FEDERAL CROP INSURANCE CORPORATION (FCIC)

The Federal Crop Insurance Corporation (FCIC) was established by Congress under the Federal Crop Insurance Act, or Title V of the Agricultural Adjustment Act of 1938. Thereby, the United States became the first nation to extend crop insurance to farmers. Secretary of Agriculture Henry A. Wallace championed crop insurance not only as a means of reducing farmers' economic risk but as a way to stabilize grain supplies and promote what Wallace called an ever-normal granary.

Wallace chaired a presidential Committee on Crop Insurance from 1936 to 1937. Acting upon the committee's recommendation, Congress created the FCIC within the Department of Agriculture. Congress authorized the FCIC to insure 50 to 75 percent of a farmer's average wheat harvest against losses from "unavoidable" calamities, including "drought, flood, hail, wind, winterkill, lightning, tornado, insect infestation, [or] plant disease." County committees for the Agricultural Adjustment Administration calculated premiums for the program. Premiums and claims could be paid in wheat or cash, but the FCIC maintained its reserves in grain in order to be able to compensate for changes in wheat prices. Planners hoped the program would even out the grain supply, with the government stockpiling wheat in abundant years when few claims were payable, and selling wheat from its storehouses in years of low harvests and numerous claims.

In 1939, its first year of operation, the FCIC insured 165,775 farms and disbursed 2.6 million more bushels in indemnities than it collected in premiums. In 1940 the agency began insuring cotton as well as wheat. From 1939 to 1943, the U.S. Treasury heavily subsidized the FCIC. As a result of the FCIC's poor financial performance, Congress eliminated the program in mid-1943, only to reinstitute and expand it while doubling the FCIC's budget in 1944. Beginning in 1945, Congress also permitted the FCIC to experiment with insuring any crop if adequate data existed for determining premiums. As a result of continued losses, Congress scaled back the FCIC's operations in 1947. In 1948, the agency insured farmers in only 375 counties, down from 2,500 counties in the preceding year. The changes helped to place the FCIC on a firmer financial footing, and during the 1950s and 1960s the agency gradually extended its activities as it experimented with insuring many crops on a piecemeal basis. Despite the modest expansion, by 1974 the agency insured only 7.5 percent of the nation's harvested cropland. In 1980, Congress removed key restrictions that it had imposed on the agency in 1947 and permitted the FCIC to insure any crop for which sufficient actuarial data existed in any agricultural county. In 1994, the nation's lawmakers made crop insurance a prerequisite for federal loans or payments under governmental price support programs. Congress ended its experiment with mandatory participation in 1996, but it prohibited growers from receiving any disaster benefits from the government unless they had purchased crop insurance. In 2000, Congress permitted private companies to submit proposals to the FCIC for insurance plans that either supplemented or supplanted insurance contracts offered by the agency.

See Also: AGRICULTURAL ADJUSTMENT ACT; FARM POLICY; WALLACE, HENRY A.

BIBLIOGRAPHY

Benedict, Murray R. Farm Policies in the United States, 1790–1950: A Study of the Origins and Development. 1953.

Kramer, Randall A. "Federal Crop Insurance, 1938–1982." Agricultural History 57 (1983): 181–200.

Risk Management Agency Online. U.S. Department of Agriculture. http://www.rma.usda.gov/aboutrma/history.html

United States Department of Agriculture. Farmers in a Changing World: The Yearbook of Agriculture, 1940. 1940.

United States Department of Agriculture. First Annual Report of the Manager of the Federal Crop Insurance Corporation. 1939.

Brian Q. Cannon