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USDA agency’s largesse grows crop insurance
Most Americans have never heard of the Risk Management Agency, but the obscure Agriculture Department office spreads good cheer and millions of dollars in grants each year to industry trade groups and universities in the name of promoting economic stability in the farming industry by reducing risk.
Along the way, such well-oiled players as the $1 billion-a-year Christmas-tree industry or the grape farmers who supply California’s booming winemakers have cashed in on the largesse. Even the lobby for prune growers got in on the action, scoring funds to teach its members how to better negotiate marketing contracts, records show.
Most often, the RMA’s money is going toward educating farmers on how to make use of crop insurance, adding potential new customers to an already overburdened federal program that costs taxpayers billions of dollars each year, the agency’s own documents show.
The Agriculture Department defended the program, insisting the RMA’s outreach and education grants fulfill a critical mission.
“In administering this program, USDA is complying with the directives as authorized by the U.S. Congress in the Federal Crop Insurance Act, which provides the authority to promote and regulate sound risk-management solutions to improve the economic stability of American agriculture,” the department said in a statement to The Washington Guardian.
But longtime budget hawks have a different take, saying the RMA’s efforts amount to nothing more than spending tax dollars to help trade lobbies encourage farmers to apply for crop insurance that is subsidized by the government, adding to the taxpayers’ burden in the long run.
“The RMA grant-giving schemes are about paying people and organizations to increase sales of subsidized crop insurance. Subsidies to increase subsidies,” said Steve Ellis of the nonpartisan Taxpayers for Common Sense watchdog group, which has criticized the RMA program as wasteful and unnecessary.
“It makes no sense except to those who are able to feather their nest, like the recipients and the RMA,” Mr. Ellis added.
Federal crop insurance dates back to the Depression-era Dust Bowl days of the 1930s. That’s when Congress created a system in which farmers got to buy taxpayer-subsidized insurance to protect against crop losses. The policies are sold by private insurers, who also are backed against their losses by the government. In essence, taxpayers are exposed twice.
Currently, the government underwrites 60 percent of farmers’ premiums, costing taxpayers billions a year. And then the government covers any losses suffered by insurers who pay out claims that exceed the premiums they collected.
The entire program is getting a closer look as the government faces going over the “fiscal cliff” next week. This summer’s Midwest drought has exponentially increased the potential costs to taxpayers from the federal crop-insurance program.
The RMA estimated the subsidized premiums and insurers’ losses from the crop-insurance program cost taxpayers more than $14 billion in 2012, or about four times the cost from 2003.
Despite the ongoing debate and concerns, Agriculture Secretary Thomas J. Vilsack late last month announced a fresh round of $12.8 million in RMA grants to be distributed around the country, boasting they would in part “help farmers get the insurance and credit that are often critical to their ability to stay in business or to diversify their existing business.”
The new grants are on top of $6.3 million RMA distributed earlier in 2012. The list of recipients gives a sense of who takes advantage of the special funding.
The National Christmas Tree Association, which represents a $1 billion a year holiday industry that employs 100,000 Americans, scored a $55,000 grant from RMA in 2012. RMA’s documents state the purpose of the grant was “to provide crop-insurance education and to help Christmas tree growers understand and manage risk.”
But DeLaine Bender, the executive director of the Christmas tree growers lobby, said the group didn’t provide training on crop insurance, instead using the money to bring professional speakers to its annual trade show in Sacramento, Calif., to do education and training at “breakout sessions” on risk management. About 300 to 400 growers attended, she said.
“Most of them are very interested in risk management,” she said, adding that the training materials reached thousands more recipients after the trade show ended, through emails and the group’s publications.
The RMA was listed as a “sponsor” for the trade show as a result of its grant, though Bender said federal monies were limited to underwriting the training sessions and not the “fun and educational theme night event at the California State Railroad Museum” listed on the trade-show agenda.
“We truly focus on risk management and helping the industry learn on how it can avoid risk,” she said. “To my knowledge, we have not promoted the insurance program.”
• The Prune Bargaining Association scored $99,429 this year to “provide crop-insurance education and to educate specialty crop producers on effectively negotiating marketing contracts” and “managing market risk.”
• The San Joaquin Valley Winegrowers Association won $36,000 to help grape growers for California’s wine industry learn how to apply for federal crop insurance and deal with “production management, crop marketing and financial risk.”
• The Minnesota Fruit & Vegetable Association got $96,567 to “provide crop-insurance education and to develop and deliver a variety of risk-management solutions for specialty crop producers in the Upper Midwest, including women, beginning growers, limited resource, Latino and Hmong producers.”
Several of the grant recipients were targeted at immigrant or underprivileged farmers through nonprofits such as Legal Aid or the Catholic Charities arm in Kansas, which won a $37,870 grant to provide crop-insurance education and “ensure that refugee specialty crop growers in the Midwest are equipped to use risk-management tools to build successful farm businesses.”
Several consulting firms, which have cropped up around the niche crop insurance business or organic farming also won grants.
Likewise, educators scored big, as more than two dozen universities, colleges and technical schools won grants, ranging from Rutgers in New Jersey to the University of Hawaii.
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