DeVonna Zeug: Prevent gutting of crop insurance

The writer, of Walnut Grove, Minn., is president of the Minnesota Corn Growers Association.

It’s an odd thing — Uncle Sam is looking for ways to spend hundreds of billions of dollars to spur job creation and economic recovery, while Washington, D.C., is proposing a plan that I fear will destabilize crop insurance that we farmers need and lenders require, as well as threaten billions of dollars in economic activity and thousands of American jobs.

It’s also troubling that, once again, Washington’s policies come at the expense of rural America.

Private insurance companies and their agents and adjusters provide coverage on roughly 270 million acres and more than 100 different crops across the nation, according to the terms of their contract, called the Standard Reinsurance Agreement (SRA).

While work remains to be done to ensure that all crops and regions of the country are fully served by crop insurance, crop insurance is indispensable for Minnesota farm families and for thousands of farm families across the country. For farmers and livestock producers who face tremendous risks each year (we borrow more money each year than most people do in a lifetime), crop insurance has provided increasingly valuable coverage to more and more producers in all regions.

The total liability insured by crop insurance grew from $31 billion 10 years ago to $46 billion in 2004 (a 50 percent increase). It then rose to $90 billion in 2008 (a tripling over 10 years, doubling over five) and settled at $80 billion in 2009 as crop prices retreated significantly from the year before.

For rural communities across the nation, crop insurance has been a source of good jobs. The industry is made up of 15 companies that employ economists, actuaries, data managers, computer programmers, product developers, sales managers and on and on, totaling thousands of jobs just internally.

They also contract with thousands of men and women in communities across the nation who sell and service policies to producers like my husband Tom and me. They employ a host of adjusters who must be ready to assess losses in a timely way when Mother Nature destroys our crop.

So what has happened?

On Dec. 4, the administration put out a draft SRA (the contract with companies) that would cut funding for delivery of insurance to farmers by roughly one-third. It further threatens the private delivery system by proposing equally deep cuts to the underwriting gains a company can make in good years.

In total, according to briefings that were conducted on Capitol Hill, the change would cut at least $4 billion out of crop insurance (and out of “flyover space” economies) over the next five years. Based on private analysis and expected crop prices, this number could actually be much higher.

In a nutshell, this level of cuts could threaten the very future of crop insurance, put in doubt the availability of insurance to farmers like me and result in thousands of lost jobs in rural communities where we live and work.

This is not the time or place for such deep and destabilizing cuts. Many sections of last year’s 2008 farm bill, which took more than $6 billion out of crop insurance to pay for other priorities, have yet to take effect.

Taking an additional $1 billion out of the delivery system each year — even while the industry is adjusting to already scheduled cuts — would be devastating. It will stymie investment in the industry, causing companies to hunker down at best and close their doors at worst, meaning less competition for our business.

Perhaps most troubling about this proposed raid on crop insurance is that the money will not stay in the rural communities or with the farmers whom crop insurance was designed to serve.

Therefore, it is not just an attack on crop insurance but also a raid on the agriculture budget baseline — the baseline that has sustained well more than its fair share of cuts over the past several years even as its overall spending levels have come down because of good policy (an anomaly as government policies go).

Cuts to crop insurance that pale by comparison were proposed in Congress last year as amendments to the farm bill and earlier this year in the budget cycle. But they were rightly and resoundingly rejected by the Congress on a bipartisan basis.

For the sake of farm families like mine, lenders whose financing allows us to plant and harvest a crop each year, the thousands of employees and billions of dollars in economic activity generated by crop insurance, and the agriculture budget, this administrative raid on crop insurance also should be turned back.

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