OPENING STATEMENT OF SENATOR TOM HARKIN

April 17, 1997

Thank you, Mr. Chairman. Today we will examine several aspects of the crop insurance program. Crop insurance is one of the most important risk management tools available to producers today. In 1994, Congress agreed that crop insurance was so important it linked crop insurance to participation in other federal agricultural programs. Bankers consider crop insurance so important that they often require insurance as a condition for loans.

As a result of these facts, today more and more farmers are taking responsibility for their own risk management through the purchase of crop insurance. Since the 1994 Crop Insurance Reform Act, participation in crop insurance has more than doubled, from a participation rate of 37% in 1994 to over 80% in 1996.

We accomplished this feat through a valuable partnership between the federal government and the private industry. We recognized that the risks associated with crop insurance were too variable and too severe for private industry to bear alone.

The 1994 Act established a system where private insurance companies would share in the risks and gains of delivering crop insurance. Without this public-private partnership, crop insurance would not be available to producers and Congress would once again be tempted to resort to expensive and unpredictable ad-hoc disaster relief programs.

In the 1994 Reform Act, Congress also challenged the crop insurance system to improve service and participation rates. We established goals for actuarial soundness and encouraged more private-sector delivery of policies. I am pleased that the federal program is moving toward these goals. Crop insurance must serve farmers as well as be responsible to the taxpayers.

Congress also encouraged the development of innovative new risk management products, such as revenue insurance. Today Iowa producers can choose from a menu of insurance products and decide for themselves which investments will best meet their needs. By all accounts farmers are excited about these new products and recognize the benefits of purchasing increased price risk protection. Sales have exceeded all expectations in Iowa where Crop Revenue Coverage was offered for the first time last year.

Clearly, farmers have entered a new era of risk management. With the government price support safety-net all but abolished, farmers will now have to rely more on revenue insurance products and futures markets for their risk management needs.

Educating producers on the features, advantages, and disadvantages of each product requires a great deal of effort and expense on the part of agents and companies to deliver these new products. We need to continue to support these efforts in a manner that is both responsible to the taxpayers and recognizes the hard work of the agents and the risks borne by the companies.

It is appropriate that we take stock of the crop insurance program at this particular moment to see where we can continue to improve delivery and efficiency. We must encourage this effort and continue to ensure that producers have protection available to them from the ravages of weather and the vagaries of market prices.