders, suppliers and the USDA; and force many farmers into unnecessary liquidations. The USDA has adequate funds to meet loan demand, and other farm programs do not have term limits. ICBA notes that borrowing and lending decisions should be made at the local level between community banks and their farm and ranch customers.
For more information and to read the coalition letter, visit www.icba.org.