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Crop/Livestock Insurance
Last updated: September 20, 2011
Crop/Livestock Insurance — Crop and livestock insurance coverage must be meaningful and comprehensive. At the same time, premiums must not be cost prohibitive for producers. Non-insured Crop Disaster Assistance Program (NAP) insurance coverage should be improved with buy-up coverage available for additional premiums. The buy-up level for NAP should be capped at 65% of yield and 65% of price. NAP coverage for grazing must be improved to be commensurate with similar coverage on annual planted crops.
Beginning farmers without a production history should be allowed to use historical county level production data or the actual production data applying to that land. USDA should offer beginning farmers a higher subsidy on the crop insurance premium as an incentive to enter the agriculture industry.
Current federal policies give producers more flexibility in making production decisions. However, many specialty, alternative and non-traditional crops are still ineligible for crop insurance coverage. USDA should accelerate the development of appropriate risk management tools for fruits and vegetables, nursery, vineyard, seed, citrus, tree crops, livestock, aquaculture, milk, and new oil crops like camelina. Additional premium subsidies should be provided since no countercyclical assistance program exists for these crops and livestock.
Innovative and good farming practices involving numerous crop rotations should be encouraged through crop insurance. During establishment of an individual actual production history, improved substitute yields should be available to new producers of crops if the crops are already proven suitable for the region.
Organic producers lack effective financial protection through current crop insurance price elections. USDA should base crop insurance price elections for organic crops on organic rather than conventional commodity prices.
Crop and livestock insurance must provide meaningful coverage and provide incentives for farmers to purchase the insurance. Premium subsidies should be higher for higher levels of coverage and lower for lower levels of coverage encouraging producers to carry more coverage. Any natural disaster assistance provided ad hoc or through a permanent disaster program should be contingent upon participation in the crop insurance or noninsured assistance programs. Disaster assistance must not be a disincentive to purchasing crop insurance; rather the two programs should complement one another.
Additional elements of a crop insurance program to consider are cost of production insurance, whole farm revenue insurance and long-term reserve accounts. A cost of production insurance policy would allow producers to insure a percentage of actual production costs. Cost of production insurance could be expanded to all commodities and possibly become a preferable base insurance program. Whole farm revenue insurance would allow producers to purchase insurance guaranteeing a certain percentage of revenue for the whole farm. It would provide protection against unavoidable losses of production and low prices. Long-term reserve accounts are a way for farmers to save, on a tax-deferred basis, during good times for poorer years.
NASDA believes that farm policy and/or a plan of insurance must provide quality loss adjustment coverage. A properly designed permanent disaster assistance program based on whole-farm revenue would compensate for quality price losses in the "revenue to count" calculation. For inventoried commodities requiring sampling, samples should be taken and analyzed by a grain grader licensed under the authority of the United States Grain Standards Act or the United States Warehouse Act or the Uniform Grain and Rice Storage Agreement, or by a laboratory approved by the USDA Risk Management Agency.
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Disaster Situations
Last updated: September 20, 2011
Disaster Situations — Farmers do not have access to the same types of federal assistance as other businesses following a natural disaster. Farm Service Agency emergency loans are provided to help cover production and physical losses in counties declared as disaster areas by the President or the Secretary of Agriculture. Unfortunately, the emergency loan program has not been an effective tool for most farmers. The emergency loan program should be revised as described under Policy Section 12.4.
When a federal natural disaster has been declared, we recommend that the Federal Emergency Management Agency (FEMA) be given the authority to make grants immediately available to agricultural producers in order for them to make emergency repairs. NASDA urges the USDA to designate Section 32 funds for natural disasters that would be available for immediate dispersion. Agricultural producers need an immediate response to a natural disaster to remain in business.
In addition, farmers should be eligible for low interest loans from the Small Business Administration and other appropriate agencies for assistance following the disaster.
Disaster situations in agriculture are inevitable. The challenge for lawmakers and the federal government is to develop a program or plan to lessen the impact of such disasters. However, until crop insurance/risk management programs are established that are capable of totally replacing ad hoc disaster assistance, producers and the federal government should have a consistent way of coping with disasters through a permanent disaster assistance program. Federal disaster assistance should not undermine the intent of crop insurance programs.
