Dec 4, 2015

Repeal of $3 billion crop insurance cut clears Congress

U.S. senators said a transportation bill Congress passed Dec. 4 restores $3 billion in cuts to crop insurance made in the budget agreement completed in October, and also helps some agricultural fuel haulers.

According to media reports, the U.S. Senate and House overwhelmingly approved the five-year, $305 billion bill, sending it to the White House for President Barack Obama’s signature.

Farm-state lawmakers and agricultural groups were angered by the October budget deal, saying the cut to crop insurance would hurt farmers and possibly increase the need for emergency disaster aid. They also said it would undermine improvements in the 2014 farm bill to crop insurance, which costs more than $9 billion annually.

The transportation bill also eases licensing requirements for people hauling smaller amounts of diesel fuel for agriculture-related uses, according to Sen. John Thune, R-S.D.

The Senate cleared the long-term transportation bill after soundly rejecting a last-ditch effort to restore a $3 billion cut to the crop insurance program.

The cut, which was part of the two-year budget agreement enacted in November, would be repealed by the highway legislation to fulfill a pledge the House GOP leadership made to House Agriculture Chairman Mike Conaway, R-Texas, before votes on the budget deal.

Sens. Jeff Flake, R- Ariz., and Jean Shaheen, D- N. H., forced a vote on the cut Thursday by raising a point of order against including the repeal provision in the transporation measure. The Senate rejected their move, 75-22, and then approved the legislation, 83-16.

The legislation, which also would revive the Export-Import Bank, was sent to Obama for his signature. The House approved the measure earlier in the day on Dec. 3 by a vote of 359-65. It would be the longest extension of highway programs since 1998.

The budget agreement requires the Agriculture Department to cap the insurance companies’ rate of return at 8.9 percent, down from the current 14.5 percent.

The cut was supposed to be made through renegotiating the Federal Crop Insurance Corporation’s Standard Reinsurance Agreement (SRA) with the companies. Since 2011 the rate of return has varied from a loss of 15 percent in fiscal 2012, a drought year, to a gain of 13 percent in fiscal 2014. Insurance companies argue that their real rate of return is closer to 4 percent.

According to media reports, long-time critics of federal crop insurance program, like Sen. Flake and the Environmental Working Group, are keeping the pressure on for additional cuts to crop insurance.

Earlier in the day on Dec. 3, EWG released a new report, written by Iowa State Economist Bruce Babcock, which argued that the original $3 billion cut would have no impact on the availability of crop insurance policies or the premiums paid by farmers.

Instead, Babcock said that agents’ commissions would bear most of brunt of the proposed cost cutting “because their commissions increased faster than the other components of the companies’ delivery costs.”