Bank and farm groups said they are increasingly hopeful that Congress will pass a crop-insurance reform package this year.
A $6 billion crop-insurance bill recently cleared what had been its most difficult hurdle by escaping the Senate Agricultural Committee on a 10-8 vote. The bill, sponsored by Kansas Republican Pat Roberts and Nebraska Democrat Robert Kerrey, got committee approval despite the objection of its chairman, Richard G. Lugar, R-Ind., who favors a more drastic overhaul of the federal crop-insurance program.
Bank groups say they are optimistic that the Roberts-Kerrey measure soon will reach the Senate floor. Assuming it passes there, a conference committee agreement should be easy to achieve, given the Senate bill's strong resemblance to a House measure passed last August, lobbyists and legislators said.
"This bill meets our objectives," said John Blanchfield, director of the American Bankers Association's Center for Agricultural and Rural Banking. "It makes it more attractive for farmers to buy crop insurance."
Farmers buy the insurance to guarantee that they will get a portion of their expected annual income even if natural disaster destroys their crops. About 70% of the nation's farmland is covered by crop insurance, almost all of it subsidized by the federal government, according to the U.S. Department of Agriculture.
Fearful of farm loans' defaulting when Mother Nature ruins crops, banks have been staunch supporters of boosting federal subsidies for this type of coverage. Leland Swanson, president of the National Farmers Union, said improved crop insurance "is a must for producers who have to routinely cope with production losses beyond their control."
The Roberts-Kerrey bill, which would cover 2001 through 2004, would allot $5 billion of the $6 billion total to increase crop-insurance subsidies to farmers - just as the House bill would. Both measures try to encourage farmers to buy more coverage by giving them a bigger subsidy as they do so.
For instance, if farmers operating under the Roberts-Kerrey bill bought coverage guaranteeing 55% of their average annual income, the federal government would pay 45% of the premium, but if they insured 75%, the government would pay 55% of the cost.
The current program reduces the subsidy as farmers buy more coverage.
Sen. Roberts called this a "critical" step toward "reforming the crop-insurance program and making it a more effective risk management tool for America's farmers."
Bank groups also said improving the program would reduce both the government's burden - it has spent billions on emergency disaster aid in the past two years - and farmers' dependence on the government.
"These ad hoc disaster payments undermine the purpose of crop insurance," said Mark Scanlan, agricultural affairs director at the Independent Community Bankers of America. "Why should farmers take out crop insurance if, every time there's a disaster, the government comes along to bail them out?"
Related Link:
Editor's Note: The link opens a new browser window. The site is not part of American Banker Online, and we have no control over the content or availability.
