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Knowledge Center Items Agribusiness Voices Concern Over Proposed Crop Insurance Program Cuts

Agribusiness Voices Concern Over Proposed Crop Insurance Program Cuts

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A 36% cut in the federally subsidized crop insurance program as part of President Trump’s proposed budget has the agriculture industry concerned. Crop insurance is the largest of the USDA’s farm support programs at nearly $8 billion a year. Also part of the proposed White House bill is eliminating the USDA’s rural economic development program and streamlining conservation programs as part of the plan to save $46.5 billion over the next 10 years. Some of the savings would come through imposition of user fees for USDA inspection and regulatory programs, including a meat safety and inspection fee.

The cuts to the crop insurance program would yield the largest savings: $16.2 billion by limiting the government’s share of premiums and $11.9 billion through elimination of the so-called harvest price option, which indemnifies growers for crop losses if the harvest-time price is higher than the price guaranteed at planting time. Last year, the Obama administration proposed that farmers pay a larger share of the premium for revenue insurance policies with the harvest price option to reduce the potential for windfall profits. About 80% of crop insurance policies carry the harvest price option.

Currently, the government pays an average 62 cents of each $1 in premium for crop insurance policies. The proposed budget under this administration would limit the subsidy to a total of $40,000 a year and eliminate subsidized crop insurance for individuals with an adjusted gross income above $500,000 a year. The two proposals would reduce or eliminate the benefit of the premium subsidy to the largest and wealthiest of operators. The administration also proposed to limit access to crop subsidies to individuals with less than $500,000 in adjusted gross income, roughly half the current level.

“The president’s proposed budget is an assault on the programs and personnel that provide vital services, research, and a safety net to America’s family farmers, rural residents and consumers,” said Roger Johnson, president of the National Farmers Union.

Echoing similar dismay at the proposed budget, Ron Moore, president of the American Soybean Association, said in a statement, “It’s clear that this budget was written without input from farmers who would be severely affected.”

However, changes in crop insurance that cause farmers to cut back on plantings could provide relief to a global balance sheet heavy with supplies, notes Scott Irwin, agricultural economist for the University of Illinois, in an article in Reuters. “Falling production could pay off in the long run by helping to lift prices.”

There is opposition in Congress to the proposed cuts, both from Democrats and Republicans. U.S. Senator Debbie Stabenow, the ranking Democrat on the Senate Agriculture Committee, said she would oppose the cuts, which "would leave our farmers, families, and rural communities vulnerable in tough times." In addition, House Agriculture Committee Chairman K. Michael Conaway and Senate Agriculture Committee Chairman Pat Roberts, both Republicans, said they "will fight to ensure farmers have a strong safety net."

RPS provides insurance solutions to the agribusiness industry and will continue to monitor developments in the proposed budget as it relates to this sector.

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