NU Online News Service, Jan. 21, 3:50 p.m. EST

WASHINGTON–Proposed cuts for the U.S. Agriculture Department's subsidy to the crop insurance program are excessive and will likely lead to more consolidation in a shrinking private crop insurance industry, an insurers' representative told the agency.

Robert Parkerson, president of National Crop Insurance Services, which represents the carriers in talks with the Agriculture Department, made his comments as the NCIS submitted a counterproposal to the Agriculture Department this week.

He said the original December proposal by the USDA/Risk Management Agency "would substantially change the structure of the crop insurance program."

Specifically, he said, it would result in an estimated reduction in funding of approximately $800 million per year over the next five years. This $4 billion cut would be in addition to the $6.4 billion cut mandated by the 2008 farm bill.

"These are pretty dramatic cuts based on little or no supporting research and data," Mr. Parkerson said.

"The industry supports thinking about change, but it has to make sense for the Government, industry and producers," he said.

In addition to the proposed cuts, the private industry has estimated, on a preliminary basis, additional costs of over $100 million to comply with RMA's new program initiatives and information technology requirements, he said

NCIS represents the private companies who sell and service crop insurance policies to America's farmers and ranchers.

The comments noted that the proposed funding reductions will impair many of the 15 private insurance companies, especially the small and medium-sized ones.

"This is likely to lead to more consolidation among the already shrinking industry and cause many of the 18,000-plus jobs associated with this industry, many in rural America, to be lost," Mr. Parkerson said.

Mr. Parkerson said that, in general, the proposed funding cuts "are excessive and unacceptable to the industry."

He noted that various proposals to reduce federal spending on crop insurance have been made over the past few years, including the Obama administration's 2010 budget proposal to cut the USDA budget by $5.2 billion, but these cuts were rejected by Congress.

"Now, through discretionary action, RMA proposes to implement the largest funding cuts ever for the industry," he said.

He said the proposed cuts will reduce industry returns well below the long-term average, "sharply reducing the incentives companies have to maintain investments in the industry in order to adequately service all producers."

Mr. Parkerson said that, "We truly hope that USDA and RMA will be willing to sit down with us soon and go through a true negotiation process for the 2011 standard reinsurance agreement.

"The industry has many good ideas to offer, based on years of analysis, much of it by third party accounting firms," he said.

"I know we can work this out to the benefit of all interested parties without wreaking havoc with a public/private partnership that has been working the way Congress intended for it to work for the last 30 years," he added.