USDA: Crop Insurance Is Vital Part Of Farm Safety Net

“Crop insurance is a vital part of the farm safety net and has become an integral part of business life for a large majority of American farmers and ranchers,” said USDA’s Risk Management Agency (RMA) Administrator William J. Murphy in testimony before the House Subcommittee on General Farm Commodities and Risk Management.

“[Farmers] would find it difficult to continue providing the United States and the world with an abundant supply of food, fiber and fuel without the protection provided by this part of the farm safety net,” he said in his June 24, 2011, appearance before Congress.

With droughts, floods and other disasters affecting crop production across many parts of the U.S., “this year is an excellent example of how important the farm safety net has become,” said Murphy. “Food security is important to this country. I’d hate to be put in a position where we don’t have these [crop insurance] programs and have widespread losses across the country.”

Murphy detailed the public-private partnership which makes the crop insurance program unique and how RMA works directly with its private partners — the 15 approved insurance companies — and the agents who deal directly with farmers and ranchers.

“Producers purchase Federal crop or livestock insurance from insurance agents operating in their communities, who sell the insurance on behalf of the 15 insurance companies,” he explained, noting that “this relationship leverages the respective strengths of the public and private sectors.”

Murphy also explained how participation in the crop insurance program has increased significantly, following changes enacted in 1994 by Congress when fewer than 100 million acres of farmland were insured under the program. “Today, over 250 million acres of farm and ranch lands are covered by Federal crop insurance, for an overall participation rate exceeding 80 percent for the major crops.”

Additionally, Murphy explained to Congress that one of the most important considerations for the Federal crop insurance program is the premium cost for producers. “If premium rates are too high, producers will not participate in the crop insurance program. If premium rates are too low, actuarial performance will deteriorate,” he said.

(Source: National Crop Insurance Services)

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