FarmPolicy

March 23, 2019

NCIS- Crop Insurers’ Returns In Question

Categories: Farm Bill

Crop Insurers’ Returns In Question

NATIONAL CROP INSURANCE SERVICES (NCIS)

FOR IMMEDIATE RELEASE February 9, 2015

(BONITA SPRINGS, Fla.) – Financial returns for crop insurers have fallen nearly 60 percent below expectations since 2011, according to the National Crop Insurance Services, the industry’s main trade organization.

The Standard Reinsurance Agreement — the business contract between the federal government and private-sector insurers that went into effect in 2011 — targeted average returns on retained premium of 14.5 percent. Returns on retained premium have averaged only 6 percent over the four-year period.

And because these calculations only measure gross revenue, not net profit, the actual financial pain has been far greater, said NCIS Chairman Tim Weber. When expenses are subtracted from gross revenue, average net profit since 2011 has been less than 1 percent, with the industry experiencing negative returns in 2012.

This “falls well short of the averages for other lines of property and casualty insurance,” Weber noted when he spoke today at the industry’s annual convention.

Weber explained that unexpected premium reductions implemented by the U.S. Department of Agriculture (USDA) in 2012, $600 million a year in reduced funding under the SRA, increased regulatory burdens, falling crop prices, and bad weather have caused the poor financial performance.

The worst year, 2012, saw companies absorb $1.3 billion in underwriting losses when premiums collected failed to cover indemnities paid out during the record drought.

“Companies need to make a reasonable return on their investment to stay in business…but we cannot do it for free, or worse yet, a negative return,” Weber said.

Crop insurers at the convention expressed disappointment in recent remarks by the Agriculture Secretary, who misinformed reporters about industry returns while advocating for additional funding cuts.

“One of those reforms would be to take a look at what the average rate of return is on crop insurance. Today it’s roughly 14 [to] 15 percent on average of return on investment,” Secretary Tom Vilsack said during an interview with Politico.

The Secretary is pointing to revenue projected by the USDA, not what has actually materialized in the marketplace,” noted Tom Zacharias, president of NCIS. “And the budget proposed by this administration would only further jeopardize the farm safety net.”

The President’s proposed budget would strip an additional $1.6 billion a year from the crop insurance system, which, Zacharias said, “leaves farmers and taxpayers more vulnerable to the whims of Mother Nature.”

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NCIS- New Congressional Ag Leaders Pledge to Protect & Strengthen Crop Insurance

Categories: Farm Bill

New Congressional Ag Leaders Pledge to Protect & Strengthen Crop Insurance, Encourage Teamwork to Address Challenges Ahead

NATIONAL CROP INSURANCE SERVICES (NCIS)

FOR IMMEDIATE RELEASE February 9, 2015

(BONITA SPRINGS, Fla.) — The new leaders of the agriculture committees in Congress addressed crop insurers during the annual meeting of the American Association of Crop Insurers and the National Crop Insurance Services and pledged to protect and strengthen this public-private partnership.

In separate taped videos, Sen. Pat Roberts, the chairman of the Senate Committee on Agriculture, Nutrition and Forestry, and Rep. K. Michael Conaway, the chairman of the House Committee on Agriculture, delivered parallel messages explaining how the 2014 Farm Bill made crop insurance the key risk management tool available to farmers.

Crop insurance is the cornerstone of the farm safety net,” said Roberts. “You have my word to continue to protect, preserve, and improve the number one risk management tool in every farmer’s toolbox.”

They also warned about the challenges ahead and stressed the need to work as a team to stave off attacks.

The critics of farm policy and crop insurance are not going to go away,” explained Conaway. “Despite some $17 billion in cuts to crop insurance, some are pushing for even more. They bill it as reform, but we all know their real end game is to kill crop insurance.”

Roberts added, “Together we must be ready and willing to tell stories of the great successes” of crop insurance.

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Hog, Cattle Market Issues

Reuters writer P.J. Huffstutter reported on Monday that, “For decades, Chuck Souder relied on corn and soybeans to keep his 400-acre Iowa farm running, but with corn selling for half its price two years ago and soybeans slumping, Souder has shifted to what he hopes will be a more profitable crop: Pigs.

“Souder spent $850,000 last year to build a wean-to-finish barn, which can house nearly 2,500 animals at a time. He is not alone.

Since 2013, Iowa farmers have filed nearly 700 construction applications for new or expanded hog buildings, a six-fold increase from five years earlier, records show. Minnesota, Missouri, Illinois and other states are seeing a similar surge, said state agriculture officials.”

[Note: For related implications on this development in Iowa click here].

The Reuters article pointed out that, “But farmers are finding that their gleaming new barns have had an unintended consequence, contributing to a glut of hogs that has sent pork prices to their lowest levels in years.

