2012 Farm Bill: Implications for Crop Insurance

Extension and Outreach/Department of Economics

2012 Farm Bill: Implications for Crop Insurance

Insuring Iowa’s Agriculture WorkshopAmes, IowaNov. 5, 2012

Chad HartAssociate Professor/Grain Markets Specialist

[email protected]


Farm Bill Progress?Senate passed their version, S. 3240, on June 21

House Ag. Committee passed their version, H.R. 6083, on July 11

The full House never took up the farm bill

The 2008 farm bill expired Sept. 30, but remember crop insurance is permanently authorized

Right now, we are under the permanent legislation of the 1933 and 1948 farm bills


Ideas on the Next Farm BillLet’s look at the common features

Both versions of the farm bill eliminate direct payments, countercyclical payments, ACRE, and SURE

The marketing loan program would continue

Livestock disaster programs would be reestablished

Some sort of revenue-based countercyclical program would be created


Crop Insurance IdeasMany crop insurance provisions are similar across

the Senate and House proposals

Revenue insurance for peanuts

Whole farm coverage up to 85%

Standard Reinsurance Agreement savings to be reinvested in the crop insurance program


Crop Insurance IdeasStacked Income Protection (STAX) for upland cotton

Revenue-based, area-wide policyPays indemnities when county revenue losses are

greater than 10% of expected revenue

One new twist from the Senate15% subsidy cut for producers with high AGIs,

$750K


Crop Insurance StudiesFood safety and contamination loss coverage for

specialty crops

Catastrophic disease coverage for hogs

Margin coverage for catfish

Business disruption coverage for poultry


Conservation ProvisionsSubsidy reduction for the 1st 4 years of coverage on

native sodHouse version would apply this only to the Prairie

Pothole region (which covers part of Iowa)

Senate would remove subsidies for producers who go out of compliance with wetlands (immediately) and highly erodible land (within 5 years)


But the Biggest Change Would Be…The Supplemental Coverage Option (SCO)

An additional policy to cover “shallow losses”

Shallow loss = part of the deductible on the producer’s underlying crop insurance policy

SCO is county-level yield or revenue policy

Indemnities are paid when the county experiences losses greater than 10% of the expected yield or revenue level, but payments are not more than the original deductible


SCO AvailabilitySCO is to be made available for all crops if sufficient

data are available

Under the House, SCO can not used if the producer has STAX or the revenue-based countercyclical program

Under the Senate, if the producer has the revenue-based countercyclical program, the loss trigger increases to 21% of expected yield or revenue


SCO Subsidies, Timing, and AdministrationSCO premiums are to receive a 70% subsidy

SCO would begin for the 2013 crop year

RMA would run SCO and set the premiums


SCO Examples

Source: Congressional Research Service


Thank you for your time!

Any questions?

My web site:http://www.econ.iastate.edu/~chart/

Iowa Farm Outlook:http://www.econ.iastate.edu/ifo/

Ag Decision Maker:http://www.extension.iastate.edu/agdm/

2012 Farm Bill: Implications for Crop Insurance

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