Republican Priorities--Ag?

 One priority, according to the new chair of House Ag, is 

"Along with that, he says the committee is learning from the disaster payments that have been made outside of the farm bill baseline to be looking at how to incorporate more of that relief in a way that provides certainty for farmers and ranchers and for the lenders providing them with access to capital."

That's according to an Agmos interview.  That's the way it goes--everything becomes a precedent--in this case the exercises in executive creation of programs by Trump and Biden become rationales for changing, presumably increasing, current programs. 

I'd not that on the one hand Thompson wants greater oversight and audit of the Biden actions, but on the other he's willing to use them to justify program changes before he sees the results.

I think I'm starting the new year in what my wife calls a crotchety mood.

EWG on Crop Insurance on Mississippi Flood Plain

When I first started working on the program side, ASCS had a disaster payment program, covering low yields and prevented planting for its then-usual crops: wheat, barley, oats, corn, sorghum, rice and upland cotton. The auditors had been critical of its administration, saying that the way the program operation ended up paying the same farm in multiple years. 

From what I remember the problem was a combination of legislation and human nature, or rather legislation and administration reflecting human nature.  Farmers are optimists, they have to be to survive the disappointments, so they remember the good years and not the bad.  That means the laws they supported provided for "Olympic averaging", ignoring bad years but usually not the great years. So the resulting payment yields were high, too high if you agree with the auditors that disaster payments from the government should be unusual.

The further problem was variability--optimistic farmers grow crops on marginal and hazard-prone land.  They've done that forever--much of the Great Plains in the 19th century.  Sometimes farmers are able to modify geography, using irrigation, levees, drainage, or terraces depending on the problem.  We're finding the limits to such measures, as now in the Central Valley of California.

Anyhow, this ramble was set off by a new EWG report on crop  insurance payments on flood prone land. 

A Letter from the President

 USDA and the administration are catching flak because of this:

The Agriculture Department last week began mandating that millions of boxes of surplus food for needy families include a letter from President Donald Trump claiming credit for the program.

 I'm trying but failing to remember somewhat of a parallel. Secretary Bergland signed a letter which we sent out to farmers, perhaps to all active producers associated with a farm.  This was, I think, in 1980, an election year.  The subject was something related to crop insurance.  I don't remember whether it was base on legislation or a policy decision, perhaps an expansion of the insurance program..  I do remember ASCS had been running a test of selling crop insurance, because Roy Cozart, who became DASCO when the Reagan administration came in, was working on putting FCIC directives into the ASCS system. That test was a failure.

IIRC we career bureaucrats, and possibly Roy, who was career but with political pull, raised an eyebrow on it. The differences between then and now: Jimmy Carter didn't sign the letter and I remember the content as being more informative and less propagandistic than the current letter.

Crop Insurance Fraud

 Farm Journal's Agweb runs a piece on a big, perhaps the biggest, crop  insurance fraud. It goes back over a decade, and I didn't notice a current hook for telling the story now, but it is a big story.  

RMA has a page listing crop insurance fraud cases.

I Don't Understand the Iowa Governor

 From the Gazette:

Gov. Kim Reynolds on Sunday requested an expedited federal disaster declaration to aid Iowa counties ravaged by last week’s a derecho that caused damage preliminarily estimated at nearly $4 billion — including $3.77 billion in crop damage in 36 counties.

What I don't understand is the crop damage request--given the changes in crop insurance and disaster programs in the 1990's I don't think there's any basis for it; at least there's no program under which USDA could make the money available.   

Disaster Coverage for Hemp

I'm still, I think the word is, bemused by the legalization of hemp.  The latest item is FSA issuing the rules for NAP coverage for 2020.  I don't know whether this is the first or second year for such coverage. 

I'm pleased to see the comparison of the provisions of the FSA NAP program and RMA's hemp insurance.  Almost all of the parameters are the same. Ever since the beginning of FCIC and AAA there have been complaints about the differences between the programs, most specifically the crop reporting dates.  Thousands of work hours and innumerable meetings have now been devoted to trying to resolve the differences, so it's good to see differences being resolved from the beginning.

Fraud in the Farm

Farmers are no better or worse than other humans--that's my position and I'm sticking to it.

What's important, I believe, is structuring institutions so there's "countervailing power"--give anyone some power, you need to find another person whose interest is countering that power.