Disaster assistance should be designed in a fashion that does not cause disincentives to purchase buy-up insurance coverage or NAP policies. Limits should be established to prevent producers from receiving more in crop sales, insurance indemnities, and disaster assistance than would be expected in a normal production year. However, producers must not be financially penalized for carrying higher insurance coverage. Disaster assistance eligibility should be premised on carrying buy-up insurance if available, excluding participation in pilot insurance programs.
Eligibility for disaster assistance should be triggered by evidence of producer loss based upon total farm revenue. Disaster assistance should focus on the gap between expected farm revenue (including insurance indemnities) and the farm's insurance guarantee.
NASDA supports planning for emergencies involving states, together with any legislative changes. In the event of a federally declared disaster under which the Robert T. Stafford Disaster Relief and Emergency Assistance Act is invoked, NASDA recommends that the USDA be required to deploy disaster liaisons to coordinate appropriate resources within USDA and with other agencies.
NASDA believes the USDA and the United States Congress should review the effectiveness of risk management tools and explore all options to provide farmers with improved risk management tools. Better coordination between the USDA and other federal, state, and local agencies is needed in developing a more inter-related program of risk management and disaster assistance for U.S. producers to deal with localized disasters.
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Providing A Safety Net For Producers
Last updated: September 20, 2011
Providing a Safety Net for Producers — NASDA's ideas are built on the principle that the most effective agricultural policy is one that allows today's producers to manage all the risks they face in order to maximize their opportunities for profitability. U.S. farm policy should not guarantee that every farmer makes a profit; it should, however, provide all farmers and ranchers an adequate safety net and a range of tools to manage risk, in all its forms, to ensure that good producers are not put out of business due to arbitrary forces beyond their control.
A price/income safety net is a necessity for the agriculture industry in today's global competitive markets. NASDA supports efforts to increase baseline agricultural spending in order to provide a reliable and effective safety net. However, we recognize that the U.S. must balance such support with its obligation under the WTO's spending classifications.
NASDA believes that maintaining the marketing loan and countercyclical programs is necessary not only for the economic stability of domestic producers, but to demonstrate to our trading partners that the U.S. is serious about using all the tools available under the World Trade Organization (WTO) to maintain U.S. market share. Planting flexibility must also be retained that allows producers to plant crops they believe will provide the greatest return.
Despite several reform and improvement efforts, the crop insurance program has been unable to provide adequate production loss protection from natural disasters, particularly the first losses not covered by insurance. The continued need for federal ad hoc production disaster programs confirms the shortcomings of the crop insurance program. NASDA believes a permanent disaster program which complements crop insurance should be a fundamental component of the farm policy safety net.
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Dairy Policy
Last updated: September 20, 2011
Dairy Policy—The dairy sector of the agriculture industry is critical to the economical and nutritional health of this nation. NASDA actively supports policies which continue to provide a market safety net for U.S. dairy producers. Dairy policy must continue to be flexible and available to producers as markets continue to vary greatly year to year. Milk prices should reflect local value rather than national price. The market price of farm milk should be determined by its local availability and marketing demand per classification of use. Dairy producers should be responsible only for the marketing/transportation costs associated with their milk as are other farm commodity producers.
The establishment of a dairy industry security reserve fund would help to protect American dairy producers from losses resulting from bankruptcy of a processor/handler. This fund could be funded through assessments on processors not to exceed two cents per hundredweight. Producers who suffer a loss because of the bankruptcy of their processor/handler could make a claim against the fund for unpaid milk shipments to that handler.
Currently, the issue of dairy producer security is left to each individual state; however, only about half of the states have dairy producer security laws. NASDA believes that the absence of adequate protection in many states, together with the confusion that is created for processors who have operations in several states with a variety of different producer security laws, requires that this problem be resolved at the federal level.
NASDA supports continuation of the Milk Income Loss Contracts (MILC) program, with adjustments to double the per farm production cap and establish flexibility to encourage multi-family or multi-generational dairy farm operations.
