New COP insurance could provide optimum crops coverage

By MONETTE TAYLOR | South Central Texas Edition

September 5, 2002 -- In 2000, legislation was passed to fund a new type of agricultural insurance for producers across the nation. After months of planning, negotiation and meetings, it's looking like producers will be offered a different kind of insurance, and with the cost of ag coverage going up for less coverage - if you can find someone to write a policy - this should be good news for Texas and the nation.

Bob Brown, managing partner of AgriRisk Consulting and a retired officer of the Farm Credit Bank of Texas, has been working on the project throughout the months.

The new Cost of Production (COP) insurance is defined as " ... a concept that allows producers of all commodities to insure up to 90 percent of actual, documented costs of production." Then, the maximum exposure a producer would have in any one year would be the remaining 10 percent, and any costs that were not covered by the COP policy.

Program originators indicate the policy helps "defray" fraud issues that seem to hound producers. The idea was to put together a program that was "fraud proof."

AgriLogic, led by Joe Davis of College Station, was contracted to work with the U.S. Department of Agriculture (USDA) on the implementation of the program, and has worked diligently to insure the pilot programs would start as soon as possible.

The crops that were, originally, identified as pilot program crops included almonds, apricots, cotton, corn, cranberries, nectarines, onions, peaches, rice, soybeans, sugarcane, and wheat. The first pilot planned is for cotton growers across the United States, and the Federal Crop Insurance Corporation (FCIC) is in the process of deciding exactly what states and acreage will be included.

"The board met in mid-June with the Risk Management Agency (RMA) in Kansas City. We met with the top echelon at the office, and actually had a very good meeting. We came to a real understanding about where the Coalition of American Agriculture Producers are coming from in this overall project, and how we fit in with and interacted with AgriLogic, in the overall project," explained Brown.

"We came away from that meeting with a promise from both the person administering the contract and the person that runs the day-to-day operation of RMA in Kansas City that they were going to 'attempt' to get cotton (the pilot program) ready for the 2003 crop."

Brown and colleagues have met with government officials in Washington, D.C., at the USDA building with the FCIC Board, which includes four, new farmers, one being Frank Jones of Dawson County in Texas who represents the Southwest states on the board.

"AgriLogic made their presentation to that (FCIC) board the evening before, but the public presentation was made on the 22nd of July, and it was very well received by the board members," said Brown.

The FCIC board consists of representatives from the insurance industry, ag producers, Keith Collins, chief economist at USDA (appointed by Ann Veneman as chair), and Joe Davis of AgriLogic, among others. Brown said everyone came away from that meeting feeling very positive about the COP program.

One area of discussion concerned the Average Production History (APH) of producers. A producer from New York state asked how that historical average was actually calculated, concerning drought years, etc.

"Congress, in this last session, developed a way for a farmer to go back and take a look at that, and they will have to sign up between now and the first of the year. We don't really know when that sign up date is going to occur. It hasn't been announced (at the time of this interview)," said Brown.

With some of the new programs out there, under the new Farm Bill, Brown said some farmers will want to "take a look" at their individual APHs to see if they really want to up-date their acreage or their history. He added that the up-date could end up costing a smaller producer up to $600 a year for the 10 years of this Farm Bill.

Presently, Brown and others are feeling fairly secure that this pilot program is imminent, but with politics as they are, and an election year bearing down on politicians, he realizes it still isn't a "done deal."

"Everybody's out there for a dollar, and it's an election year and everybody's very careful about who they do what for," he laughed.

"The FCIC has tentatively approved the program (COP) and sent it out for what they call 'expert review.' This means there are a list of contractors that USDA uses around the country, mostly in the expert review area ... universities and academia ... and people who are, supposedly, deep thinkers," he added.

If Brown had to guess, at this point, he feels the program stands a 95 percent chance of being implemented, and would be turned over to insurance companies for them to begin to develop their documentation and training for sales people by Dec. 1.

He said there are about 10 insurance companies that do business in the area, and that he has had meetings with some of them, already.

"At this point, they seem to be fairly positive on developing a product around this whole program," added Brown.

Once COP becomes a pilot program, and it proves itself through one-, two-, or three-year pilots, it moves right into available insurance coverage for use by producers, without any further action by anyone, said Brown.

After the identified program crops are on board, others identified as "minority" crops hope to be added, according to Brown.

"We have moved through the whole program with lots of obstacles in the way, but now (we) are in a place and a time where we just need a little time in order for this thing to ripen, so to speak," added Brown.

The best thing about the program will be the benefit to American farmers. That's what it's all about, he summarized.