Mr. Chairman, I appreciate your calling this hearing on crop insurance and allowing me to testify.

 I am here because North Dakota production agriculture is in a state of crisis.  We have experienced several years of unusually wet conditions which have drowned out significant acreage and created an epidemic of scab infestation causing $3 billion in losses over the last five years and $1 billion in losses last year alone.  Our small grain farmers also got socked with low prices well below the target price previously provided in the farm bill.

 As a result, our region is a first test case in agriculture without the safety net features previously provided by agriculture disaster programs or deficiency payments.

 It is therefore extremely important to closely assess the ability of the federal crop insurance program to provide an effective way for farmers to manage their risks during challenging times that are an inescapable component of farming.

 I regret to report to you that crop insurance has failed to meet the needs of production agriculture under stress and the program is in desperate need of improvement.  In our region we are now seeing an exodus of family farmers from the land that is worse than any time during the debt crisis of the 1980's.  Unless changes are quickly made, the face of the Northern Plains and the character of our farms will be changed forever.

 I'm the only former state insurance commissioner in Congress and in my years here I have spent a great deal of the time working on crop insurance.  Frankly, I thought it would work better.

 The system's chief failing has been its inability to provide coverage levels that begin to cover the financial exposure of farmers.  Just as an automobile owner would be upset about car insurance that didn't come close to the vehicle's value or even cover the bank loan against it, farmers are finding coverage levels well below their production expectations and the operating loans they have taken to plant the crop.

 The North Dakota experience clearly shows that you can have good farmers with quality land face tough going several years running if a weather cycle turns against them.  Each losing year drives down their yield history and further reduces their ability to adequately insure their crop.  A system that makes annual adjustments of this type ignores the multi-year cycles typical of weather patterns such as the wet cycle affecting us.

 As a result, crop insurance loss payments were woefully inadequate compared to the actual losses the farmers were incurring.  Agriculture lenders tell us that 80 percent of their customers lost money last year and North Dakota State University assesses the average loss at $23,000 per farmer.

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 The true test of whether we will make appropriate changes in crop insurance involve making the system work where agriculture is under stress — not merely looking with rose- colored glasses at areas where growing conditions are — at present — generally favorable.

 Our area has a history of successful farming.  Yet due to variables especially in precipitation and a shorter growing season it will always be more volatile than, for example, Indiana.  The greater the volatility, the greater the risk on the farmer, and the greater the need for a functioning crop insurance program.

 I have several focused recommendations to improve the crop insurance program.

 First, in years when a county has been declared a federal disaster, the farmer should not have his harvest calculated into his yield history.  The disaster declaration affirms that losses were not the farmer's fault nor the land's inability to produce.  We used to send disaster payments.  The least we should do now is not penalize the farmer for disaster losses.  The present system takes one year's disaster and compounds it into a multi-year disaster by destroying the coverage levels a farmer can obtain for his crops.

 Second, a producer acquiring new land in his area should be allowed to bring his production history onto the newly acquired land — particularly when the newly acquired property is close to the farmer's existing location.  We are seeing a tremendous amount of land change hands this year because of the losses and this small change would be significant to those taking the chance to expand.

 These two changes could — in my view — be achieved quickly with limited impact on the program.  Other systemic changes to shore up the program over the long term should improve coverage levels, expand the concept of being able to procure coverage for price as well as production, and facilitate the transition into alternative crops through pilot programs to allow farmers to capture the full opportunity of the "Freedom to Farm" concept.

 Moves to withdraw or reduce federal participation in crop insurance will drive up premium prices and dramatically reduce the coverage available to farmers.  I predict that over time, an entirely private system would effectively red-line out geographic areas or certain crops where loss remains a substantial risk. The result would be that farmers in greatest need of this risk management tool would be the least able to find and afford the coverage they need.

 When the 103rd Congress effectively abolished agriculture disaster loans we committed to farmers a workable crop insurance program to afford them meaningful risk protection.  We must not walk away from that responsibility and leave our farmers unable to protect their huge financial exposure every crop year.