05/03/07 USDA's gap insurance proposal

Farm and Ranch May 3, 2007 One of the provisions the USDA is proposing be included in the 2007 Farm Bill is to allow farmers to purchase supplemental insurance to cover all or part of their individual crop insurance policy deductible or gap insurance. Agriculture Secretary Mike Johanns says gap insurance would be a great help to farmers. Johanns: "Because what farmers tell us on the Farm Bill Forum circuit they said Mike, you know I can only cover so much. And for young farmers and for farmers who are not well established that 30 percent or there abouts that they could not cover was a disaster for them. Literally the difference between staying in business or going out of business." Johanns says crop insurance is much more reliable than depending on whether or not congress will have the funds to provide disaster relief for failed crops. But what about the cost of gap insurance? Johanns: "Keith Collins our chief economist was asked at a hearing do you think this will be affordable. He said yes we think this is going to be very affordable for farmers. So, there you go." One reason the premium would be substantially lower than premium levels for higher levels of standard coverage is that USDA's proposal requires an area wide or county wide event to trigger the gap coverage. There would need to be a county wide loss of ten percent or more and that can be a problem in Northwest where some counties normally have high and low production areas and a good crop in one part can prevent the trigger from kicking in for producers who suffered 10 percent plus losses in another part of the same county. I'm Bob Hoff and that's the Northwest Farm and Ranch Report on the Northwest Ag Information Network.