A flawed system: Local group finds issues with new farm bill

Fergus Falls Daily Journal (MN)

March 30--Family farmers and Supplemental Nutrition Assistance Program recipients gathered outside the headquarters of NAU Country Insurance in Ramsey, March 12. At a press conference, the group of people were demonstrated against federal crop insurance, a program that has become a "torn safety net" according to the Land Stewardship Project (LSP) and against NAU -- an insurance company that is resisting crop insurance.

Bryan Simon is a member of the LSP and is a beginning farmer in Barrett. He said LSP is a nonprofit membership based organization that works on issues related to farming and rural communities and good stewardship of the land. LSP's argument right now, is that the federal crop insurance program is not working the way it should.

"We need crop insurance that works for the taxpayers of the farm bill and for farmers and not just the big corporations and big farmers," Simon said.

Lisa Lacey, senior insurance specialist and branch manager at AgCountry Farm Credit Services said crop insurance is meant to provide a safety net for farmers.

"So, if the producers have large losses due to natural perils crop insurance will help compensate for part of the loss," Lacey said. "Many farmers can also use crop insurance as a marketing tool, so they can forward contract for some of their production."

Crop insurance is also meant to provide a safety net for operating the farm. Lacey said a lot of banks will take crop as collateral so the insurance is a way for farmers to continue their farm operation every year.

"Essentially, farmers are paying in a premium every year and they might not collect every year but could collect once every 10 years," Lacey said. "It's similar to a house policy in that if your house starts on fire, you will get paid. You pay premium every year but a loss has to occur to collect. Crop insurance is similar and there will be certain parameters that need to be met in order to collect."

A torn safety net?

Ben Anderson, federal policy organizer of the Land Stewardship Project works with family farmers and rural residents across rural Minnesota and west Wisconsin and with members of the project. They are striving to get a better farm bill that represents everyday people, family farmers and rural residents. Anderson said LSP represents 4,000 households total and so, about a couple hundred are represented in the Otter Tail County area. Some LSP members and family farmers have noted two major problems they see in crop insurance.

"Crop insurance is supposed to be a safety net for the farmer, but it is the only program in the farm bill with no subsidy limits," Anderson said. "So larger farmers are getting more out of it and the subsidies are not tied to meaningful ways to practice conservation efforts to help the soil health and ensure clean water."

For instance, Simon said soil health practices such as cover crops and livestock integration are not being implemented and incentivized like they should. In result, Simon said topsoil will blow or wash away into ditches and end up in waterways.

At AgCountry Farm Credit Services, Lacey said there is a tie to conservation efforts and subsidies through the crop insurance program. Someone who wants to be insured and receive the subsidy has to be in compliance with the FSA and have an AD-1026 (a form to show a farmer is in compliance of conservation standards) on file.

"If they do not have that on file, they do not receive the subsidy," Lacey said.

When it comes to having no cap on the subsidies provided by crop insurance, LSP and Simon argues this gives larger farms an advantage. According to LSP's special report, "...farm operators can collect an unlimited amount of insurance subsidies that grow with the size of the operation. This gives an unfair advantage to the largest farms, because they are in a position to collect an undue share of the subsidy."

The way the crop insurance program currently is, according to Simon, makes it hard for beginning farmers to flourish.

"As a beginning farmer this is a huge issue right now," Simon said. "The crop insurance program is driving up the price of land and you can't afford to buy land and expand your operation and get bigger, because you can't compete with big farmers."

In the perspective of providing crop insurance in Fergus Falls, Lacey believes the program is working well right now and the size of a farm operation does not dictate who AgCountry chooses to insure.

"As AgCountry, we work with small, large and young beginning farmers and we have a wide cross-section of the market," Lacey said. "Crop insurance as a whole has a large pool of insured farmers that the risk is spread across, these farms are large and small."

Lacey said there was also benefits added in the last farm bill to help beginning farmers, helping them get increases in subsidy levels and get their administration fee waived.

Simon said it was necessary to go and rally outside of NAU insurance, because not only are they resisting any changes in the crop insurance program, but they are benefiting from the current system, making billions of dollars in profits off federal crop insurance according to LSP.

"Big farm corporations and big crop insurance companies are making money and don't want this message to get out, that there are negative effects in our current system," Simon said. "Most farmers right now are struggling and this is the main farm program that is supposed to help farmers."

AgCountry ensures they work for the benefit of their customers. Lacey said her agency's standard is to serve all their customers.

"We will help customers find the crop insurance program that would work best for them in that time," Lacey said. "I would like to believe most other agencies are doing the same thing for their producers. If our customers don't trust us, they won't come back, so we want to build a trusting relationship."

There are about only 15-16 crop insurance companies allowed to administer crop insurance program according to Simon and some, like NAU, whose parent company based in Australia, is spending millions of dollars to lobby Congress in their interest. He believes family farmers' and taxpayers' voices are getting drowned out by the large insurance companies and big farm operations.

"Lawmakers are being lobbied heavily by the crop insurance industry and big ag who want to continue to make a lot of money and a lot of money has been spent on lobbying for lawmakers and in term, Congress writes policies that benefit them and not the general farmer," Simon said.

While Lacey said she couldn't speak for every crop insurance agency, she said AgCountry has someone internally who lobbies for them, but based on the feedback the insurance agency gets from their patrons.

"We are a coop, so when we are lobbying, we are lobbying on behalf of our stakeholders," Lacey said. "So, again, each company will be set up different but at AgCountry, we ask for feedback . ... and are lobbying on behalf of our customers."

LSP's proposals

LSP members and the farmers they represent are asking for a $50,000 cap to be placed on the crop insurance program in this current farm bill.

"Hopefully, they can help the smaller farmer and funds can spread farther," Simon said. "$50,000 would be the most each individual farmer can get each year. I talked to a lot of farmers who feel like they pay money into crop insurance and don't get anything out of it."

Putting a cap on crop insurance isn't as simple as it sounds according to Lacey.

"Setting a cap on subsidies a farmer can receive will cause large producers to not buy insurance and the pool could get smaller and the amount of risk will spread across a smaller amount of acres, which could cause premiums to go up," Lacey said.

LSP is also asking for subsidy payments to be more tied to how producers farm and ensure they are implementing good soil practices. If farmers follow good conservation practices, Simon said then yes, the crop insurance program should benefit them, but if the farmer performs poor land stewardship, they should not be subsidized.

"We want to call on folks to call or talk to members of Congress and say that we can have sensible and meaningful changes to this and it should be supported," Anderson said.

In a month or two, Anderson said drafts of the farming bill should be available. Anderson is in support of the amendments to the bill by Representative Rick Nolan.

"His Crop Insurance Modernization Act reforms these elements, strengthens crop insurance and incentivizes more conservation in it and will help give access to the program for more beginning farmers," Anderson said.

In agreement with another insurance specialist at AgCountry, Lacey feels what has been written in the bill is good.

"I think at this point, we think what legislators have written in is good," Lacey said. "There are limited changes with some small tweaks here and there, but as it stands right now, we are happy with where it is at."

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