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White House urges Senate to cut crop insurance in farm bill

The U.S. Capitol Dome is seen behind the entrance to the U.S. Senate (R) on Capitol Hill in Washington, November 9, 2012. REUTERS/Larry Down
The U.S. Capitol Dome is seen behind the entrance to the U.S. Senate (R) on Capitol Hill in Washington, November 9, 2012. REUTERS/Larry Down

WASHINGTON (Reuters) - The Senate should cut crop insurance subsidies, the most expensive part of the farm safety net, by $1 billion a year before it passes the new farm bill, the White House said on Monday.

The five-year farm bill would cost about $500 billion, with three-fourths of the money going to food stamps for the poor. Senators could vote on the bill within a week. The House was expected to debate its version in June.

Both bills cut traditional subsidies by substantial amounts and put much of the savings into an expansion of federally subsidized crop insurance. They also cut conservation and food stamps. The House would make the biggest food stamp cuts in a generation, $20 billion, compared to $4 billion in the Senate.

Farm bills, written every few years, are comprehensive legislation that cover farm exports, food aid, agricultural research, biofuels and rural economic development along with the headline issues of farm supports, conservation and public nutrition. Congress is months late in passing a new bill.

In a statement, the White House said it "looks forward to working with the Congress to achieve crop insurance and commodity program savings that are not contained" in the Senate bill. The White House has proposed $38 billion in farm bill savings, with crop insurance reform the most controversial.

It would reduce the federal subsidy on premiums, now averaging 62 cents of each $1, by 3 percentage points on the most heavily subsidized and most popular policies, which shield crop revenue from low prices and poor yields.

Premium subsidies would be cut by an additional 2 points on policies that base the revenue guarantee on market prices at harvest time rather than the price projected at planting time. One analyst said those policies were unduly expensive in the 2012 drought because commodity prices soared in the fall.

The administration also would limit insurers to a 12 percent rate of return, down 2 points, and lower the annual payment, now $1.3 billion, to defray overhead costs.

Altogether, the reforms would save an estimated $1.1 billion a year.

The White House said farmers should be required to practice soil and water conservation to qualify for subsidized insurance, a step written into the Senate bill.

Senate Agriculture Committee Chairwoman Debbie Stabenow said she expected crop insurance to a central issue. "We'll have a lot of discussion, a lot of debate, on this," said Steabenow, a Democrat representing Michigan.

Republican Arizona Senator John McCain proposed an amendment to end crop insurance subsidies for tobacco during a debate on Monday. Democratic New York Senator Kirsten Gillibrand has said she may try to prevent cuts in food stamps by adopting some of the administration's crop insurance reforms.

The farm bill includes a provision that requires the wealthiest farmers to pay a larger share of crop insurance premiums.

Fifteen companies sell crop insurance. They range from privately held companies to subsidiaries of Wells Fargo & Co, Deere & Co and Archer Daniels Midland Co and insurance giants such as ACE Ltd and Endurance Specialty Holdings Ltd.

(Reporting by Charles Abbott; Editing by Lisa Shumaker)

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