Federal crop insurance and Wisconsin’s agriculture
The Federal Crop Insurance Corporation (FCIC) was created in 1938 and has continued to evolve as farmers, insurance companies, and the USDA have worked to adopt the program to changing needs and wishes of those involved in production agriculture.
The USDA’s Risk Management Agency operates the FCIC to manage the federal crop insurance program. In Wisconsin it is estimated that 5.3 million acres of crops are insured. In 2016 over $24 million were paid out in indemnity payments to Wisconsin farmers for losses based on production or revenue losses. Corn is the leading crop with about 3 million acres insured in Wisconsin. Soybeans are second with an estimated 1.5 million acres.
Insurance is funded by farmer paid premiums and subsidies provided by the Federal Government. In 2016 subsidies for Wisconsin farmers buying crop insurance were over $140 million according to the Rain and Hail Insurance Society.
Wisconsin farmers paid $76 million in premiums. Indemnity payment amounts can be tracked by county, state, and by year by using the website www.rma.usda.gov/data/indemnity. In agriculture weather swings and price cycles can greatly impact the amount of losses annually and by region. In 2012 many Wisconsin farmers were impacted by drought and excess heat, and the Federal Insurance program paid for large claims.
The Federal Crop Insurance program was created to provide stabilization to rural counties. Today many younger producers can use crop insurance products to allow access to operating funds. When I worked for a supply cooperative, the amount lent for crop inputs was levered against the amount of crop insurance protection a young farmer had purchased.
A simple example is if the farmer had purchased a Federal Crop Insurance policy that offered $600 in protection coverage per acre, the supply cooperative would fund a loan for 65% of the protection or $390 per acre. This allowed the farmer borrower the ability to plant a crop. Without the Federal Crop Insurance policy in place, the borrower may not be able to fund an annual crop input loan to continue to farm. Insurance not only stabilizes but allows for opportunity for young operators to begin to farm their own operation.
Sometimes the Federal Crop Insurance gets a black eye. If you Google the topic of crop insurance and fraud, you can easily find individual farmers, crop insurance agents, and others that have put effort into stealing from the Federal Crop Insurance program.
In 2017 at least 2 Wisconsin farmers have been sentenced for crop insurance fraud. If a person knows of a farmer or others that may be committing fraud with the Federal Crop Insurance program, there is a USDA Hotline at 800-424-9121. It is very important to include the details that would assist the Office of Inspector General in investigating the report. Fraud reports can also be reported online or via snail mail. Additional assistance in filing a report is available online from the USDA website.
Another complaint is that some farmers have farmed the crop insurance program. I have never had experience with a farmer that is farming only to farm the crop insurance program. It would seem to me a real challenge to farm just to collect an insurance loss payment.
I taught school for many years and do know by experience that some individuals will put more effort into evading doing a quality project than doing what it would actually take to have a quality project. The current USDA Ag Secretary, Mr. Perdue, has recently raised issues that he believes there are farmers farming the crop insurance program.
Nationally the USDA Federal Crop Insurance program costs annually have averaged $8 billion. There are proposals in the Nation’s Capital at this time to reduce and limit subsidies for the program.
There are rumored goals of cutting subsidies by 36% over the next 10 years and limiting insurance to farms with an adjusted gross income of less than $500,000. There are also proposals of limiting the amount of subsidy per farm to $40,000 annually. What are your thoughts on these proposals? How will these proposals impact your farm or agribusiness? Will your access to credit be impacted with the proposed cuts in the program?
Bob Panzer lives and farms in Chippewa County, WI. He serves as a Land Manager for Pifer's Auction and Realty, Eau Claire, WI.