“The U.S. Federal Crop Insurance Program: why it matters now and in the future”

Presented to the European Union

Agricultural Attaches

November 18, 2011 - Washington, DC

by

James Callan

Scope of the U.S. Federal Crop Insurance Program Insurance for 128 crops, a range of coverage levels • Coverage -- 438 combinations of crops and plan types available

(Yield, Revenue, Area/individual farm, Whole farm, Asset (e.g., fruit trees, nursery)

Program Structure • Standard Reinsurance Agreement (SRA) between the USDA and 15 Private Insurance Companies and more than 10,000 Insurance Agents – SRA Updated in 2005 and 2011 Key time periods in the program’s history • 1980 went to private delivery; 2000, an increase in premium subsidies; 2007 Farm Bill –

reduction in government payments, but recognition of key element of safety net; 2012?

Sources: Risk Management Agency – USDA, James Callan Associates

Crop Year 2010 2011*

Value of Insured Crops $78 Billion $113 Billion

Acres Insured 256 Million Acres 264 Million Acres

Total Premium $7.6 Billion $11.8 Billion

Claims Paid So Far for 2010 $4.2 Billion $5.7 Billion

Loss Ratio .55 .48

*These are real time estimates.

Source: Risk Management Agency –USDA

National Summary of Business as of 11-14-2011

What’s Next?: The Future is Now

Building off the 2007 Farm Bill, crop insurance is likely to be even more of a centerpiece for the farm safety net as a result of the 2012 Farm Bill

In 2011, all the major farm policy proposals interact with crop insurance and would make it the focal point of an enhanced safety net for American’s farmers Decision over which USDA agency delivers this new “shallow loss” revenue program – either Farm Service Agency or Risk Management Agency of USDA – however, each would use crop insurance as the basis for the safety net; what implications could this have for the delivery of insurance in the future?

Source: James Callan Associates

Questions? Thank you

James Callan

Chie Executive Officer, James Callan Associates

jamescallan@msn.com

(703) 577-1978