Hog futures prices hit a four-year low this past week. A strong dollar has made U.S. pork more costly than meat from competing countries, which has led to a slowdown in exports, especially to China. And cargo slow-downs due to a labor dispute at West Coast ports has left stocks of pork products piling up.

Pork prices followed beef prices to record high levels last year, as the cattle herd shrank and a swine virus diminished the U.S. hog herd.”

The Reuters article added that, “The building boom has facilitated a surge in the U.S. hog and pig herd, which has rebounded from an eight-year low of 65.1 million this past September, to 66.1 million as of December, according to Agriculture Department data. The agency expects pork production to increase by 4.6 percent in 2015 over 2014.

“Pig farmers, meanwhile, could be facing declining margins and rising debt payments in the years to come.”

Also with respect to U.S. pork supply, today’s chart of the day update form USDA’s Economic Research Service indicated that, “The emergence of Porcine Epidemic Diarrhea virus (PEDv) in the U.S. swine herd in the spring of 2013 caused a sharp—but temporary—drop in litter rates. PEDv afflicts young piglets in particular, and caused millions of newborn pigs to die as the disease spread to herds in 33 States…Litter rates rebounded in the spring of 2014, responding to the warmer, dryer climates and to aggressive actions by producers, including increased biosecurity measures and vaccination. These measures contributed to lower disease incidence and limited losses of newborn pigs from PEDv; they are also expected to limit the incidence of the disease this winter and will help to minimize the impact of future outbreaks.”

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Also, Reuters writer Tom Polansek reported yesterday that, “Texas rancher Jim Rackley would like to add more cattle to his herd of about 50 to take advantage of sizzling beef prices and growing demand from health-conscious consumers for his grass-fed beef. But the prospect of cloudless skies keeps him cautious.

“Rackley’s worries over a lack of rain are typical of many U.S. beef cattle producers trying to restock after a years long drought, which peaked in 2011, decimated ranches built up over generations and shrank the nation’s herd to its smallest in more than 60 years.

“Now a combination of record-high cattle prices and cheap grain has prompted ranchers to start adding back cattle earlier than expected. But the rebuilding will still be long and slow.”

The Reuters article added that, “The cattle population was larger than in 2013 and 2014, but still the third smallest since 1952, said University of Missouri livestock economist Ron Plain.

“‘Herd rebuilding is on the way, but putting a calf into the herd today will take at least a year and a half before you get anything out of it,’ said Jack Salzsieder, owner of Iowa-based brokerage firm JRS Consulting, referring to the time required to bring a calf to maturity to be processed.”

Keith Good

NCIS- Crop Insurers to Leave No Attack on Crop Insurance Unchallenged in 2015

Categories: Farm Bill

Crop Insurers to Leave No Attack on Crop Insurance Unchallenged in 2015

NATIONAL CROP INSURANCE SERVICES (NCIS)

FOR IMMEDIATE RELEASE February 9, 2015

(BONITA SPRINGS, Fla.) — With crop insurance now cemented as the cornerstone of U.S. farm policy, political attacks are inevitable. But crop insurers will make education a top priority in 2015 and will address the critics, said Tim Weber, chairman of the American Association of Crop Insurers and National Crop Insurance Services.

“Those with an agenda or an anti-agriculture bent cannot be given free rein to define our industry or the policies that underpin the rural economy,” he explained today during the industry’s annual convention. “No one knows the virtues of crop insurance better than the men and women in this room, and I challenge us all today to leave no attack unchallenged in 2015.”

Weber noted three pillars that are essential for the continued success of crop insurance. They will be the focus of educational efforts and include: Keeping crop insurance affordable for producers to promote wide-scale participation; making sure it is widely available for numerous crops in all geographic locations; and ensuring the viability of private-sector insurance delivery.

“We have a great story to tell, and if we don’t tell it, then no one will – certainly not the way it must be told,” Weber said.

In addition to stepped-up education efforts, Weber said 2015 priorities will include working with allies and building new partnerships, making investments in the private-sector delivery system to constantly improve efficiency, and tirelessly guarding program integrity by stamping out waste, fraud and abuse.

“Make no mistake, crop insurance’s days of flying under the radar are done,” he concluded, “but we have a wonderful industry, supporting a sector that is arguably more important to America than any other, [and] we have lots of friends on Capitol Hill and in the farming community.”

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Policy Issues; Trade; Biotech; and, Animal Feeding Operations (AFOs)

Policy Issues

Alison Rice reported late last week at AgWeb.com that, “Farmers already concerned about the grain markets and the market price for crop insurance need to add a new worry to their lists in 2015: federal support for crop insurance.

“‘This is probably the most challenging year for crop insurance in a very long time,’ warned Mary Kay Thatcher of the American Farm Bureau Federation. Thatcher, the organization’s senior director for Congressional relations, gave her remarks Thursday at the Crop Insurance and Reinsurance Bureau’s annual meeting in Florida.”

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