NACIA Farm Bill Update -- Farm Bill Conference Report Action Today
May 14, 2008

Yesterday, the Farm Bill Conferees posted the Conference Report and Managers Statement. We have reviewed the crop insurance title, and a summary is below. The House will begin consideration of the Rule governing debate regarding the Conference Report at approximately 10:30, with a vote at approximately 11:30/11:45. We expect them to proceed to debate and a vote on the Conference Report itself immediately following, with the final vote coming around 12:30 or 1:00. The Farm Bill Conference Report is not able to be amended, so it is a straight up or down vote on passage. C-Span will be airing House Floor proceedings, so tune in if you are interested. If you want to watch online, C-Span streams at http://www.c-span.org/watch/cs_cspan_wm.asp?Cat=TV&Code=CS.

We expect Senate consideration to follow shortly after the House vote.

In reaction to the final Conference agreement, the President issued a statement stating that he will veto the bill if it reaches his desk. This statement can be found on the NACIA home page.  
 
Lastly, Farm Bill Conferees have currently scheduled for 2:00 today a press conference regarding the Farm Bill Conference Report vote. The press conference will most likely be able to be viewed at http://agriculture.house.gov/hearings/audio.html.

Crop Insurance Summary:

The provisions related to Federal crop insurance are in Title XII of the bill and cover a variety of topics, primarily designed to (a) generate budget savings, (b) promote special projects, and (c) address chronic program weaknesses. Here is a summary:

To generate budget savings, the bill:

• Reduces the target loss ratio for the program from 1.075 to 1.0;
• Raises the administrative fee for CAT policies to $300 per crop per county.  The service fee charged for NAP coverage is raised as well.
• Moves various payment dates, including
  • Advancing farmer payments of premiums to August 15, starting in 2011; and
  • Moving back FCIC payment of administrative expenses and underwriting gains to companies to October 1, beginning 2012;
• Reduces the funding available from RMA for contracts and partnerships (from $25 million to $12.5 million per year) and for reimbursement to successful product submitters under the 508(h) system (from $15 million to $7.5 million per year)
• Reduces the size of FCIC’s administrative reimbursement payments to companies-
  • By 2.3 percent of premium for buy-up policies, or half that amount in States with a loss ratio above 1.2,  
  • By 2 percent of premium for CAT policies, and
  • Down to 12 percent of premium for area policies (such as GRP or GRIP)..  

To freeze these reductions into place, the Bill allows RMA to renegotiate the SRA only once every five years starting in 2011, though it allows consultation among participating insurance companies during the renegotiation process. The bill also requires RMA, in its next SRA negotiation, to consider ways to restructure A&O payments to companies, such as by basing them on graduated scales related to individual State or crop loss ratios or on changing premium levels.

For address the needs of various special interests, the bill:

• Requires development of a new price election system for grain sorghum;
• Authorizes a pilot program for enterprise and whole farm units;
• Requires special qualify coverage for malting barley; and
• Mandates FCIC to enter contracts for new policies including:
  • Improved coverage for organic agriculture;
  • Coverage for energy-producing crops;
  • Aquaculture policies for saltwater, freshwater, and bivalve species;
  • Poultry and avian coverages;
  • AGR insurance for beginning farmers;
  • Skiprow cropping practices; and
  • Pilot programs for camelina, nondehiscent sesame, and grass seed.

Finally, to address identified program weaknesses, the bill:

• Tightens rules against rebating and explicitly prohibits any rebate type other than payments of CAT fees or patronage dividends that existed prior to 2008;
• Eliminates the authority for the Premium Reduction Program;
• Clarifies rules for valuing farm-stored crop production;
• Places limitation on insurance of controlled businesses;
• Forbids insurance coverage on land considered “native sod” that is brought into production after passage of the Bill,
• Provides funding for RMA to improve its computer systems ($15 million per year for four years) and to continue the data mining program ($4 million per year);
• Creates a new system for 508(h) proposals to receive 50 percent upfront payment of research and development costs on approval of an initial concept by the FCIC Board;
• Requires RMA to places special emphasis on beginning farmers and ranchers in its risk management education program;
• Blocks the currently-pending RMA proposal to change the definition of “basic units”; and
• Requires RMA, within 180 days, to issue a special report on its plans and options to address the problem of declining yields.

In addition to these specific amendments to the Federal Crop Insurance Act, the bill also creates a new Supplemental Agricultural Disaster Assistance (or Standing Disaster) program, designed to pay farmers suffering wide-scale losses with additional payments based on their crop insurance coverage and using a whole-farm payment methodology.

We will continue analyzing these provisions over the next several days and keep you posted with events. Please let us know if you have any questions or would like further information about any specific points noted above.

Brent W. Gattis
NACIA Washington Representative