RMA starts new high-risk land crop insurance program
November 30, 2012 | 02:28 PM
The Agriculture Department’s Risk Management Agency is trying to avoid frequent changes to crop insurance rates due to the drought, and is introducing a new crop insurance program for high-risk land for 2013 as well as revising the premium rates for all major crops, a key USDA official said in an interview Thursday.USDA Risk Management Agency Administrator Bill Murphy said the agency, which sets the rates for crop insurance sold by private companies, announced revised rates for all major crops on a state-by-state basis earlier this week.
After an independent study recommended that the agency give more weight to crop performance in recent years, the agency revised rates for corn and soybeans in 2012 and has revised those rates again for 2013, he noted. While the corn and soybean rates went up in some states and down in others, overall they went down, he said.
In making those revisions, Murphy said, the agency has limited the impact of the 2012 drought so that rates will not be moving dramatically upward one year and downward another.
“We wanted to avoid a yo-yo effect,” Murphy said, adding that the agency will not know the complete effect of the drought until later. “We have built in a cushion for us to allow for those losses. By providing the cushion this year, we are providing some stability in the program.”
The agency also announced that for the first time this week it has revised the rates for spring wheat, cotton, rice and grain sorghum using the new methodology.
Rates for rice went down in most states, but up 13 percent in Tennessee. Cotton premiums will generally go up in the West, but down in the Southeast.
In addition, Murphy noted, the agency is introducing a “high-risk land program” that will offer farmers with land along riverways, for example, more insurance options.
In the past, Murphy noted, farmers with land that is designated as high-risk could take out only catastrophic coverage, which covers about 50 percent of historic production and 50 percent of the farmer’s historic election. The new program will allow farmers to buy higher levels of coverage, but it will be expensive, Murphy said.