Providing key information on recent developments in rural America, including up-dates on the Farm Bureau, and salient issues converging around water quality, farm sustainability and the protection of biodiversity.

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GREEN GrassRoots Environmental Effectiveness Network is a project of Defenders of Wildlife designed to serve grassroots wildlife and wilderness advocates. GREEN policy positions do not necessarily represent those of Defenders of Wildlife.

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FEDERAL CROP INSURANCE - INSURING THE FARM BUREAU’S FUTURE

The Farm Bureau is currently lobbying Congress for funds to "help" farmers by subsidizing the crop insurance industry. They thing they are probably not emphasizing on these visits is that they, themselves, own several crop insurance companies that would directly benefit from this windfall. Not surprisingly these efforts have everything to do with the Farm Bureau making more money and very little to do with keeping small family farmers in business. In fact, these crop insurance programs may help contribute to the decline of family farmers. Sadly, they will also result in the unnecessary destruction of millions of acres of environmentally sensitive, and highly erodible habitat.

By expanding the crop insurance program, producers are encouraged to maximize production. This leads to unwise cropping in marginal areas, like wetlands. It also leads to increased commodities production, continued over-supply, low prices, and intensified market concentration.

With proposals before Congress the crop insurance subsidy this year will exceed 4 billion dollars. Not a penny of that will be directly delivered to the farmer. It will go to the insurance industry. With the Farm Bureau lobbying on behalf of these proposals, the bureau’s financial ties to insurance should be scrutinized carefully. Considering their intimate insurance connections, Farm Bureau’s non-profit status as a farm trade group seems in conflict of interest.

By some estimates, factoring in underwriting gains, reinsurance schemes and administrative costs, with current expansion, the federal crop insurance could generate 7 billion dollars in gross annual capital for the insurance industry. Of the 14 companies approved by the USDA to provide crop insurance, Farm Bureau owns and controls about one-third of them. The others may be linked through re-insurance schemes.

If crop insurance was an economical, environmentally sound risk management tool, a four billion dollar subsidy might make sense. Unfortunately, insurance is not highly regarded. At best, farmers see it as an option protecting against catastrophic disaster. At worst, insurance is an unwelcome prerequisite for financing. It builds no long term wealth and can end up chaining farmers to production treadmills where returns just offset costs.

From a farm policy perspective, crop insurance could be equally devastating. The resulting over-supply of commodities will prolong and intensify the current economic crisis in agriculture.

Never before have prices, across the board, been so low. These prices have helped spawn what is probably the worst market concentration ever. Statistics show concentration is now worse in some areas than when Sherman developed the anti-trust statutes earlier in this century. While, today’s situation is a challenge, there are more effective ways to deliver 4 billion dollars into the agricultural sector - ways that won’t worsen what you’re trying to fix.

According to Farm Bureau literature, crop insurance is the savior of the family farmer. They continually promote the concept on their national radio show, on their web site, and numerous other media outlets. A recent story on their web site featured an Ohio farm family who "weathered the gloomy economy" and are "living their dream" because of crop insurance. They are more subtle in their lobbying call to arms. The Farm Bureau’s recent AgRecovery Plan calls for " $2 billion to improve and expand agriculture's financial safety net through federal risk management programs." The only risk management tool being discussed in any current bills in Congress is crop insurance.

To understand Farm Bureau’s interest in crop insurance, it helps to understand Farm Bureau’s insurance affiliations. Of the nearly 3000 Farm Bureau’s nationwide, all of them, including the parent organization, the American Farm Bureau Federation, derive most of their income from insurance sales. Currently, across the nation, there are more than 60 farm bureau owned and controlled insurance companies selling various forms of Life, and Property and Casualty insurance. In many areas, the Farm Bureau non-profits, and the Farm Bureau insurance companies are housed in adjacent offices. Often, because rent amounts are adjusted accordingly, the Farm Bureau insurance company pays tens of thousands of dollars rent, tax free, to the parent Farm Bureau affiliate.

