[Congressional Record Volume 145, Number 34 (Thursday, March 4, 1999)]
[Senate]
[Pages S2274-S2277]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROBERTS (for himself, Mr. Kerrey, Mr. Craig, Mr. Burns, 
        Mr. Hagel, Mr. Daschle, Mr. Conrad, and Mr. Baucus):
  S. 529. A bill to amend the Federal Crop Insurance Act to improve 
crop insurance coverage, to make structural changes to the Federal Crop 
Insurance Corporation and the Risk Management Agency, and for other 
purposes; to the Committee on Agriculture, Nutrition, and Forestry.


                crop insurance for the 21st century act

  Mr. ROBERTS. Mr. President, I rise today, along with my colleague, 
Mr. Kerrey of Nebraska, to introduce a bill that we call the Crop 
Insurance for the 21st Century Act. We believe this bill represents an 
important step in improving the Federal Crop Insurance Program, and in 
creating greater access to the risk management tools that our farmers 
and ranchers simply must have.
  Senator Kerrey and I, and many others who are privileged to represent 
the agriculture community, have long discussed the need to address 
reforms to the Crop Insurance Program. However, the necessary demands 
from the agriculture community and the Congress to successfully reform 
this program, in my personal opinion at least, did not reach a 
crescendo until last fall when we approved something called the omnibus 
appropriations bill, and that contained approximately $6 billion in 
disaster assistance for our farmers and ranchers.
  I am sure, while Republicans and Democrats and individual 
agricultural groups were unable to agree on the necessary size and 
scope of the disaster package, one thing became abundantly clear to all 
involved--if we had a Crop Insurance Program that worked, without 
question, the situation would not have been so serious.
  This has been a longstanding effort. I can remember well, back in 
1978, when I was a staff member in the House of Representatives to my 
predecessor, that was when the Crop Insurance Program was first 
established. It has been 20 years, and we still have an obligation to 
reform the program and make sure that it works for all regions, all 
farmers, all commodities.
  In response to the demands for the improved risk management tools, 
Senator Kerrey and I committed to pursuing major crop insurance reforms 
in this Congress. To aid us in this task, last November we contacted 
all of the major farm organizations and all of the commodity groups, 
all of the crop insurance companies, all of the agricultural lending 
groups, and requested their guidance on these issues. We were 
listening. We wanted to find out their advice in regard to what do we 
need to pay attention to, what is the most serious issue that we need 
to address in the Crop Insurance Program. We received feedback from 
over 20 of these major organizations.

[[Page S2275]]

  These comments we received served as a guidepost in developing this 
legislation. And, while the comments received were wide ranging, there 
was near consensus in several areas.
  These included as follows: First, the need for increased levels of 
coverage at affordable prices to all producers. Second, we need 
expanded availability of revenue-based insurance products. Third, 
program changes to address the needs of producers suffering multiple 
crop failures. Fourth, structural changes to the Risk Management 
Agency--the acronym for that is RMA, and that is what I will call it 
from now on, but it is the Risk Management Agency--that will allow for 
increased access to new and improved crop insurance policies.
  Senator Kerry and I took these comments to heart, and the legislation 
we are introducing today has been developed in large part by really 
trying to work to incorporate these comments into legislative language.
  Our bill inverts this existing subsidy structure. Currently, many 
producers do not purchase the highest levels of coverage because the 
greatest level of Government assistance simply occurs at the lowest 
levels of coverage. This often makes the higher levels of coverage 
simply unaffordable. It causes many producers to have insufficient 
coverage, which eventually leads to calls for the ad hoc disaster bills 
that are so expensive. We cannot continue to pass a disaster package 
every year.
  I tell the Presiding Officer, we were just discussing this in a 
previous meeting, it costs the Federal Government about $1.5 billion on 
average in regard to the disaster bills. They seem to occur on even 
numbered years. I think the Presiding Officer knows what I am talking 
about. We cannot afford that.
  Therefore, under our legislation, the highest level of subsidy will 
occur at the 75/100 coverage levels. While the inversion of subsidies 
will be the most important change for many producers, we have included 
several changes that we believe will benefit America's farmers and 
ranchers. These include, first, the average production history--that is 
called APH in the crop insurance acronym world--APH adjustments for 
producers that have no production history because they are beginning 
farmers or they are farming new land or they are rotating crops.
  Let me add, at this juncture, that is exceedingly important, because 
under the farm bill that how exists, farmers have a lot more 
flexibility, and when they move to a new crop, obviously, they ought to 
be able to simply insure that crop.
  Second, mandating APH adjustments for producers suffering from crop 
losses in multiple years. Third, requiring the RMA to work to undertake 
a pilot project to develop new rating structures for undeserved areas 
of the country, and particularly the southern part of the United 
States, with the intention it will eventually become a permanent change 
in the program.
  Here is a suggestion or a part of the bill that will be of interest 
to Senator Thomas--removing the prohibition on coverages for livestock. 
I just indicated that we had a good visit this morning about this very 
subject. The livestock sector is going through a very difficult time in 
our country today. We need to address this problem with regard to 
insurance and how it would dovetail into the livestock industry and 
give our stockmen and our ranchers some protection.
  In addition, the legislation provides for major changes in the 
structure of the RMA, the FCIC, that will allow for accelerated product 
approval and the development of improved crop insurance policies. Many 
people understand the Risk Management Agency serves as a regulator over 
the crop insurance industry. What many do not know is that this same 
outfit, the RMA, also serves as a developer for products that are then 
sold in direct competition with privately developed products. Thus, the 
RMA serves as a competitor with the industry it is supposed to 
regulate.

