NU Online News Service, Jan. 21, 3:50 p.m.EST

WASHINGTON–Proposed cuts for the U.S. AgricultureDepartment's subsidy to the crop insurance program are excessiveand will likely lead to more consolidation in a shrinking privatecrop insurance industry, an insurers' representative told theagency.

Robert Parkerson, president of National Crop Insurance Services,which represents the carriers in talks with the AgricultureDepartment, made his comments as the NCIS submitted acounterproposal to the Agriculture Department this week.

He said the original December proposal by the USDA/RiskManagement Agency "would substantially change the structure of thecrop insurance program."

Specifically, he said, it would result in an estimated reductionin funding of approximately $800 million per year over the nextfive years. This $4 billion cut would be in addition to the $6.4billion cut mandated by the 2008 farm bill.

"These are pretty dramatic cuts based on little or no supportingresearch and data," Mr. Parkerson said.

"The industry supports thinking about change, but it has to makesense for the Government, industry and producers," he said.

In addition to the proposed cuts, the private industry hasestimated, on a preliminary basis, additional costs of over $100million to comply with RMA's new program initiatives andinformation technology requirements, he said

NCIS represents the private companies who sell and service cropinsurance policies to America's farmers and ranchers.

The comments noted that the proposed funding reductions willimpair many of the 15 private insurance companies, especially thesmall and medium-sized ones.

"This is likely to lead to more consolidation among the alreadyshrinking industry and cause many of the 18,000-plus jobsassociated with this industry, many in rural America, to be lost,"Mr. Parkerson said.

Mr. Parkerson said that, in general, the proposed funding cuts"are excessive and unacceptable to the industry."

He noted that various proposals to reduce federal spending oncrop insurance have been made over the past few years, includingthe Obama administration's 2010 budget proposal to cut the USDAbudget by $5.2 billion, but these cuts were rejected byCongress.

"Now, through discretionary action, RMA proposes to implementthe largest funding cuts ever for the industry," he said.

He said the proposed cuts will reduce industry returns wellbelow the long-term average, "sharply reducing the incentivescompanies have to maintain investments in the industry in order toadequately service all producers."

Mr. Parkerson said that, "We truly hope that USDA and RMA willbe willing to sit down with us soon and go through a truenegotiation process for the 2011 standard reinsuranceagreement.

"The industry has many good ideas to offer, based on years ofanalysis, much of it by third party accounting firms," he said.

"I know we can work this out to the benefit of all interestedparties without wreaking havoc with a public/private partnershipthat has been working the way Congress intended for it to work forthe last 30 years," he added.