NASDA supports continuation of Cooperatives Working Together (CWT), the self-help program administered by the National Milk Producers Federation and maintaining states' right to create multi-state marketing agreements in order to enhance milk prices within their regions.
NASDA also supports creation of a revenue insurance pilot program to provide comprehensive and adequate revenue insurance for dairy producers that is cost effective with payments triggered by price levels which enhance the viability of small-scale dairy farms.
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Education
Last updated: September 20, 2011
Education—Education is an important component of any risk management plan. The USDA should educate producers and lenders about risk management strategies. Education must extend beyond basic crop insurance/risk management programs. Education should provide basic management training, financial management accounting/bookkeeping, human resources, organizational development, and domestic and international marketing. Educational forums should be positioned as incentives for obtaining lower crop insurance premiums from the federal government.
The Risk Management Agency's dairy options pilot program concept should be expanded to other traded commodities. By combining crop insurance and risk management tools, farmers can develop a total risk management plan. This approach enables a farmer to move into a more market-oriented world.
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Small and Disadvantaged Farmers
Last updated: September 20, 2011
Small and Disadvantaged Farmers—A 1997 USDA report on "Civil Rights and Small Farmers" concluded that small and disadvantaged farmers were being neglected by USDA assistance services, and instead, these services were directed to larger farm operations. The National Commission on Small Farms, in 1998, sent to USDA a report on small farms in the United States. The report was the product of considerable discussion and deliberation based upon extensive testimony, both oral and written, from across the country. NASDA recognizes the significance of the report and adds that American agriculture depends on its diversity of crops and cultures to thrive and grow. NASDA supports policies and programs that recognize American agriculture excels because of its cultural diversity that encourage the sustainability of small farms. NASDA further recommends increased awareness of the needs of limited resource producers.
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Intergenerational Farm Transfers
Last updated: September 20, 2011
Intergenerational Farm Transfers—The economic future of our nation's agriculture depends on the ability of a new generation to enter farming.
Retirement and succession planning are of considerable importance to farm households and tools should be available to farmers and ranchers to make decisions that enhance their own futures as well as the future of agriculture.
NASDA believes new business succession and farmland tenure models must be developed. These models must be regionally appropriate and respond to the unique needs of both beginning and retiring farmers and ranchers. Models should also recognize farms that produce energy, such as dairy farms with manure digesters.
NASDA supports tax incentives and capital gains exclusion for selling to first time farm/ranch buyers. NASDA also supports USDA grants to state departments of agriculture to provide assistance /guidance to transition farms and farming operations from current ownership to the next generation of family farms.
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Farm Viability Programs
Last updated: September 20, 2011
Farm Viability Programs—National farm viability policy can and should be relevant to all operations, from the maple sugar producer in New England to the shellfisheries off our nation's coasts, from the tree and shrub production regions in the Northwest to the citrus groves of the South. Farm viability programs administered by states and supported by the federal government must recognize all sectors of the industry are important. They must acknowledge all of agriculture needs to grow to sustain the versatility and diversity of the industry.
In doing so, these programs will nurture a culture of innovation and entrepreneurship that will result in the creation of new markets, both close to home and abroad, and the development and improvement of new and existing products. This will create a stream of new ideas and actions that will help us to achieve the three goals that all states have for their agriculture sustaining working farmland, improving farm profitability and preparing new and next-generation farmers to carry on. Ultimately, success in all these efforts will lead us to our goal of strengthening all agricultural sectors.
These types of investments have proven successful for agriculture in the past. For example, the emphasis on biofuels has boosted the grain industry, while the success of farmers markets has helped strengthen the connection between farms and the people who depend on them for healthy, nutritious foods. These investments also must focus on retaining agricultural and rural youth in next-generation businesses, attracting new, non-traditional residents to farming, pursuing new capital, and meeting the demand for fresh products that support healthy diets. While these are important projects, providing cost-share dollars to states that have established farmland viability programs would allow USDA Rural Development to more closely fulfill its mission of facilitating economic development in rural areas.
In short, agriculture faces the need to continue to reinvent itself, adapt to new market opportunities, and capitalize on emerging trends, all while remaining relevant to its core customers.