December 6, 2017
Editor’s Note: On October 24, the National Sustainable Agriculture Coalition (NSAC) released its 2018 Farm Bill policy platform, An Agenda for the 2018 Farm Bill, which provides a comprehensive vision for a more sustainable farm and food system. This is the sixth and final post in a multipart series that breaks down NSAC’s policy priorities for the 2018 Farm Bill.
Americans rely on family farmers to put food on our tables. We also trust that in the production of that food, farmers are actively working to protect and steward their lands and natural resources. Because farming directly impacts our most basic human needs (e.g., access to food, clean water, and fresh air), it is in the public interest to help farmers to be successful economically and responsible environmentally.
There are many ways that farmers can simultaneously mitigate financial risk and improve the sustainability of their operations, like investing in crop and enterprise diversification or improving soil health. There are a myriad of federal policies that help farmers achieve this “twofer,” including conservation, agricultural research, and value-added programs. When it comes to the farm bill, however, the taxpayer subsidized crop insurance program is generally seen as the primary risk management tool.
Farming is inherently a risky business. Weather, pests, variable costs for inputs, and fluctuations in market prices for farm products can create a volatile business environment and cause farm income to vary significantly from year to year. The federal crop insurance program help farmers manage that risk in a similar way that a non-farmer might use a car insurance policy, but with a major difference. On average, the U.S. taxpayer subsidizes 62 percent of the cost of crop insurance premiums for participating farmers. Taxpayers also subsidize otherwise private insurance companies for the cost of delivering the insurance to farmers.
The U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA) administers the federal crop insurance program. Theoretically, the program should provide protection against unexpected environmental and economic disaster equally to all farmers, regardless of the size of their farm or what they grow. In practice, however, the program excludes many types of farms and farmers. It can also discourage key sustainable farming practices, like the planting of cover crops or the use of advanced nutrient and pest management, while encouraging unsustainable practices, like planting monocultures or short rotations. Additionally, the program provides subsidy support without any per farm limit and with little transparency, which allows some of the largest and wealthiest farms to grow larger and wealthier at the expense of other farmers and the taxpayer.
Family farmers need risk management options like the federal crop insurance program, but in order for the program to serve them effectively and efficiently, it must be modernized. Farmers deserve a federal crop insurance program that works regardless of what they grow, encourages good land stewardship practices, and promotes a level playing field for all. In return for taxpayer support of the farm safety net, the American public deserve a crop insurance program that is as effective as it is accountable and transparent.
To make the federal crop insurance program more effective and efficient for farmers and taxpayers, the 2018 Farm Bill must:
In 2011, an overwhelming 78 percent of all U.S. farms had no crop insurance coverage at all. Even if you remove the smallest farms (those grossing less than $10,000 per year) from the equation, the percentage of farms without crop insurance is still nearly half (47 percent). The low participation rates are due in part to the fact that even though roughly 100 crops are eligible for crop insurance coverage, many of those policies are only available in very limited geographic areas. In other cases the policies discourage smaller growers because they are are geared solely to farmers selling into the national wholesale market, or are too complicated for and time consuming to navigate for diversified farming operations.
Small to medium-sized farms – among the least well-served by the federal crop insurance program – tend to be those that sell most into local and regional markets, markets that crop insurance has not served historically. The same holds true for produce farms of all stripes. Among the results is outsized support for the largest commodity crops (e.g., wheat, corn, soybeans, etc.), and inadequate support for livestock and for specialty crops, including fruits and vegetables. For instance, according to RMA 2014 data, only 36 percent of vegetables grown in the U.S. were covered by crop insurance. In contrast, 89 percent of the acreage for the top 15 commodity crops was covered during that same period.
Similar to many other industries, proper insurance coverage is a must-have for most farm businesses. Because lenders often require farmers to have crop insurance in order to qualify for loans, however, crop insurance can skew farmers’ decisions about what, where, and how to grow. If a farmer cannot obtain a policy for the crops best suited to the their particular land, climate, or market, for example, they may feel pressured into growing the crops on which they can obtain coverage. This structural flaw in the system can effectively push farmers away from diverse production systems and into monocultures or bi-cultures composed of one or two major commodity crops that have the most widely available and generous crop insurance coverage.
It is not plausible for RMA to offer individual crop policies for every single crop in every single county. The agency should, however, offer farmers equitable access to appropriate insurance options regardless of their crop or enterprise type, methods of production, or markets. The crop insurance program must be modernized to properly support America’s small to mid-sized producers, and to recognize the important role of specialty and diversified crop and livestock production.
