EVERETT INTRODUCES FARM RISK MANAGEMENT ACT
WASHINGTON, D.C. -- U.S. Rep. Terry Everett (R-Ala.,) introduced legislation Tuesday that would reduce the financial impact of disasters on local farmers by allowing the creation of farm risk management accounts, using both USDA and individual farmer contributions.
"We are seeing farmers lose their farms due to the unfortunate combination of increasingly harsh weather, rising operational costs and a federal crop insurance program that is too expensive to help many cover their losses," said Everett, a senior member of the House Agriculture Committee.
The Farm Risk Management Act, which Everett first introduced in July 2006, would allow farmers to insure their income by creating a whole-farm risk management program based on total revenues from their farming activities, not linked to the farmer's production of a particular commodity.
Under the Farm Risk Management Act, a farmer would deposit money into the new risk management account. The U.S. Department of Agriculture would then match the farmer's contribution in this tax-deferred, interest bearing account. As a result, farmers would effectively be self-insured.
The new risk management account would go beyond the scope of current crop insurance by allowing farmers to withdraw funds from their accounts to help offset any unforeseen farm expense including high energy or fertilizer costs.
"There is an immediate need for significant crop insurance reform that will better enable farmers to manage the unique risks involved in agricultural production," said Everett. "As lawmakers mark up the 2007 Farm Bill reauthorization, I hope my legislation will be considered and generate debate on alternatives to less effective, traditional crop insurance."
"My approach could save the federal government money by eliminating the need for ad hoc disaster assistance," Everett added. "Above all, it will give farmers greater flexibility to overcome weather and other uncontrollable factors that directly impact their business, and the ability to provide adequate, affordable food for America's tables."
The new Everett Farm Risk Management Account features such provisions as the following:
- Farmers could insure their income based on average gross income, and would be afforded whole-farm coverage rather than coverage by specific commodity.
- The farmer would be required to deposit at least two percent of his gross farm income into the new account. Maximum deposits of up to 150 percent of the producer's gross farm income would be allowed.
- The USDA would match the farmer's contribution of two percent in the tax-deferred interest bearing account.
- During the first year, 25 percent of the farmer's crop insurance premium would go to the Farm Risk Management Account and the remaining 75 percent would remain in conventional crop insurance coverage.
- During the second year, 50 percent of the farmer's contribution would go to the Farm Risk Management Account and the remaining 50 percent to conventional crop insurance.
- During the third year of transition, 75 percent of the farmer's contribution will go to the Farm Risk Management Account with 25 percent in conventional crop insurance
- By year four, the farmer would be fully invested in the new Farm Risk Management Account.