REVIEW OF PRESIDENT’S BUDGET AND CROP INSURANCE
As you know, the Trump Administration released its Fiscal Year 2018 Budget last week. It calls for major reductions in federal spending to help secure the goal of substantial debt reduction. Despite recent years of falling income for the nation’s farmers, the President’s budget calls for a historic proposed cut of over $38 billion in farm bill programs. IL Corn is keeping an eye on things as they progress, as we can be sure that critics of U.S. farm policy will take full advantage of this proposed document to influence the farm bill debate in the House and Senate. IL Corn farmers have repeated told us that crop insurance is your top priority for the Farm Bill, and it faces substantial cuts in the proposed budget.
Within the USDA budget, mandatory spending cuts on crop insurance include the following:
- Limit crop insurance premium subsidy to $40,000
- Limit Harvest Price Option for Crop Insurance
- Limit crop insurance eligibility to $500,000 Adjusted Gross Income (AGI)
- Limit eligibility for agriculture commodity payments to $500,000 (AGI)
Here is some information to bust the myths about crop insurance that have led some to support that types of cuts proposed by the Administration.
MYTH: Means testing such as adjusted gross income (AGI) limits and premium assistance caps will keep large, wealthy farmers from receiving the assistance they do not need.
FACT: By changing the risk pool, reducing participation from any group of farmers will change the premiums for ALL farmers. Crop insurance is, by statute, an actuarially sound program, which means more participants (and more acres) in the program, the more the risk will be spread, keeping premiums and costs down for all participants.
GAO analysis in 2011 showed that a $40,000 premium support cap would affect 26% of total insured liability in the crop insurance in the program. So while a premium support cap might only impact a small number of producers, it would put a very large portion of crop production at risk.
USDA has called a cap on premium support “ill-advised,” noting regions with high-value crops (such as fruit, vegetable, and organic crops), large-acreage farms and/or a higher risk of crop loss would be hit especially hard. USDA has noted that North Dakota, South Dakota, Texas, Minnesota, California, Arizona, Mississippi, Utah, and Hawaii would all bear a disproportionate share of the effects of a cap on premium support.
Even though crop insurance opponents note that only a small number of producers would be impacted by an AGI limit, it’s important to keep in mind that these producers often farm a large number of acres. It is the acres impacted by an AGI limit, not the number of producers that will drive changes to premiums for ALL farmers.
Midsize family farms, large family farms, and nonfamily farms represent only 10.3 percent of all farms in the United States. However, they represent 51.7 percent of the acres operated and 75.8 percent of the value of agricultural production.
In other words, depending on where an AGI limit was set, it could put at risk more than three-quarters of all agricultural production in this country.
Clearly, and AGI limit that would impact more than half of the acres planted would have a significant impact on the risk pool for crop insurance and would impact rates for every farmer.