Wednesday, April 13, 2016

Understanding Crop Insurance: Historical Perspective—Part 2

Written by M. Sean High—Staff Attorney

Movement towards Federal Legislation
In 1932, “at a time of near collapse of the agricultural economy,” President Franklin Roosevelt named Henry A. Wallace as Secretary of Agriculture.[1] In 1936, under the direction of Wallace, the United States Department of Agriculture (USDA) began to actively investigate the possibility of a federal crop insurance program.  Significantly, research regarding wheat yield results, collected from individual farms led USDA to make a preliminary analysis that “wheat data could provide an actuarial basis for crop insurance.”[2]   

Meanwhile, in both 1934 and 1936, large portions of the U.S. agricultural sector experienced significant difficulties due to widespread drought.  The effects of these adverse weather conditions caused the general public to become increasingly interested in the possible benefits that could be achieved through the use of crop insurance.[3]  As a result, crop insurance was listed among the campaign issues of the 1936 presidential election.[4]

While both of the presidential candidates in 1936 expressed their support for the concept of crop insurance, they disagreed on structure and implementation.  President Roosevelt favored a “government-sponsored program,” while his Republican opponent, Governor Alfred M. Landon of Kansas, “believed a private approach was preferable.”[5]   

Shortly after Roosevelt’s 1936 presidential victory, the President’s Committee on Crop Insurance released a report recommending the establishment of a federal crop insurance program that applied to wheat only.  According to the report, a federal crop insurance program should “be administered by the USDA with policies sold by local committees or boards of directors who could require minimum levels of participation before offering insurance in a given county or region.”[6]

Based on the findings of the President’s Committee report, on March 30, 1937, the U.S. Senate passed a crop insurance bill to establish the President’s Committee’s recommendations.  In time, U.S. House of Representatives included legislation “nearly identical to the Senate bill” as part of the Agricultural Adjustment Act of 1938.[7]  As a result, the Federal Crop Insurance Act (FCIA) was enacted on February 16, 1938 for the purpose of “promot[ing] the national welfare by alleviating the economic distress caused by wheat crop failures due to drought and other causes, by maintaining the purchasing power of farmers, and by providing for stable supplies of wheat for domestic consumption.”[8]

[1] Federal Crop Insurance 1938-1982, Randall A. Kramer, Agricultural History, Vol. 57, No. 2 (Apr., 1983), p. 184
[2] Id. at p. 185
[3] Id.
[4] Id.
[5] Id. at p. 186
[6] Id. at pp. 186-187
[7] Id. at p. 188
[8] Id.

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