In the case of agencies, that's typically the inspector general, including the auditors, the fraud hot lines, and the whistleblowers.  I'm not sure those checks and balances are sufficient, but they can work, as in this instance of a tobacco farmer in Kentucky defrauding crop insurance.

Any Double-Dipping on MFP

Still no FSA notice on the MFP, but there is a notice on the Dairy Margin Protection Program.  I have not kept up with program, but from the following Background paragraphs my guess is it's a revenue insurance type program, but run by FSA and not RMA.

"MPP-Dairy payments are triggered when the difference between the National all milk price and the National average feed cost (the margin) falls below the producer-selected margin trigger, ranging from $4 to $8, calculated monthly. USDA prices for milk and feed components required to determine the National average margin for July were released on August 29, 2018. The actual National average margin for July is $6.71815/cwt. As a result, dairy operations that elected margin coverage of $7.00, $7.50 and $8 will be issued a payment.

Payments for margins triggered will be issued directly to producers. MPP-Dairy payments issued will not be offset by premium balances due. The full balance of the premium is due September 28, 2018."

It raises the question to me, which I may have mentioned before, of whether there will be double-dipping under the MFP.  In other words, crop insurance has products, on which I'm not expert, which can cover loss of revenue from a base, a loss which might be caused by production losses and/or market price dips.  Producers have to sign up for such products and pay premiums.  MFP is essentially a free one-shot policy covering market price dips. So producers who signed up for the DMPP or a revenue crop insurance policy will receive two payments for the same loss.  That doesn't seem right, but from a program administration standpoint it immensely simplifies the operation.

FSA and NAP--Catching Fraud

The Rural Blog has a short piece on this:

Dexter Day Gilbert, who has farms in Alabama and Florida, pleaded guilty recently to submitting false applications under his name and others to the Noninsured Crop Disaster Assistance Program. He submitted 14 false claims of loss between July and November 2016. Court documents say he began submitting the applications in March 2016. He will be sentenced in September.

Digging a bit further, the fraud (almost a million, which I find amazing) may have been in collusion (to use a currently popular term) with an FSA employee.

Automated Crop Appraisals?

Crop insurance relies on crop appraisers to sample an acreage of disaster-affected crops and project the reduction in yield which will occur.  It looks as if automated intelligence may be on the way to assist in the job, if not eventually to replace appraisers.  The first crop: cassava.  From Technology Review:

"Some cassava farmers may not be able to tell one plant’s debilitating brown streak from another’s troubling brown leaf spot—but a smartphone-friendly AI can.
Wired reports that researchers have developed a lightweight image-recognition AI that can identify diseases in the cassava plant based on pictures of its leaves. That could be useful, because cassava is one of the most commonly eaten tubers on the planet, but is grown predominantly in developing countries where access to expertise to diagnose unusual crop problems may be limited."

Puerto Rico Disaster--II

As a followup to my previous post, while RMA has Puerto Rico included in its database of agents, it doesn't appear to have any agents for Puerto Rico. 

I'm operating under the assumption that Maria will show the USDA arrangements for Puerto Rico to be as faulty as Hurricane Andrew did for Dade County and the Typhoon Gay (?) did for Guam.  It's the perpetual fate of those entities/places/people who don't fit the existing mold. 

Agricultural Disaster in Puerto Rico--USDA

This NYTimes piece portrays the devastating impact of hurricane Maria on Puerto Rican agriculture.  It's total.  I did a quick check of USDA websites.  The USDA site and the FSA site have nothing keyed to Maria (just Irma).  Give RMA props; their website does have a Maria page.  

That's good.  Not so good is the confusion in the site (although perhaps due to my skimming too quickly).  According to the results of a google search for "crop insurance in Puerto Rice", FCIC does have crops insured on the island, for crop year 2016, roughly in the 50-60 percent insured range.  Not clear how that happens, because there don't seem to be any companies offering coverage there.

There is a Facebook page for a Puerto Rico Crop Insurance Corporation, but with nothing in it.  There is legislation dating back to 1966 establishing a Puerto Rico Farm Insurance Corporation, which presumably is the vehicle for the coverage.  And FSA reminded producers in 2016 they needed to comply with conservation compliance rules.

The one good thing I noted in this cursory survey--Puerto Rico stands alone among all the states by having a State Executive Director on board (appointed last year and apparently immune from the turnover from the election.)

