Farmers used to adopting their risk management plan around a federal failsafe may soon find that failsafe gone. That’s because the current USDA negotiating draft of the Standard Reinsurance Agreement has a huge hole in it the size of $6.9 billion.

The proposed cuts come from the crop insurance program and are three times that of past proposed cuts that were rejected by Congress. Worse, the Congressional Budget Office, having seen the proposal, has reduced the budget available for use in the next farm bill budget by a staggering $3.9 billion. With skyrocketing crop insurance liabilities – $80 billion in 2009, up from $31 billion in 1999 – farmers will be hard pressed to find essential coverage for all farm business risks. 

Farmers need to increase the emphasis on risk management and preventing those risks that can be controlled. Some areas of concern include:

Equipment safety. Make sure your machinery and all farm-related equipment is in proper working order and that all workers understand how to use equipment correctly. Train all new employees on equipment use and make sure your equipment is inspected regularly to safeguard against accidents.

Property safety. Inspect your buildings and grounds every week to ensure buildings are free from debris or damage and make sure the grounds pose no hazards such as uncovered wells, ground water contamination risks, or electrical hazards.

Emergency training. At least two people on your property should be trained in handling emergency situations. Ideally all employees should have basic first responder training. Also, make sure to stock necessary emergency supplies.

Animal safety. Keep dangerous animals separate from places where humans interact with other animals. For example, don’t pen bulls near horse-riding rinks. Make sure you safeguard visitors from livestock and pets, such as dogs.

Chemical safety. Store chemicals properly and away from both ground water sources and livestock. Lock all storage facilities and make sure the buildings are maintained to prevent contamination of the chemicals and potential fire or health hazards.

Limited operation entry. Make sure to post adequate signage spelling out clearly visitor requirements, such as hunting permissions and supervision of children.

As the new farm bill takes shape, it’s difficult to say if there will be a significant reduction in insurance coverage. The smart farmer will plan now to lower risk potential in order to offset any lack in future coverage.

USDA Standard Reinsurance Agreement:  click here

Flickr photo credit:  ƒernando

Filed under: Agribusiness by afis blogger