  I am aware of no other private industry that faces these same 
hurdles. Senator Kerrey and I believe it is time to change this culture 
that has often served as a roadblock to producer access to new and 
improved products. Our legislation will, first, change the structure of 
the FCIC board of directors to bring reinsurance and expertise in the 
agriculture economy to the board. Second, make the FCIC the overseer of 
the RMA. Third, allow the RMA to continue to develop policies for 
specialty crops and underserved areas.
  Fourth, to create an Office of Private Sector Partnership to serve as 
a liaison between private sector companies and the FCIC board of 
directors. Fifth, to leave the final approval or disapproval of all 
policies in the hands of the board. And, finally, allow companies to 
charge a minimal fee on each policy when one company decides to sell 
another company's product. Hopefully, Mr. President, this will allow 
the companies to recover the research and development costs and will 
encourage the creation of new policies.
  While these steps will not be the answer to solving all of the 
problems in the Crop Insurance Program, we believe they will be an 
important step. Each year our producers put the seed in the ground with 
great faith and optimism and believe that, with a little faith and a 
little luck and the good Lord willing and the creeks not rising, they 
will produce a crop. But the task is not easy. Between the multiple 
risks of drought and flood and fire and hail and blizzard and disease 
and insects and also a little market interference in regard to the 
Federal Government, it often seems the deck is stacked against them. If 
producers do survive these risks, they are often still at the mercy of 
weakened exports, and Asian flu or the global contagion, as we call it, 
caused by a global financial crisis and inadequate access to foreign 
markets.
  I will be the first to admit that reforming this program cannot come 
without budgetary costs. At the same time, I can think of no other 
industry that faces the number of multiple risks that must be addressed 
on an annual basis by those in production agriculture.
  Congress must not and cannot be forced to pass these ad hoc disaster 
bills every year. We must give our producers the risk management tools 
that they need. I believe this legislation is an important first step, 
and I ask our colleagues to join Senator Kerrey and myself in this 
difficult but absolutely vital task.
  I yield the remainder of my time to my good friend and colleague, the 
Senator from Nebraska.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. KERREY. Mr. President, I rise today to introduce with Senator 
Roberts the Crop Insurance for the 21st Century Act.
  This bill will make crop insurance more affordable, more flexible, 
and more responsive to the changing needs of farmers.
  That has been our goal from the start, when we asked for help from 
farmers in Nebraska, in Kansas, and from the many farm, commodity, 
banking and crop insurance interests that work with producers. They 
responded with a multitude of ideas, and those ideas form the basis for 
this bill.
  The basic structure of the crop insurance program was set out in 
1980, and much of that structure remains in place today.
  Congress last reformed the crop insurance program in 1994, when we 
created new opportunities for private sector delivery of policies and 
risk sharing. And our success has been great--more than 181 million 
acres are enrolled in the program today, up almost 100 million acres 
since 1993.
  But we are now seeing participation on the decline. That is cause for 
concern.
  And last year, we discovered more cause for concern. Farmers in the 
northern plains who had been reliable buyers of crop insurance found 
that it was no longer offering much protection, after repeated years of 
weather-related disasters.
  Other farmers across the country made the seemingly improbable 
decision not to buy a 100 percent subsidized catastrophic policy 
because they found it worthless--so worthless they wouldn't spend even 
$50 for the administrative fee. And they then chose not to purchase a 
buy-up policy, either.
  And of greatest concern was the inevitable ad hoc disaster program, 
which Congress had theoretically eliminated in 1994. We spent an 
additional $6 billion on disaster aid last year in part to make up for 
these problems. And there are no substantive changes in the program to 
ward off another disaster bill this year.
  We will spend at least $18 billion this fiscal year to support 
agriculture. And the crisis is only deepening.

