What is in this article?:
- NFU/University of Tennessee Agricultural Policy Analysis Center study looks at farmer owned reserves (FORs).
- Group urges Congress to consider FORs as agriculture legislation is crafted.
Cotton and insurance
Any crops you’ve looked at that needs additional tweaking in the FOR system? Does cotton hold up like grains would?
“Historically, cotton was under these types of programs. In our model, we didn’t change the policies. We kept LDPs in for cotton and rice, although not direct payments. That’s because we couldn’t make the budgets work without that.
“On the other hand, those account for a relatively small portion of the total pie. So, yes, there is the need for tweaks since cotton is unique since it isn’t eaten. If its price changes, it certainly affects the profit of a farm but nobody starves.
“As for rice, the United States isn’t a big rice-eating nation. While we’re a small producer in the world, our rice exports are relatively large. In China, by contrast, they eat almost all the rice they produce and export almost none.”
“We believe the FOR system would be of great benefit to farmers. It would certainly reduce the cost of the revenue insurance they have. That’s because such insures against two kinds of risk: risk of price and risk of production.
“This would reduce the price risk significantly. Therefore, revenue insurance would have to mostly handle the production risk premium.
“So, it should have a positive impact on revenue insurance and crop insurance costs.”