Farmers could see another round of cuts to crop subsidies under recent proposed changes to the Federal Crop Insurance Program (FCIP). Estimated cuts over the past 10 years total $12 billion. Senate legislation includes a provision for establishing a means test for crop insurance payments, but the provision was not included in a recent report by the House Agricultural Committee. Under the Senate’s proposed amendment, premiums would rise 15 percent for farmers with incomes of more than $750,000.
The FCIP is a primary risk management tool for farmers. Eighteen thousand agents serviced 1.15 million crop insurance policies in 2011. IIABA warns that limiting crop participation will have negative effects such as reducing producer financing, forcing farmers to look for disaster assistance elsewhere. IIABA wants to ensure that crop insurance agents can continue to advise farmers about coverage choices within the program.
The amendment comes while ongoing Midwestern drought and heat conditions continue to wreak havoc on crops, especially potential corn bushel yields for 2012. The USDA originally projected 166 bushels of corn per acre in June. The current projections now sit at 146 bushels, but agricultural meteorologists for AccuWeather.com believe the yield could be as low as 138 bushels.
A Milliman report focused on Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio and South Dakota projects a 147 loss ratio for those states in 2012 based on projected corn and soybean yields and prices. It warns that drought conditions in the Midwest could cause more than $2.8 billion in underwriting losses and have already resulted in indemnity payouts totaling $822 million as of mid-August.