[[Page S2276]]

  Will this bill fix that crisis? No. Crop insurance does not and can 
not provide income. If you're getting a check from your insurance 
company--for your car, or your house, or your farm--you've lost money.

  But the program today no longer provides even enough support to keep 
most farmers in business after a couple of loss years. How can it, when 
most of them have a 35 percent deductible? For a farm operation with 
$500,000 worth of production, that means the farmer absorbs the first 
$175,000 of loss.
  Let me give you an example of how the economics of crop insurance 
work today. Doug Schmale of Lodgepole, NE, grows about 1,500 acres of 
wheat on his farm. He's a believer in crop insurance and buys it every 
year. And now he buys CRC, because he understands that covering revenue 
is an improvement over just covering yields.
  Doug says the reason he only buys 65 percent coverage is because, 
``That's where it makes the most sense, because that's where the 
government puts the money. But it's still not adequate.''
  Doug is insuring 26 bushels of wheat per acre, which he admits is 
nowhere close to what he can live on. And since 1987 he's only 
collected on his insurance policy twice. And he pays about $8,000 a 
year to buy it, every year.
  What Doug wants is to buy a 75 percent CRC policy. But if he does 
that today, his costs will more than double. He'll go from $4.72 an 
acre to $9.75. And that's not even an option when wheat is only worth 
$3.00.
  Doug says that this bill will finally make coverage affordable for 
him. He'll get enough coverage--at a price he can afford--to stay in 
business if he has two bad years in a row.
  There's been a lot of talk about ``safety nets'' over the past few 
years. And we all know that we wouldn't insure our houses with a 35 
percent deductible. But the economics of agriculture say to farmers, 
``Underinsure,'' especially now, when every dollar per acre makes an 
enormous difference.
  Congress must help change that message. Our message to farmers must 
be, ``We want you to insure your farm operation for enough coverage 
that your policy has some value. We want you to be able to take into 
account crop rotation, new crops and new land. If you have an 
unbelievable run of bad luck with the weather, we want crop insurance 
to help you stay in business.

