Crop Insurance S.R.A. Capped at 8.9% Under Budget Deal

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Crop Insurance S.R.A. Capped at 8.9% Under Budget Deal
Jonathan Coppess, Agricultural Policy Specialist - University of Illinois

The federal government is expected to vote on the budget deal, maybe as soon as today. If it goes through unchanged one of the safety net programs from agriculture will most definitely fall to the axe. Todd Gleason has more on what will happen to crop insurance.

University of Illinois Ag Policy Specialist Jonathan Coppess…
1:53 radio
2:08 radio self contained



University of Illinois Ag Policy Specialist Jonathan Coppess is in Washington, D.C. He says the deal would require the Obama Administration to renegotiate the Standard Reinsurance Agreement or S.R.A. and take 3 billion dollars out of the crop insurance program over a ten year period.

Coppess :44 …getting changes at this hour is an uphill climb.
Quote Summary - And within that renegotiation put a cap if you will, or a limit on the rate of return for crop insurance companies at a very low rate, about 8.9%. What is surprising about this is that it seems the ag committees were not consulting, and I think you’ve seen the reaction from the ranking members and the chairs that they oppose this move. So, as of going into last night they were talking to leadership to see if they could get this revised somehow, but I’ve heard that this saves about three billion dollars and that it is part of a big budget package. Getting changes at this hour is an uphill climb.
The change, says Coppess, would not mean the end of crop insurance, but rather some serious changes in how the program is priced and delivered to farmers around the nation.

Coppess :28 ...could be a real problem with the program down the road.
Quote Summary - So that is the big concern. If you set the rate of return to low. It is just not possible for the companies to stay in. And we are still trying to sort out and dig through this determine exactly what it may do. It should have implications for reinsurance. This is always the issue with crop insurance. If you want to look for savings, it is much more complicated than making changes to a program to get savings. There is a lot more to it and this is an indicator of one of our worst fears going all the way back to the super committee in 2011; that budget negotiators will make cuts to programs without fully understanding the ramifications just because they can save money. This could be one of those instance where what looks like savings up front could be a real problem with the program down the road.
If the deal goest through Coppess thinks some of the companies approved to provide insurance may have to get out. It might also increase the cost to the farmer. It could even impact the ability of the private system to deliver crop insurance.