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Murphy: Agents needed on crop insurance program

SCOTTSDALE, Ariz. — There are good reasons to continue private sector delivery of the crop insurance program, Agriculture Department Risk Management Agency Administrator Bill Murphy said here today after a speech to the Crop Insurance and Reinsurance Bureau on the current state of the program.

Reacting to a proposal by the National Association of FSA County Office Employees for the FSA county offices to take over the crop insurance program or parts of it, Murphy said in an interview that “the Farm Service Agency does a great job, but crop insurance is a unique tool. It is a financial tool. There is a good reason [crop insurance] agents are required to be licensed in every state.”

NASCOE, as the FSA county employees organization is known, this week presented members of Congress with a study contending that the government could save up to $2.5 billion per year by taking the crop insurance program away from insurance companies and agents and turning it over to the county offices. If Congress does not want to turn the entire program over to the FSA offices, it could give FSA part of the work, particularly the handling of reports that farmers prepare for both FSA and their crop insurance providers, NASCOE officials have said.

William Murphy

Bill Murphy
But Murphy said he believes that the decision about whether to make the reports to the FSA office or the crop insurance agent “should be the producer’s choice."

Murphy said RMA is working on making the reports less duplicative, but that he believes farmers will still have to make reports to both the FSA office and to agents because the government and the crop insurance companies need somewhat different data.

But he noted that many crop insurance agents insist on using the crop production reports that farmers make to FSA in their decision making because the USDA Office of the Inspector General considers the FSA report to be the most authoritative in any case of conflict.

In his speech, Murphy signaled that farmers are satisfied with the management of the program. Even though there were so many weather issues and losses that insurance adjusters had to be moved around the country to meet the demand, “I have not received any calls whatsoever about claims being late. Farmers were not excited as long as they saw you they knew the claims were coming, “Murphy said.

In his discussion of the crop insurance program, Murphy said that the 2011 crop year had been “phenomenal,” with the number of acres insured rising to 264 million from 256 million in 2010. But there was also a series of weather incidents that led the indemnities that must be paid for farmers' losses to rise to $9.4 billion from $4.1 billion in 2010.

But the program is still financially healthy, Murphy said: “We won't see higher underwriting gains but it will still be a good year.”

With prices high and acreage rising, total premiums rose to $11.9 billion from $7.9 billion and premium subsidies rose to $7.4 billion from $4.7 billion, he said.

Members of the House and Senate agriculture committees realize that if they lower premium subsidies, farmers are more likely to demand ad hoc disaster assistance, he said, but he also warned the industry officials that the rising cost of the program is on members' radar screens as well.

“Congress is just very strongly behind the program right now,” Murphy said. “It is a good position going into the next couple years, but it will get dicey.”

In other comments, Murphy said:

Corn, sobyeans, wheat and cotton make up 83 to 84 percent of the program.
The situation in South Dakota showed that genetics are improving yields because, even though there were cases of prevented planting, when crops could be planted yields are high.
Sugar beet, peanut, dry bean, peas and lentil producers have made proposals for insurance, but the Federal Crop Insurance Corporation board has not yet approved them because they want to make sure that the insurance products do not undermine the underlying market.
Camelina will be the first energy crop to get crop insurance coverage, which will be available for the 2012 crop year. The Air Force encouraged USDA to develop insurance for camelina, an oilseed that can be established on marginal land as a rotation for wheat and used as a biofuel.
RMA is also working on products for olives and pistachios and California producers have become more interested in crop insurance.
The agency continues to increase use of data mining to improve program integrity, a practice that pleases the Office of Management and Budget, which is generally unenthusiastic about crop insurance.
Data mining and spot checks have helped the agency look into the practices of producers who repeatedly file larger claims and more frequent claims that the farmers around them.
Prevented planting is a “lose-lose” issue for the agency, with some producers claiming that their neighbors are “slopping seed” into the ground in order to qualify for a full insurance policy, while others claim that some producers are not planting when they could so they can get the prevented planting payment.