TAILIEUCHUNG - Federal Crop Insurance: Background and Issues

For the broader farm community, given that many farmers and ranchers who do not benefit from commodity programs use crop insurance as their primary or perhaps only federal risk management tool, policymakers may consider how effective federal crop insurance has been for producers of specialty crops and livestock. Across the federal government, controlling or reducing program costs continues to be an issue. Over the next 10 years, federal spending on crop insurance is projected to outpace spending on traditional commodity programs by about one-third, which might capture the attention of budget cutters looking for potential sources of savings. . | Federal Crop Insurance Background and Issues Dennis A. Shields Specialist in Agricultural Policy December 13 2010 Congressional Research Service 7-5700 R40532 CRS Report for Congress------------- Prepared for Members and Committees of Congress ỉederal Crop Insurance Background and Issues Summary In preparation for the next farm bill the 112th Congress will likely continue reviewing the effectiveness and operations of the federal crop insurance program as part of the farm safety net. In 2010 the House Committee on Agriculture sought input from farmers and others on the program and the . Department of Agriculture USDA revised its agreement with the crop insurance industry to deliver crop insurance to farmers following a rapid rise in government costs of the program. This report provides a primer on the federal crop insurance program. The federal crop insurance program began in 1938 when Congress authorized the Federal Crop Insurance Corporation. The current program which is administered by the . Department of Agriculture s Risk Management Agency RMA provides producers with risk management tools to address crop yield and or revenue losses on their farms. In purchasing a policy a producer growing an insurable crop selects a level of coverage and pays a portion of the premium or none of it in the case of catastrophic coverage which increases as the level of coverage rises. The federal government pays the rest of the premium averaging about 60 of the total . Insurance policies are sold and completely serviced through 16 approved private insurance companies. The insurance companies losses are reinsured by USDA and their administrative and operating costs are reimbursed by the federal government. In 2010 federal crop insurance policies covered 255 million acres. Major crops are covered in most counties where they are grown. Four crops corn cotton soybeans and wheat accounted for three-quarters of total acres enrolled in crop insurance. Most crop insurance

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