July 7, 2000
President signs crop insurance bill
By Mike Barnett
Editor
New crop insurance coverage will begin with fall-seeded
crops as President Clinton has signed “The Agricultural Risk Protection
Act” into law.
The bill includes a $15.3 billion farm assistance package, including $7.1
billion in direct payments to producers and $8.2 billion for the federal
crop insurance program.
Under the $8.2 billion designated for crop insurance, the federal share
of the premium for the most popular type of insurance would jump from
38 percent to 67 percent.
How good the new bill is depends on who you talk to. Ag Secretary Dan
Glickman criticized parts of the new law.
“For three years in a row now, U.S. taxpayers have provided billions
of dollars in emergency farm assistance,” Glickman said. “This
is a clear admission that the 1996 Freedom to Farm Bill fails to provide
an effective safety net for American farmers. The president, vice president
and I have implored Congress to avoid costly, ad hoc, emergency aid by
addressing the fundamental flaws in the farm bill.”
On the other hand, Rep. Larry Combest (R-Tex.), chairman of the House
Agriculture Committee and sponsor of the legislation, said the new law
will provide producers the ability to protect themselves against the increasing
economic risks to their crops and livestock created by harsh weather and
volatile markets. (Combest has also held field hearings across the country
seeking input on changes needed in farm policy.)
“Crop and cattle producers will find new coverage for revenue losses
as well as insurance that more realistically reflects their productive
capability and production costs,” Combest said. “I strongly
urge producers to take a look at this coverage with particular attention
to its rewards for efficiency, good management, and the ability for producers
to better cover risks from weather as well as markets.”
Changes in the crop insurance program—from the increased government
premium subsidies to the incentives for developing new crop insurance
products—are significant, said Mary Kay Thatcher, American Farm Bureau
Federation deputy director of the Washington, D.C., office.
“Not only are we doubling the amount the program now spends, but
the legislation also includes substantial incentives for companies, land
grant universities, individuals and others to develop new crop insurance
products,” Thatcher said.
Highlights of the new bill include the following:
• Premium schedule for additional coverage. The bill builds
on the 30 percent premium discount provided to producers for the 1999
crop year and will allow producers to insure their crops at higher levels
of coverage. Producers participating in the Federal Crop Insurance Program
will receive additional premium assistance at all levels of buy-up coverage.
Producers with good insurance or production experience may receive a discount
on premiums.
• Premium schedule for other plans of insurance. Producers
selecting innovative plans of insurance, such as revenue protection and
others, would receive an equal percentage of premium assistance that producers
selecting traditional multi-peril crop insurance would receive.
• Catastrophic risk protection. Standard catastrophic risk
protection (CAT) coverage (insuring 50 percent of yield at 55 percent
of price) at a fee of $100 continues. Producers may select an alternative
CAT coverage based on area yields and losses that is comparable to the
standard individual CAT coverage.
• Assigned yields and actual production history adjustments. Producers
struck with multi-year natural disasters face lower yields in their production
history. The legislation provides producers maximum flexibility in maintaining
their insurable yield to address this problem. Producers may record in
their actual production history a yield equal to 60 percent of the long-term
county average yield for any year the actual yield falls below that amount.
• Review and adjustment in rating methodologies. The bill
requires the FCIC to review the rating and loss histories of insurance
policies by area and make any appropriate adjustments for any excessive
rates for the 2002 crop year.
• Double insurance and prevented planting. The bill establishes
new procedures for insuring multiple crops on the same land, with provisions
for traditional double-cropping areas. Producers also have more flexibility
with regard to prevented planting coverage.
• Non-insured crop disaster assistance program (NAP). The
law changes the area loss requirements of the NAP program to an individual
loss trigger, allowing producers of crops for which there is not an insurance
policy to have risk protection similar to CAT coverage with an equal fee.
The new legislation will also attempt to crack down on fraud, waste and
abuse.
The law directs the Secretary of Agriculture to develop and implement
a coordinated plan for the FCIC and FSA to reconcile producer information
on an annual basis. The FSA will also assist FCIC with investigating claims
of waste, fraud and abuse and FSA state committees will review insurance
policies for program vulnerabilities to reduce waste and abuse.
The legislation also directs the FCIC to establish methods to identify
those who may be abusing the program. It also provides greater civil penalties
for program abuse.
Bill includes $5.5 billion
in assistance
By Glen Jones
Director, Research Education & Policy Development
The Agricultural Protection Act of 2000 made major changes to crop insurance programs. It also provided $5.5 billion in this fiscal year, in farmer assistance, due to low market prices. The bill provides producers with current transition payment contracts (AMTA) to receive a payment equal to and in addition to their 1999 payment. Payments are to be made before the end of the current fiscal year, Sept. 30, and will total $5.4666 billion. So, there will be a second AMTA (market loss) payment made. The chart lists AMTA payment rates for the crop years 1999 and 2000, expressed in cents per bushel unless otherwise noted. Notice that Congress based the second AMTA payment (market loss payment) on 1999 AMTA payment rates rather than 2000 payment rates, which are lower.
AMTA Payment Rates for Crop Years 1999 and 2000
