Farm Groups Ask USDA to Stop Crop Insurance Cuts

April 13, 2010

WASHINGTON (April 13, 2010)—In a letter to Secretary of Agriculture Tom Vilsack on Friday, the American Farm Bureau Federation (AFBF) and other leading farm groups voiced their serious concerns over reductions to the budget baseline for agriculture that would result from the renegotiation of the Standard Reinsurance Agreement (SRA), the contract between the USDA and the companies that deliver federal crop insurance to farmers. The second negotiating draft offered by USDA that is currently on the table proposes to cut $6.9 billion out of crop insurance. The cuts are three times the amount the House and Senate decisively rejected on up or down votes in 2008.

The cuts proposed by USDA has caused the Congressional Budget Office to reduce by $3.9 billion the budget that lawmakers would have available to write the next farm bill.

The letter requests that Secretary Vilsack call off the current SRA renegotiations, reinstate the current SRA, and allow Congress to achieve responsible savings in crop insurance delivery in the context of the farm bill.

Federal crop insurance is a critical component of the farm safety net and a key risk management tool for farmers and ranchers. The total liability insured by crop insurance in 2009 was $80 billion, up from $31 billion 10 years ago.

In addition to the AFBF, the National Corn Growers Association, American Soybean Association, National Association of Wheat Growers, USA Rice Federation, and others signed the letter.

Please see below for the full text of the letter:

April 9, 2010

The Honorable Tom Vilsack
Secretary
U.S. Department of Agriculture
1400 Independence Ave., SW
Washington, DC 20250

Dear Secretary Vilsack:

We are writing to express our grave concern regarding the March 2010 budget baseline established by the Congressional Budget Office (CBO). That baseline assumes a $3.9 billion savings over 10 years as a result of the cuts proposed in the ongoing renegotiation of the Standard Reinsurance Agreement (SRA).

Congress was not “credited” with a savings mandate for the SRA renegotiation provision included in the 2008 farm bill. However, CBO appears to be basing its savings on what it believes to be a plausible outcome to those negotiations. We further understand that if the final negotiations provide more than $3.9 billion in reductions, CBO will immediately update its baseline to reflect those savings and Congress will not be credited with the savings either.

These reductions in the federal crop insurance program may undermine this component of the farm safety net and will sharply reduce the agriculture budget in the advent of a baseline budget farm bill. It would make a potential budget reconciliation process next year extremely difficult.

If the situation is left unaddressed by the Agriculture Department, reasonable savings obtained in an SRA renegotiation cannot be properly credited to Congress to apply toward improving crop insurance for producers or to help meet potential reconciliation instructions. This does not bode well for any policies under the jurisdiction of the House and Senate Agriculture Committees.

We urge you to stay the ongoing SRA renegotiations, reinstate the current SRA, and allow Congress to address this issue legislatively in order to preserve the budget baseline.

Sincerely,

American Farm Bureau Federation
American Soybean Association
American Sugar Alliance
National Association of Wheat Growers
National Barley Growers Association
National Corn Growers Association
National Milk Producers Federation
Southern Peanut Farmers Federation
USA Rice Federation
Western Peanut Growers Association

Cc: Chairman Lincoln, Senator Chambliss, Chairman Peterson, Congressman Lucas