U.S. Representative Larry Combest, (R) -Lubbock, announced Tuesday that Texas Tech University has received a $464,938 grant through the U.S. Department of Agriculture for its project that will help farmers better plan how to utilize their base acreage under the Farm Bill.
"After drafting the Agricultural Risk Protection Act of 2000, which put a new emphasis on and provided resources for the development of better risk management tools, I encouraged Texas Tech to help take the lead in developing risk management strategies for farmers," Combest said. "I am pleased that USDA has seen the utility of Tech's project, and I believe it will help farmers make smart business decisions in future crop years."
Tom Knight, a Professor of Agricultural and applied economics at Texas Tech, said the project will determine whether current models utilized for planning decisions are deficient in helping farmers manage their market risks under the Farm Bill signed into law in May. Deficiencies are likely to be found in current models' abilities to help farmers manage their risks when planting alternative crops on base acreage allocated to other crops, given various market conditions.
"We re trying to look at the need for and the development of a risk management tool that would allow them to lock in and secure, at relatively low cost, the counter-cyclical payment on their base acreage if they plant an alternative crop. It is intended to take out some of the risk involved in exercising the planting flexibility that you maintain in the current Farm Bill while protecting your counter-cyclical on the crop which you have as base acreage," Knight said. "We think it is a concern that is critical to cotton producers right now."
The project is expected to take two years to complete, Knight said.
The projects were funded and awarded by the Risk Management Agency (RMA). The agency's extensive network of public and private sector partnerships annually generates new market-driven insurance products, educational initiatives and the sales and servicing of nearly 1.3 million policies covering over 215 million acres and providing farmers over $37 billion in coverage (current as of November 25, 2002).
In 2000, legislative changes to the program made premiums more affordable and most farmers increased their coverage levels. Participation at higher levels of coverage means that RMA and private crop insurance companies automatically provide more assistance to farmers when disaster strikes. In 2002, an estimated 80% of the acreage growing the principal U.S. crops are insured. USDA estimates that the program will pay thousands of hard-hit farmers about $4.1 billion in claims for lost production - a record high.