Crop insurance coverage appears likely to be expanded as House and Senate committees again take up providing 5-year reauthorization of farm programs.

The committees are acting despite a report earlier this month arguing that in many cases the federal crop insurance program allows growers to make more money from insurance payouts than they would from a healthy harvest.

This is particularly so for industrial-scale operations that have been enjoying record profits, says report by Bruce Babcock, a professor of economics at Iowa State University.

R.J. Lehmann, a senior fellow at the R Street Institute, a conservative think tank, says the House Farm Bill is even more generous than the Senate version. He says, according to projections from the nonpartisan Congressional Budget Office, the House bill would increase federal spending on crop insurance by $8.91 billion over the next decade, compared to a $4.98 billion increase in the Senate bill.

“While pitched by its sponsors as the more 'fiscally responsible' of the two bills, largely due to its projected $20.5 billion in cuts to the Supplemental Nutrition Assistance Program, the House bill actually calls for even larger increases in corporate welfare to mega-farms,” Lehmann says.

Congress is acting under a virtual ultimatum from the politically powerful American Farm Bureau Federation. In a letter to Congress in April, the Farm Bureau said one of its key priorities in the reauthorization bill is to “protect and strengthen the federal crop insurance program.”

“Given the pressing long-term fiscal challenges facing our country, the Farm Bill offers a perfect opportunity for Congress to demonstrate fiscal responsibility by slashing programs that waste taxpayer money, raise costs for consumers and damage the environment,” Lehmann says. “It's an opportunity that neither the House nor the Senate has yet stepped forward to seize.”

The Senate Agriculture Committee is dealing with the issue today, and the House Agriculture Committee will begin work on its version Wednesday, and is expected to complete work by the end of the week.

This is good news for crop insurers, which include Wells Fargo, ACE Ltd., XL Group, Everest Re Group and Starr International, amongst the 17 players in this market.

Lehmann says that among the largest disparities is a more generous Supplemental Coverage Option, which covers up to 90 percent of a farmer's crop revenue when elected in combination with a conventional policy.

The House bill would increase spending for the SCO by $3.85 billion over the next decade, compared to $2.25 billion in the Senate bill.

According to Lehmann, the House bill also calls for more generous “yield plugs” in the adjustment for average producer history yields, leading to a $936 million increase in spending over the next decade, compared to the Senate's $406 million. It also includes crop insurance provisions not in the Senate bill to provide $205 million of equitable relief for specialty crop producers and create a $283 million program for beginning farmers and ranchers.

The Senate version of the legislation also goes further in attaching important taxpayer protections to crop insurance subsidies. It would save $178 million by restricting subsidies for crop production on native sod, compared to just $118 million of savings in the House bill. It also would save $66 million by requiring conservation compliance for those who receive crop insurance subsidies, which the House bill does not.

To placate Southern farmers who objected to the loss of direct payments, both the House and Senate bills also project to spend $3.69 billion over the next decade by creating a stacked income protection crop insurance program for cotton and another $269 million by creating a peanut revenue crop insurance program.

Proposed amendments to the Senate bill would also expand crop insurance for fruit and vegetable producers as part of an effort to expand the program for underserved crops and regions, including fruit and vegetable producers. The bill provides additional assistance for underserved producers to partner with private developers of crop insurance to create improved insurance products.

Amendments to the Senate bill filed today also seek to improve crop insurance for beginning farmers and ranchers.

It proposes to give beginning farmers and ranchers a 10 percentage point discount for all crop insurance premiums. The bill also provides beginning farmers and ranchers with an improved production history when they have previous farming experience or when they face natural disasters.

Another proposed amendment to the Senate bill prevents anything in the farm bill or any amendment to it from tying conservation compliance to federal crop insurance.

Ryan Schoen, at Washington Analysis said in an investor's note that, “Ultimately, we expect deep political divisions on unrelated issues, namely federal food stamp programs, to stall passage of a farm bill reauthorization or extension until late in the third quarter, when the current bill expires.

Special Reports /

House, Senate Propose Generous Farm Bills

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