Furthermore, it must be understood that through interlocking boards of directors and other mechanisms, Farm Bureau insurance companies operate as one huge company. For instance, the national parent organization, the American Farm Bureau Federation (AFBF), owns a portion of the American Agricultural Insurance Company (AAIC). (AAIC is one of the companies approved by USDA to provide crop insurance) AAIC is a huge national insurance company with assets of more that $575 million and a surplus of $285 million in early 1999. The remainder of AAIC is owned by a group of 33 other state farm bureaus. Dean Kleckner, president of the AFBF, also serves as president for AAIC, and every member of the board of directors for AAIC is chosen from the AFBF board.

Because of the complexity of these business structures, it is hard to tell how far the sphere of Farm Bureau influence spans.

For example, AAIC recently bought the re-insurance division of another huge insurance conglomerate, Nationwide. The terms of the deal were not disclosed. Nationwide insurance was started as the insurance company for the Ohio State Farm Bureau, but was forced to separate in 1948 when state insurance regulators grew concerned about conflict of interests. Under the current crop insurance plan, insurance companies can choose to re-insure with private companies.

Beyond insurance, Farm Bureau companies form the keystone to a huge agricultural empire that is connected via Farm Bureau controlled CO-OP’s and investments to just about every aspect of agribusiness imaginable - from bovine growth hormones and bio-technology, to Phillip Morris and Archer Daniels Midland.

These agribusiness outfits are notorious for working contrary to the interests of the family farmer. For instance, a group of state Farm Bureau insurance companies are heavily invested in Premium Standard Farms - a huge factory hog business with a bad-neighbor reputation for undermining family farmers, rural communities and environments.

With a federal crop insurance subsidy of over four billion dollars, and with a potential gross capital cash flow in excess of 7 billion, it is clear this huge network of farm bureau insurance companies stand to profit quite handsomely. This profiteering however, seems to place Farm Bureau in direct conflict of interest.

It has been said the Farm Bureau cannot serve two masters. On one hand the Farm Bureau is given tax-free, non-

profit status because their mission statement says they serve the farmers and ranchers of America. On the other hand, the Farm Bureau derives most of their income and members from related insurance companies This sets up a delicate situation. When push comes to shove, will Farm Bureau serve the farmer or the insurance company stockholders? Though Farm Bureau literature would like to convince us otherwise, common sense tells us they can’t serve both.

A broader over-riding concern for farmers is that Farm Bureau uses their huge tax free lobby to advance agribusiness policy detrimental to the family farmer. The concept of "production management" is the best example of this. With the single exception of the Farm Bureau, all farm organizations admit over-supply is currently a major fundamental problem and recommend some sort of supply management. These groups embrace basic supply-demand concepts, and believe managing production will return market prices to healthier levels. Farm Bureau has historically fought any attempts to manage production. When you look at their insurance and other agribusiness connections the reasons become apparent. Any reduction in production translates as fewer sales of insurance, pesticide, fertilizer, oil, biotechnology, etc.

This raises another conflict of interest question, even more fundamental than crop insurance. Should the Farm Bureau be able to use their considerable non-profit resources to lobby for farm policy that favors agribusiness interests over farmers, when they are granted non-profit status because they represent farmers? This is a question Farm Bureau members need to ask their leadership.

If the American Farm Bureau Federation wants to be believed when they advance crop insurance coverage as a great safety-net for farmers, they should divest their insurance interests from any affiliation with the federal crop insurance and reinsurance programs. Stated differently, if the Farm Bureau wants use their tax-free lobbying power to advance programs to help farmers, their insurance companies should not profit from those programs.

Because of powerful lobbying, crop insurance bills are on the Congressional fast track. This is unfortunate. A new farm policy is needed that creates stable markets for farmers in ways that work for environment and future generations.

Furthermore, an additional 500 million from the emergency supplemental is targeted to expand the insurance program. This is particularly egregious.

This 500 million needs to be delivered to producers directly.