Agriculture Economists Help Mississippi Farmers Select Crop Insurance

April 23, 2014

Mississippi growers at some point this fall will have to make a momentous, one-time decision on how best to insure their livelihood over the next five years.

In arriving at that decision, they will depend in large part on agricultural economists such as those at the Mississippi State University Delta Research and Extension Service who are now assembling projections to help in making that decision.

All the while, U.S. Department of Agriculture specialists are working to draft regulations mandated by the Agricultural Act of 2014, which after more than a year of rancorous debate, was signed into law Feb. 7.

By law, the federal regulators have 180 days from the law’s signing to produce the complex set of rules. That would place its release date sometime in August, at the latest.

For now, however, growers in the Mississippi Delta have a more immediate concern: getting their crops in as untimely rains continue to pass through the area, soaking fields and idling tractors.

At the Delta Research and Extension Service offices, economists are using projections developed at the University of Missouri to assemble spreadsheets into which area growers will be able to plug their individual crop allocations and other variables to help determine, on a commodity by commodity basis, which of two principal crop insurance programs to subscribe to.

“We’re doing the arithmetic,” Larry Falconer, one of four agricultural economists spearheading the effort. “We’re trying to put together tools that reflect the best information we can to support the provisions of the 2014 act.”

While much remains unknown as growers and agricultural economists alike await the final regulations, much has been laid out.

Direct payments, for instance, which had been mailed to growers whether they incurred losses or not since the program was established in 1996 are now a thing of the past. Counter-cyclical payments also have been done away with.

Moreover, cotton is no longer considered a Title I crop, and, as such, Falconer said, “cotton growers will receive a transition payment in the fall.”

Falconer said cotton growers are no longer eligible for Agriculture Risk Coverage or Price Loss Coverage — the two new crop insurance programs from which growers will be choosing. Cotton acres will now be termed generic, providing an avenue to crop insurance.

“They didn’t just chuck it in the wastebasket and say, ‘fellows, you’re out of luck,”’ Falconer said.

Growers’ calculations will rely, in part, on guesswork.

“Nobody has a crystal ball,” Falconer said.

They do, however, have econometric models to work from.

The Farm Bill includes funding for land-grant universities, such as Mississippi State, to develop the spreadsheets and other tools to assist growers in determining their best coverage options.

According to Congressional Budget Office projections, crop insurance subsidies are expected to comprise 8 percent of the $489 billion, five-year farm bill, or just more than $39 billion.

Signup for 2015 coverage “probably will be in the fall,” Falconer said. “I’ve heard some folks say the signup will be extended into January of next year, but the agriculture secretary (Tom Vilsack) has said it will be this fall, which I take to mean after harvest and before Christmas.”

By then, Falconer said, 2013 data will be complete, eliminating at least one uncertainty, “and we’ll have a better feel than we have now.”

Falconer and his colleagues including two outlook economists will continually be refining their calculations as the signup date approaches, finessing their models to best serve area growers.

It is a responsibility fraught with uncertainty.

“Every five or six years, you get the (farm) bill,” Falconer said, “and you feel the pressure.”

 

 

 

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