TOPIC | INDUSTRY INSIGHT


Credit Providers Urge Senators to Keep Crop Insurance “Strong and Vibrant”

March 2012

The three major trade associations representing agriculture credit providers expressed their unified view regarding the need to maintain a strong and vibrant Federal crop insurance program as a vital risk management tool for farmers and ranchers, noting that agriculture is an inherently risky business, both in terms of weather and markets, as well as being capital intensive.

“Federal crop insurance provides producers with an effective tool to manage their risk, and it provides lenders with greater certainty that loans made to producers will be repaid,” said American Bankers Association, Independent Community Bankers of America and The Farm Credit Council in a March 14 letter to the Senate Committee on Agriculture, Nutrition and Forestry that was formally submitted for the record at the hearing.

“Federal crop insurance is an important component allowing lenders to take on the additional risk of financing many young and beginning producers who have less collateral and equity,” they note.

The Federal crop insurance program has evolved into a broad-based safety net for producers. It is instrumental in assuring that American agriculture remains solid, solvent and globally competitive. “Without the risk protection provided by Federal crop insurance, agricultural lenders would be forced to increase underwriting standards, increase costs to offset risk, and likely be forced to reduce credit availability to some producers for their production, equipment and land purchase needs,” they add.

The letter explains that financially strong crop insurance companies, reinsurance companies and agents are critical to delivering the benefits derived from a strong program. “The private-sector delivery system currently in place for Federal crop insurance is working efficiently and effectively, and we believe its overall framework should remain intact,” they say.

“Federal crop insurance program is working,” the letter continued. “It continues to provide significant risk management support to producers. Producers enjoy the ability to select revenue and yield protection that enables them to obtain adequate capital from lenders to continue to be successful in their operations.”