Brown Amendment Would Wreck Crop Insurance

November 6, 2007

WASHINGTON (Nov. 6, 2007)—Last week, Senator Sherrod Brown (D-Ohio) announced that he intended to offer an amendment to the farm bill that would price farmers and ranchers out of insurance while forcing many providers out of business.

The Brown bill is based on the failed amendment offered during House floor consideration by Congressman Jim Cooper (D-Tenn.), which was soundly defeated on a vote of 175-250.

“The Brown amendment would price many California fruit and vegetable farmers out of insurance, even though one of the main goals of this farm bill is to help our state’s farmers,” said Jordan Roach, an agent from Fresno, California.

The Brown plan would substantially increase the cost of catastrophic risk protection and all other coverage levels, making coverage unaffordable and leaving many farmers uninsured.

“The Brown amendment would increase the premiums that farmers and ranchers pay for their insurance at every level,” said Bob Carden, an agent from Winter Haven, Florida. “Far from strengthening the safety net for Florida farmers and ranchers, the Brown amendment would seriously weaken the safety net they have.”

The Brown amendment would also impose a 30 percent tax on insurance providers, while cutting delivery and service expense reimbursement by nearly 40 percent.

“When you slap a 30 percent tax on insurance providers and then cut funding for the delivery of policies by nearly 40 percent, it is hard to imagine insurance being offered in places like Maine anymore,” said Art Carroll, an agent from Limerick, Maine. “If this farm bill is supposed to be about helping farmers in places like New England, the Brown amendment undercuts the objective.”

The Brown amendment would impose deep budget cuts on the program above and beyond the already substantial cuts contained in the bill approved by the Senate Agriculture Committee, including cuts in funding for the delivery and servicing of policies.

“Cuts to crop insurance do not just hurt providers, they hurt farmers and ranchers,” said Dee Vaughan, a Texas corn farmer.

“Crop insurance was way too expensive before the 2000 reform bill and you could not get decent coverage,” said Gerald Tumbleson, a corn farmer from Minnesota. “Since the reform bill passed, we have been heading in the right direction but the Brown amendment would reverse all of that.”

USDA Chief Economist Dr. Keith Collins has indicated that USDA’s own data show that delivery funding to providers does not cover all approved delivery costs currently. A recent study by a national accounting firm also demonstrates that delivery costs already exceed current funding.

“Montana farm families need crop insurance coverage to be both available and affordable,” said Will Roehm, a wheat farmer from Great Falls, Montana. “But I believe the Brown amendment would make something as basic as insurance coverage less available to some Montana farmers and totally out of reach for others.”

A GAO report on the profitability of the crop insurance industry has been routinely disputed by reports of large, national accounting firms, including Price Waterhouse Coopers (1997, 1999), Deloitte & Touche (2004) and Grant Thornton (2007). These reports consistently conclude crop insurance profitability is less than the profitability of all property and causality (P&C) lines of insurance while embracing greater risk and volatility.

Under questioning by the House Agriculture Committee, GAO recently submitted a one-page report admitting their 2005 report on crop insurance profitability comparison with P&C insurance did not use the exact same years in the analysis and that using different years understated P&C profitability for the comparison by 67%.

“Just like farmers or any other business, insurance providers need some good years to offset the really bad years,” said Joanie Grimes, an agent from Hillsboro, Ohio. “A lot of good years can be entirely wiped out by just one 1988 drought or one 1993 flood.”