By Stephen J. Hedges, Washington Bureau Chicago Tribune, December 26 2007 http://www.chicagotribune.com/business/chi-wed_monsantodec26,0,6085830.story
WASHINGTON - While the federal government doesn't usually endorse products, the U.S. Department of Agriculture has struck an unusual arrangement with agribusiness giant Monsanto Co. that gives farmers in Illinois, Indiana, Iowa and Minnesota a break on federal crop insurance premiums if they plant Monsanto-brand seed corn this spring.
The arrangement has raised some eyebrows, particularly among organic farm groups that argue the government agency should not be promoting corn that contains an herbicide; the Monsanto brands contain chemicals that kill weeds and insects.
Monsanto's deal is legal, note USDA officials who point out that such arrangements were encouraged in a 2000 crop insurance law that Congress enthusiastically passed. The idea is to give farmers a break on their insurance premiums if they use corn seeds that are higher yield and shown to resist insects and other threats.
USDA officials said they are aware of the appearance of favoritism toward one of the nation's largest ag companies.
'We knew it would look that way,' said Shirley Pugh, a spokeswoman for USDA's Risk Management Agency, which administers federal crop insurance. 'But other companies can come and do the same thing. We are making the discount available because the corn has shown the traits necessary to reduce the risk.'
Pugh said the arrangement benefits not just farmers, but also taxpayers, since USDA pays a portion of each farmer's insurance premium.
Farm groups said the timing of the USDA-Monsanto agreement will help farmers who face higher crop insurance premiums because of elevated corn prices.
'We're very supportive of the concept,' said Ron Litterer, president of the National Corn Growers Association, and a farmer in Greene, Iowa. 'Not only for Monsanto but for any biotechnology company that can make the case that by using those products, it lowers the risk of providing a corn crop.'
The deal with St. Louis-based Monsanto occurred under a provision called the Biotech Yield Endorsement program, which is part of the Agricultural Risk Protection Act of 2000.
No other companies have taken advantage of the program, Pugh said. The insurance premium benefit to farmers, according to USDA, will be about $2 per acre, or $2,000 for a typical 1,000-acre farm.
Crop insurance prices have skyrocketed for farmers as corn prices have reached near-record highs in recent months. Today, corn trades at about $4 a bushel, double the price of about two years ago.
Those prices have continued to stay high because of increased demand from the ethanol industry, which uses the grain to make fuel, as well as increased corn exports and demands from cattle-feeding businesses.
Crop insurance rates can be as high as $50 an acre, according to Kurt Koester, a vice president and co-owner at AgriSource Inc., a crop insurance agency in West Des Moines, Iowa, involved in the pilot program. Several years ago, Koester said premiums were about $15 to $20 an acre.
'Farmers are going to face some really tough decisions here,' Koester said. 'They've got this high-value corn sitting out in their fields. When you take the cost of this crop insurance, even with government subsidies, there's going to be sticker shock.'
The pilot program with Monsanto covers the country's four most productive corn states. It involves corn that contains YieldGard Plus with Roundup Ready Corn 2 or YieldGard VT Triple technology from Monsanto, the company said. The deal with the Agriculture Department was finalized this month.
The corn grown is generally used as cattle feed and as raw material for ethanol plants.
Monsanto won the BYE designation by providing three years' worth of research that convinced the USDA's Federal Crop Insurance Corporation board that its triple-stack corn variety produces higher yields under difficult conditions, such as weeds and corn borer.
'It really bore out what we've heard from our farmers, saying over and over again that these triple-stack technologies in the corn plant help protect against weeds and root worms,' said Darren Wallis, a Monsanto spokesman. 'What this does is reduce the risk for the farmers.'
Monsanto, however, has earned the wrath of organic agriculture and environmental groups, mostly for promoting the growth of genetically altered crops. The presence of Roundup in its corn seed has also drawn criticism.
Ronnie Cummins, national director of the Organic Consumers Association, characterized the USDA-Monsanto BYE arrangement as one of many examples in which the department has sided with big agribusinesses instead of smaller farmers and farm groups. He said the BYE program will leave farmers with little choice but to buy Monsanto seed.
'We definitely have a problem with all the benefits that [Monsanto] gets,' Cummins said. 'If you really look at our crop subsidy program and what's given to farmers, you really see a lot of those subsidies going to purchase genetically engineered crops.'
Cummins also said that the USDA-Monsanto arrangement excludes organic farmers.
Most of the corn acreage in the four states involved is insured, according to USDA figures. Of the 11 million acres planted in corn in 2006 in Illinois, about 9 million acres, or 79 percent, had federal crop insurance, according to USDA. In Indiana, 68 percent of corn acres were insured, in Iowa, 87 percent and in Minnesota, 89 percent.