Members of the US Congress are considering a two-year budget deal that aims to save the federal government money by cutting nearly a third of its spending on crop insurance.
The federally subsidized program, which costs more than $9 billion annually, would see cuts of $3 billion implemented over 10 years according to the tenets of the arrangement and – if you listen to opponents of the proposal – devastate the agricultural industry.
Under terms of the deal, the cuts would come by lowering the rate of return for companies that sell crop insurance to farmers.
Specifically, section 201 of the Bipartisan Budget Act of 2015 calls for USDA to renegotiate the agreement with private crop insurance companies by December 31, 2016 and then to renegotiate the agreements at least every five years after that. Additionally, the bill calls for a cap of 8.9% on the amount that crop insurance companies can earn on retained premiums for the 2017 to 2026 reinsurance years.
According to an analysis from AgWeb, the diminished rate of return represents “an immediate 38% cut in potential earnings” to these companies and could cause them to exit the crop insurance business altogether.
That could “undermine a critical risk-management tool for American agriculture producers and consumers,” said a joint statement from Republican chairmen of the House and Senate Agriculture Committees, Mike Conaway and Pat Roberts. Both have promised to vote against the bill, believing that cuts would mean farmers will becoming increasingly dependent on Congress to approve emergency spending for farmers who suffer large-scale losses.
“Agriculture producers are battling floods while others continue to face ongoing and severe drought,” Roberts told colleagues at a Senate Republican caucus lunch Tuesday. “Crop insurance has kept them in business in a tough economy and eliminated the need for a costly emergency federal disaster package.”
He said he hopes lawmakers can find a different way to generate savings through the budget deal.
The proposed cuts come just one year after a congressional farm bill eliminated many program subsidies, including payments that went to farmers regardless of crop yield or price.