  ``And we will help you do it.''
  Additionally, this bill recognizes that many farmers are trying new 
crops and in fact other government policies have encouraged them to do 
so. The crop insurance program offers little option but to underinsure 
or go without coverage. This bill would required changes in the program 
to take that into account.
  And just as importantly, this bill takes a big step toward 
restructuring the agency that oversees the program. Unbelievably, the 
statute now makes the board of directors responsible for reporting to 
the government agency, instead of having the agency report to the 
Board. We'll put the board of directors at the top of the hierarchy 
where they belong.
  By making changes in the administration of the program, we'll come 
closer to the flexible and responsive risk management program that 
farmers expect. That may be the most important thing we accomplish.
  Senator Roberts and I have worked together on crop insurance in the 
past, and we are happy to take the lead again. And I reiterate: this is 
not the panacea to the financial crisis in rural America, but it is a 
worthwhile first step.
  I look forward to a renewed spirit of bipartisanship on ag issues, 
and we are starting here today.
  Mr. President, quite simply, this piece of legislation will make crop 
insurance more affordable, more flexible and more responsive to the 
changing needs of farmers. That has been our goal from the start, for 
farmers in Nebraska, farmers in Kansas and farmers throughout the 
country.
  The basic structure of the Crop Insurance Program was set in place in 
1980. Much of that structure remains in place today. The last time 
Congress changed the law was in 1994, and at that time we created new 
opportunities for private sector delivery of policies and risk sharing. 
It is a model, in my judgment, Mr. President, that has worked.
  The taxpayers take half the risk; the private sector takes half the 
risk. They are the ones out selling the product and, as a consequence, 
there is far less taxpayer exposure than there would be otherwise. 
Senator Roberts just alluded to it. In fact, I think he did more than 
just allude to it. He said it directly.
  The ad hoc disaster program we believed we were ending in 1994, when 
we passed the crop insurance bill, well, it came back last year with a 
vengeance for $6 billion. It is not a very efficient way of helping 
businesspeople, family-operated farms that suffer losses. It is a very 
inefficient way. Typically it costs us a great deal more money and 
typically it does not benefit the people who need it the most.
  What crop insurance gives the farmer is a management tool that they 
can use to manage risk. It is not a replacement for other programs. It 
is not a replacement for income. It is a tool that they can use to 
manage the considerable risk of manufacturing a product outside.
  In 1994, after we created the program, we met with considerable 
success. We had 181 million acres that were enrolled in the program--
that is up from 100 million acres enrolled in 1993--but we are seeing 
participation rates decline. Last year we discovered more cause for 
concern when farmers in the northern plains who had been reliable 
buyers of crop insurance found that it was no longer offering much 
protection. They were unwilling to buy a 100-percent subsidized 
catastrophic policy because they found it was worthless. It is only 50 
bucks, but they are telling us that it is worthless.
  Other concerns were expressed by farmers, to both Senator Roberts and 
I, and many other Members of Congress, about how to make this Crop 
Insurance Program work. We have tried, with this piece of legislation, 
to do that, by inverting the subsidies, by equalizing the subsidies for 
revenue insurance, by allowing revenue insurance to be offered for 
price as well as for yields, by changing the APH for multiyear losses, 
as well as making changes for farmers that are coming on line for the 
first time, by allowing livestock to be covered for the first time, a 
permissive piece, and, most importantly for me, by restructuring the 
Risk Management Agency itself, making the Risk Management Agency 
director responsive to the board and bringing on a new private sector 
entity to evaluate reinsurance and evaluate what, indeed, the market 
itself wanted to do.
  Mr. President, I would like to talk specifically about one 
individual, a man by the name of Doug Schmale from Lodgepole, NE. He 
grows about 1,500 acres of wheat on his farm. He likes crop insurance. 
He buys it every year and has bought it since 1987. He has collected 
but twice.
  I talked to him about the details. Listen to his details. It is the 
same thing we are hearing from farmers throughout the country. He buys 
65 percent coverage, he said, because ``that's where it makes the most 
sense, because that's where the Government puts the money. But it's not 
adequate.''
  It doesn't provide him with the protection he needs. That means he 
will be insuring about 26 bushels an acre, which he admits is nowhere 
close to what he can produce, nowhere near the kind of losses he would 
expect if he were to suffer a loss on that crop.
  What he would like to do is buy a 75 percent crop recovery policy. If 
he does that, the premiums are so high that, given the price of wheat, 
he cannot afford to buy it.
  Again, Mr. President, we are not talking about throwing a bunch of 
money out here. We are talking about allowing these subsidies to change 
so the private sector can sell the product easier. I must emphasize 
this over and over, that what crop insurance represents for the 
taxpayer is a terrific way to put a product out there to manage risk, 
because the private sector assumes half the loss. The private sector 
will suffer a significant loss if there are losses. So they are not 
going to be out there underwriting policies for things that they 
consider to be too risky, because they are on the line for half the 
loss.
  This piece of legislation represents a substantial step forward. We 
have pilot projects in there for beginning farmers.

[[Page S2277]]

We have pilot projects in there, as well, for many of our southern 
friends who are concerned that cotton, because it is a lower-cost 
product, has not been able to get good underwriting. We have tried to 
accommodate concerns for many other crops as well.
  We believe that if we can get this legislation passed this year, it 
will be a giant step forward from what we had in 1994 and will continue 
us in the direction of saying that we are not going to have ad hoc 
disaster programs. We are going to allow the farmer himself to have a 
product that enables him to manage that risk and reduce the risk 
associated with a rather risky endeavor of production agriculture.
  I don't know if the Senator from Kansas has anymore enlightened, 
humorous remarks to make. I wonder if the Senator from Kansas will 
agree that what we saw after we passed the law in 1994 was a 
substantial increase in the number of acres that are covered, and the 
program is working, but we have kind of hit a wall. We reformed it 
considerably. We are moving more toward the market, but we have hit a 
wall.
  The market is basically saying, ``We have products that we can sell; 
our farmers will buy the products.'' But here are changes we need to 
make in this law and if you make these changes, we think you will find 
more acreage is underwritten, more satisfied customers and less need 
for ad hoc disaster, as a consequence.
  Mr. ROBERTS. Mr. President, if I may respond to my distinguished 
friend, the whole goal of this is to provide the farmer and rancher 
with the risk management tools to enable that decisionmaking to be made 
by the individual producer as opposed to those of us in Washington who 
respond, as I indicated before, it seems like almost even numbered 
years to the plight of those who are experiencing disasters. We think 
this program or this reform will certainly represent a lot more 
consistencies.