Cost of Farm Programs by Crop

I've been remiss in noting this post from IL extension which goes through a Congressional Research Service report on the expenditures by crop under the 2014 farm legislation.

Clovis Redux

The appointment of Sam Clovis might be in trouble, as he had an interview in 2014 in which he was critical of crop insurance, which has become the basic safety net program for crop farmers.

Interesting times ahead. (I predict he'll backtrack and the Senate will confirm.)

I Don't Understand Insurance: Obamacare and Crop Insurance

From a Politico story on the improving profit picture for insurers in Obamacare markets:

Insurers in the Obamacare marketplaces spent 75 percent of premiums on medical claims in this year's first quarter, an indication the market is stabilizing and insurers are regaining profitability, according to a Kaiser Family Foundation study released this week. By comparison, in the prior two years, insurers spent more than 85 percent of premiums on medical costs during the same period, which translated into huge losses.

Insurers lose money when they spend 85 percent on medical costs? That means to me their administrative costs are 15 percent.  I'm no expert on crop insurance, but I think USDA doesn't support 15 percent in administrative costs.

Did a quick google search and found this CBO analysis of a proposal:

"This option would reduce the federal government’s subsidy to 40 percent of the crop insurance premiums, on average. In addition, it would limit the federal reimbursement to crop insurance companies for administrative expenses to 9.25 percent of estimated premiums (or to an average of $915 million each year from 2015 through 2023) and limit the rate of return on investment for those companies to 12 percent each year.b [emphasis added]

 My personal opinion is that 9.25 percent is still too high, at least that FSA could administer an insurance program at less cost, given a reasonable time and resources to gain expertise.

A Bubble Bursting--the Farm Economy?

It's probably been years since I posted about the possibility of an agricultural depression, like the 1980's.  Farm commodity prices have fallen and been low for several years, and the value of ag land has fallen as well.  In the 1980's those two factors meant those farmers who had overextended themselves in an effort to cash in on the 70's boom in prices started going bankrupt.  But not so this time, at least according to this article.

The factors at work:

1. farmers built up their net worth during the boom better than they did in the 70's
2. interest rates now are low, in the 80's high
3. lending on real estate was more rational 
4. better safety net due to more crop insurance coverage.

Not really qualified to question any of these, though I would observe no. 4 conflates insurance coverage for weather and coverage for economy.  We did have some bad years during the 80's weather-wise, but I don't recall much crop insurance coverage for economy.

I'd also observe there are a lot fewer farmers today than in the 80's, which IMHO reduces the likelihood of any one farmer going bust--there's fewer marginal players in the game. 

Crop Insurance Explained

Modern Farmer has an explanation of crop insurance, particularly the Harvest Price option, in their explanation of the cuts Obama is proposing in his last budget. Seems to me to be a reasonable explanation, not that I'm an expert these days.

Companies Leaving Crop Insurance

Bloomberg has a post on companies (Wells Fargo, Cargill, Deere) leaving crop insurance.

That development somewhat counters the argument that government subsidies to crop insurance are too high.  On the other hand, given the size of these companies, it may be that the hassle is too much for the potential profits, particularly since prices have declined.

Ag Policy and Crop Insurance

An Agpolicy piece on crop insurance, somewhat stale, discussing moves to have payment limitation on insurance and cut insurance subsidies.

Actively Engaged Regulations Finalized--Is the 30-Year Struggle Over?

FSA published the final rule on "actively engaged" in farming determinations here.

"No major changes are being made in response to comments, because FSA has determined that the comments support the definitions and requirements for ‘‘actively engaged in farming’’ specified in the proposed rule and support limiting eligibility for farm payments. Also, there was no consensus amongst the comments for any alternative payment eligibility provisions that would address the 2014 Farm Bill requirements. FSA has made minor changes from the proposed rule in this final rule to respond to commenters’requests for clarifications of certain provisions"

 With age I've diminished interest and ability in parsing FSA regulations, so I'll leave that to others.

My reference in the title of this post is to the 1985 farm bill, which I believe IIRC added the actively engaged provision to the payment limitation regulations There's been a long political fight over how to define the term.  Perhaps the fight is now ended, given the declining importance of FSA programs, and the focus will shift more to the rules on the crop insurance side?  We'll see.