Risk Management

moldCrop insurance is a critical risk management tool for wheat producers. Like any other important tool on the farm, it needs periodic maintenance and “sharpening” to increase its utility and effectiveness.

Of safety net programs available to producers, crop insurance is one of the most reliable and, thus, one of the most important. According to the USDA’s Risk Management Agency, nearly 49 million acres – or 77 percent of the country’s total wheat acres – were covered by a form of crop insurance in 2008. Coverage percentages hit 89 percent in Montana, 87 percent in Kansas and 95 percent in North Dakota – illustrating the breadth of use of this vital program and speaking to its role as the largest single part of the federal safety net for agriculture.

Protecting the Program

Like all safety net programs, crop insurance is frequently subject to real or proposed budget cuts. NAWG has emphasized to Congress on many occasions that additional cuts beyond those that were already made in the 2014 Farm Bill may jeopardize the capability of the partnership between the federal government and the private insurance industry to effectively deliver risk protection to our members.

Priorities for Improvement

NAWG has identified five major areas in which current crop insurance programs could be improved, working with Congress and the Risk Management Agency:

  • Erosion of Actual Production History (APH): Each year of crop failure reduces a farmer’s production history on which he or she can be insured. This has the perverse effect of reducing the affordable safety net only because unavoidable disaster struck. NAWG is working with Congress and others on proposals to remedy this problem.
  • RMA audit procedure adjustments: NAWG supports raising the automatic indemnity trigger for RMA audits to account for higher average commodity prices over the last few growing seasons, and NAWG supports limiting audits to the year in question, with the option of further exploration if necessary.
  • Revision of quality loss adjustment factors: In many cases, RMA compensation for discounts is not commensurate with the actual discounts taken at the elevator. NAWG has begun to work with RMA to seek a solution and will urge Congress to support these efforts.
  • Separation of crop practices and classes of wheat: NAWG believes there should be a way to recognize the different risks associated with different cropping practices and allow producers to tailor the tools available to their respective risks. In other words, irrigated and dryland production acres should be allowed to carry different insurance products on the same farm or unit, and producers should be allowed to insure winter wheat and spring wheat as separate crops.
  • Acreage reporting requirements: NAWG encourages the Farm Service Agency and RMA to implement plans to use the same acreage reporting date for each region. NAWG also encourages policies that would allow FSA and RMA to share acreage and production data, which would alleviate duplicate reporting requirements on the part of producers.