  Yes, it will cost money, but if you add up the average $1.5 billion 
that we have paid in disaster programs, not to mention the $6 billion 
emergency bill as of last year, of course that is reflective of the 
loss of export demand we have seen because of the economic problems all 
over the world. But I certainly agree with my colleague and my 
cosponsor.
  Mr. President, I have several unanimous consent requests, I tell my 
colleague, if I may offer them at this point.
  Mr. President, I ask unanimous consent that Senators Craig, Burns, 
Hagel, Daschle, Conrad,  and Baucus be added as original cosponsors on 
the bill just introduced by Senator Kerrey and myself.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. ROBERTS. Mr. President, I further ask unanimous consent that any 
Senator wishing to be added to this legislation as an original 
cosponsor be allowed to do so prior to the close of business today.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. ROBERTS. I yield the floor.
  Mr. KERREY addressed the Chair.
  The PRESIDING OFFICER. The Senator from Nebraska.
  Mr. KERREY. Mr. President, I appreciate that growing list of 
cosponsors. I hope this is a piece of legislation which we can persuade 
our friends on the Budget Committee to make room for. It will save us 
money in the long term. It will save us and prevent us from spending 
multibillions of dollars a year on ad hoc disaster assistance in some 
kind of a supplemental appropriation. I hope very much that we are able 
to get some additional room.
  I was disappointed we did not see it in the President's budget. He 
has a lot of new spending priorities. I think if we put this a bit 
ahead of some of the spending priorities, we ought to make room for it.
  I promise my colleagues, if we do that, if we change the law in this 
way, you will find we will be saving money in the long term trying to 
make certain that family-based agriculture, one of the most important 
parts of our economy, still producing this year at least $20 billion 
worth of surplus in trade--it is going to be down a it in 1999, but it 
is still an enormously important part of our economy--I assure my 
colleagues if we get room in our budget to include the cost of this 
expansion of crop insurance that it will save us money in the long 
term.
  Mr. CRAIG. Mr. President, I rise today to join my good friends and 
colleagues Senators Roberts and Kerrey as a cosponsor of legislation 
being introduced today to reform the Federal agricultural crop 
insurance program. I am proud to stand with these leaders in purposing 
sweeping legislation to bring back some normalcy to our Nation's farm 
economy and expand the risk management tools available to our farm and 
ranch families.
  The bill addresses several concerns farmers from my state and I have 
about the current crop insurance program. Specifically, I am pleased 
that the legislation includes provisions to establish an APH history 
adjustment for beginning farmers and multi-year disasters. In addition, 
removing the exclusion for livestock coverage is long overdue.
  By cosponsoring this legislation today, I do not wish to imply that 
our search for meaningful crop insurance reform ideas has been 
completed. Just the contrary--I see this bill as a reasonable and 
appropriate first step toward our long-term goal of providing real risk 
management tools to our farmers and ranchers.
  While I am pleased that the bill includes provisions that allow the 
Risk Management Agency to develop policies for ``speciality'' or 
``minor'' crops and for crops in under-served areas, I look forward to 
working with my colleagues to develop even stronger and more beneficial 
risk management tools for these producers. Idaho's great agricultural 
economy is based on minor and nontraditional crops. We lead the nation 
in the production of such crops as potatoes, winter peas, and trout. 
Idaho is second in the production of seed peas, lentils, sugar beets, 
barley and mint. Furthermore, we are in the top five states in the 
production of hops, onions, plums, sweet cherries, alfalfa, and 
American cheese.
  The needs of these producers are just as important as those of more 
traditional farm commodities. I want to assure my colleagues that I 
will continue to work for the resolution of this and other matters as 
our effort to reform Federal crop insurance progresses.
                                 ______