There will be a $2 billion cut to the return on investment allowed for crop insurance companies. There will be a $900 million cap on administrative expenses that will save $3.7 billion, and changes to the CAT program will save $600 million. The White House plan proposed to reverse the Congressional action which reduced the premium cost to farmers in an effort to increase participation. It says participation averages about 83% so high premium subsidies are no longer needed, and it will reduce the subsidy level for the higher coverages of crop insurance to save $2 billion per year.
3) Conservation assistance will also be cut by $2 billion, but curiously the plan says federal support for conservation will increase by $60 billion over the next 10 years. While the budget cutting document says “The Administration is very supportive of programs that create incentives for private lands conservation and has made great strides in leveraging these resources with those of other Federal agencies towards greater landscape-scale conservation; however, the dramatic increase in funding (roughly 500 percent since enactment of the Farm Security and Rural Investments Act of 2002) has led to difficulties in program administration and redundancies among our agricultural conservation programs.” The plan says high crop prices have reduced producer demand for certain agricultural programs. Subsequently, “the administration plans to make the budget cuts by better targeting funding to the most cost effective and environmentally beneficial programs and practices.”
4) Mandatory disaster assistance will be extended through 2016, but to be eligible, farmers must purchase crop insurance, and it reworks the SURE program. SURE is the Supplemental Revenue Assistance Program developed as the permanent disaster program in the 2008 Farm Bill. The White House plan says SURE provides financial assistance at levels that are 15% higher than crop insurance; it is proposing a change to limit payments which do not exceed 90% of expected farm income in the absence of a natural disaster.
While producer programs consume about 20% of the USDA budget, they will be the only ones cut. There were no cuts proposed to public food aid programs or other parts to the USDA budget.
The White House has proposed an extensive budget cutting program which attempts to reduce the deficit. Agriculture spending will be cut by $13.3 billion. The direct payment program will be eliminated. Crop insurance programs will be cut by $8.3 billion, and another $2 billion will be taken from conservation spending, all of which will be over a 10 year period. Additionally the permanent disaster program will be reduced to ensure participants do not profit from it.
Source: the FarmGate blog