By expanding access to better insurance options, RMA can facilitate farmers’ entry into new and expanding markets, such as the highly lucrative local and organic markets. More equitable access across crop and farm type will also encourage farmers to make choices that keep their land and their farms sustainable.
The federal crop insurance program takes a very short-term (single year) view of risk management on the farm. Currently, the program emphasizes the maintaining or increasing of yields over nearly all else – including conservation stewardship and long-term sustainability.
Existing research indicates that conservation practices have a number of benefits for farmers and the environment, including the ability to reduce yield variability and increase yields over time. Conservation practices also have well-established benefits, resulting in improved water quality, soil health, and greenhouse gas mitigation on the farm. Better aligning crop insurance with conservation is a win-win that generates numerous co-benefits – conservation is not only good for the environment, it’s also an effective risk mitigation strategy that further insulates farmers from disaster, thereby making them a less risky investment for taxpayers.
A series of reforms are needed to remove current crop insurance barriers to sound conservation practices and to re-align the federal insurance program to begin to actively promote risk-reducing conservation activities.
Since 2007, over 20 percent of all crop insurance subsidies have gone to the largest one percent of farms (calculated by sales). This is not only unfair and unreasonable, it is also an untenable course that risks the future of American agriculture by severely disadvantaging beginning farmers. Our farming and ranching populations are aging, in order to bring in the next generation of producers, we must remove barriers to entry and success in agriculture – like the inability to access adequate and affordable crop insurance coverage. In the 2018 Farm Bill, Congress must deliver a federal crop insurance program that works for all farmers equitably, including beginning and socially disadvantaged farmers. To to do this, they must ensure that the program is not contributing to farm consolidation and creating an uneven playing field by adopting reasonable premium subsidy caps, targeting subsidies to working farmers, and implementing means testing so as not to subsidize the wealthy.
Sunshine is as good for crop insurance as it is for crops. In a program that came with a price tag of over $8 billion last year, it is critical that the program is effective and efficient for both farmers and taxpayers. The federal crop insurance is unique amongst agricultural and other large subsidy programs in that it requires little-to-no public transparency. Though the program is heavily subsidized by taxpayers, the public is provided with no information as to how much the federal government is subsidizing any given individual farm or crop insurance company. The public is also unable to access information on whether or not farms receiving crop insurance subsidies are meeting basic conservation requirements. Furthermore, the federal government is currently prevented from sharing in any savings derived from the increased efficiency of the crop insurance industry, which leads to inflated costs and reduces the incentive for modernization.
Most people wouldn’t spend $8 billion on something unless they were sure it worked, really well. Why should we expect any differently from the American taxpayer when it comes to the federal crop insurance program? The 2018 Farm Bill must ensure taxpayers are getting a return on their investment by introducing transparency and accountability into this cornerstone program.
Ensuring that the farm safety net is stable, effective, and efficient is a top priority for the National Sustainable Agriculture Coalition (NSAC). We call on Congress to stand up for family farmers by supporting the modernization efforts outlined here and in our farm bill platform.
Several Members have already actively begun the process by developing bills targeted at reforming the structure of crop insurance and commodity subsidies. Introduced bills include: S.1025/H.R. 2332; S.1733/H.R. 3698; S. 2096/ H.R. 4305, and H.R. 4425. Coming soon there will also be bills to create an effective payment limit for commodity program payments, the other part of the traditional farm safety net.
There are also several marker bills focused on other issue areas that include crop insurance reform recommendations. The Beginning Farmer and Rancher Opportunity Act (H.R. 4316), introduced in the House by Representatives Tim Walz (D-MN) and Jeff Fortenberry (R-NE), contains several provisions aimed at improving access to crop insurance for beginning farmers. The American Prairies Conservation Act S. 1913/H.R. 3939 introduced by Senators John Thune (R-SD), Amy Klobuchar (D-MN), Michael Bennet (D-CO) and Mike Rounds (R-SD) and Representatives Kristi Noem (R-SD) and Tim Walz (D-MN), would extend protections for native grasslands linked to crop insurance to the whole country.
NSAC will continue to work with our member groups and allies on commodity and crop insurance modernization efforts as outlined in our detailed farm bill platform.
For ongoing updates on NSAC’s 2018 Farm Bill crop insurance and commodity program efforts, stay tuned to our crop insurance campaign page and our blog.
Categories: Commodity, Crop Insurance & Credit Programs, Farm Bill
Under the Crop Insurance Modernization heading, you say the “…Farm Bill 2018 must •Expand access to crop insurance equitably to all types of farmers and for all farming methods”. Are you saying this should cover hydro, aqua and aero farming as well? As it is a farming method, it is not the same as farming within the soil. Thoughts?