Good morning.  Last week, the Committee began a comprehensive
review of how the federal government should assist farmers and ranchers in managing the financial risk inherent in agricultural production. Today's hearing will continue that process with a review of the Federal Crop Insurance Program.

Some are convinced that we must substantially increase the level of
taxpayer support for  crop insurance so that farmers and ranchers have access to increased financial protection at less cost.  I am not yet convinced, however, that such a course is in the best interests of farmers and ranchers.  Before committing additional funds, I believe we should consider fundamental questions about crop insurance and the government's role.

Last week, Mississippi State University agricultural economist, Dr.
Keith Coble, testified that agricultural economists almost unanimously agree that farmers' demand for crop insurance is inelastic.  He indicated that reducing farmers' cost of crop insurance by 20 percent would increase participation in the program by only about 10 percent. In other words, farmers' response to higher insurance subsidies is likely to be only modest.   If this is the case, even if we increase crop insurance subsidies, will the government continue to enact ad hoc disaster assistance anyway?

Dr. Coble's testimony also raised the issue of the crop insurance
program's actuarial soundness.  He raised this, not as an issue of cost-control, but as an issue of fairness to farmers.    He indicated that we have a situation where some producers are able to gain from the crop insurance program, but many others, sometimes in the same area, are priced out of the insurance market.  Dr. Coble was talking primarily about Mississippi, but farmers in other areas have concerns about crop insurance premiums as well.  Indiana crop yields are not as volatile as yields in many other states.  Most farmers in Indiana do not buy federal crop insurance because the premium seems excessive for the yield risk they face.   Is the reason for limited crop insurance participation in low-risk areas, like Indiana, due to USDA's premiums being skewed to favor high-risk areas?

Before we consider additional subsidies, I would like USDA to
perform a comprehensive review of crop insurance premiums in Indiana and other low risk states to determine whether premiums accurately reflect the local risk of farming or the extent that low risk states subsidize high risk states.

Let me turn now to Senator Harkin for his opening statement.