Some Wheat Growers May Get
Chance To Try New Insurance

WASHINGTON —(AP)— Wheat growers in Kansas, Oklahoma and elsewhere could get a chance to purchase new crop insurance policies that protect against the twin perils of lost yield and lost income.

The U.S. Department of Agriculture is mulling over a proposal from the private American Agrisurance Co. of Iowa to begin marketing the crop revenue coverage (CRC) policies for the 1997 crop year in wheat-growing states.

These policies differ from existing crop insurance because they provide payments if farmers raise a solid crop but prices are low, and also when they have a bad crop year but prices are high.

House Agriculture Committee Chairman Pat Roberts, R-Kan., said because there are fewer protections for farmers under the new farm bill, and because of complaints with existing crop insurance, the CRC policies could be a boon on the Plains.

"You have to explore all the options here, to provide the farmer with that appropriate safety net," Roberts said. "This is one way we can do that."

The CRC plan was developed in large part by Art Barnaby, an agricultural economist at Kansas State University who worked with American Agrisurance. Barnaby said that if Kansas wheat farmers had been able to purchase the policies in this poor crop year — with prices high — it would have meant more income in their pockets.

"It gives the most coverage when you need it most," Barnaby said.

For example, a wheat grower who has averaged 40 bushels per acre in production could have bought $110.10 per acre of CRC coverage, assuming a price of $3.55 per bushel.

If the grower had been able to actually produce only 10 bushels per acre and wheat prices rose to $5.48 a bushel, the CRC payment would automatically adjust upward to $164.40 an acre. The net to the grower, therefore, would be $109.60 per acre, once the actual 10-bushel production is subtracted.

Under the current multiperil crop insurance program, that same grower would have gotten just $71 an acre, Barnaby estimated. And under the minimum catastrophic insurance mandated under last year's farm bill, the payment would be about $42 an acre.

The National Association of Wheat Growers, which supports the CRC plan, estimates the new policies will cost about 10 percent to 15 percent more than multiperil insurance. But the producer will gain unprecedented coverage for fluctuations in price.

So far, CRC policies have been sold only to Nebraska and Iowa corn and soybean farmers. About 30 percent of producers bought the policies, but USDA officials say there has been no chance yet to gauge their effectiveness in a bad year.

"It's very early to make a judgment," said Ken Ackerman, acting administrator of USDA's Risk Management Agency. "It was very popular as a sales matter. But we have not gone through a claims period on it."

A USDA crop insurance panel is now mulling over how many wheat-producing states should be permitted to test-market the CRC policies. Barnaby and the wheat growers association both support permitting the sales in nine wheat states, including Kansas and Oklahoma. The other states are Texas, Colorado, North Dakota, South Dakota, Montana, Nebraska and Washington.

Ackerman, however, said the government is concerned that permitting such a large test market might put federal taxpayers at greater risk if crop yields are poor in many areas. The government acts as a partner in CRC by providing reinsurance to the companies that sell it.

"I think the concept is very good," Ackerman said. "The nine states that were discussed are basically the nine largest wheat states. For that to qualify as a pilot program obviously raises questions."

National Association of Wheat Growers President Chuck Merja, in a letter to Agriculture Secretary Dan Glickman, said limiting the program to one or two states would actually increase the risk to the government and private insurers by concentrating on one region that could easily experience a bad crop year.

"A broad program for 1997 will reduce that risk and provide a better test of crop revenue coverage in terms of grower acceptance, marketing capability and future program risk assessment," Merja wrote.

A smaller program would likely leave out both Kansas and North Dakota, both of which dwarf the other states in terms of wheat production. Barnaby said a company that could sell in only a couple of states couldn't afford such a great risk.

"They are the 800-pound gorillas in terms of wheat," Barnaby said.

A USDA crop insurance board is expected to decide how many wheat-growing states can market the CRC policies in a few weeks. Because winter wheat is planted at the end of summer, the policies would need to be available by about Aug. 1.