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House Subcommittee on
General Farm Commodities and Risk Management

Jul 21, 2004

Mr. Chairman and Members of the Subcommittee, thank you for the invitation to join Mr. Davidson to update the Subcommittee on the activities of the FCIC Board and to follow up on the series of crop insurance issues the Subcommittee has identified. I currently serve as Chairperson of the Board of Directors of the Federal Crop Insurance Corporation (FCIC).

The Board has responsibility for general management of FCIC. Since the last oversight hearing of the Subcommittee a little over a year ago, the Board has held 11 public meetings and taken 50 official actions, including approving 15 program expansions and modifications. One important example is a major expansion to the Adjusted Gross Revenue-Lite (AGR-Lite) insurance plan. This policy fills an important void in FCIC's product line, because it makes available crop insurance for small-to-medium size producers of livestock and specialty crops. AGR-Lite covers farmers" and ranchers" adjusted gross revenue from the whole farm, based on five years of Federal tax return data. It is a simplified version of the Adjusted Gross Revenue plan of insurance.

Since its initial approval for sale in Pennsylvania, AGR-Lite has been expanded to 16 other states, primarily in New England, the mid Atlantic States and in the Pacific Northwest.

Another recent Board action was to reinstate the Livestock Risk Protection, or LRP, policy for fed and feeder cattle and the Livestock Gross Margin, or LGM, policy for hogs. LRP was suspended following the finding of BSE in Washington State, and LGM was suspended following the determination that the contract had serious program integrity issues. RMA worked successfully with the owners of these products to identify modifications requested by the Board, and each of the products is expected to be selling again this fall. Because livestock products are new activities for FCIC, first authorized under ARPA, the Board has requested that a major review and analysis of each of the livestock programs be conducted one year after they have returned to the marketplace.

Other Board actions include expanding the blueberry and pecan pilot programs, approving a sugar beet stage removal pilot program and a silage sorghum pilot program, and modifying and expanding the Group Risk Income Protection plan.

On the management front, I also want to mention that the Board recently completed rewriting of the delegations of authority for FCIC, for the first time since the early 1990s. The Board worked for over a year with the RMA management team and the Office of General Counsel to review all statutory responsibilities and ensure they are properly delegated for action.

The Board also strengthened standards for reimbursement to outside entities for research, development and maintenance costs for products submitted for approval for sale.

Looking ahead, over the next 12 months, the Board's current agenda includes expected action on 15 pilot project evaluations and at least 6 feasibility and development contracts that are planned for completion. In addition, there are some 65 other pilot evaluations, contracts and partnerships underway under RMA oversight. Further, we anticipate that a number of new innovative products submitted under section 508(h) of the Act will come to FCIC from the private sector in the coming year. Regardless of the source of the new products, our goal at the Board will be to ensure before approval that each product is actuarially sound, is marketable to the majority of farmers of the covered commodity, and does not negatively affect program integrity or the delivery system.

The Board is committed to strengthening the nation's crop insurance and other risk management programs and the regulatory functions of FCIC, including those conducted by RMA on FCIC's behalf. All of the Board members are pleased to have the opportunity to serve U.S. agriculture and all are working hard to ensure this crucial part of the farm safety net functions as effectively as possible.

That completes my remarks. Thank you.