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ProAg Signs 2011 SRA

ProAg has signed the 2011 SRA and will soon complete the filing of the related documents contained in the “Plan of Operations”.

Michael Connealy, President of ProAg, released the following opinion statement regarding the 2011 SRA negotiation:

The USDA was faced with multiple issues in this process. The recent GAO report was often cited as the foundation for tighter financial terms for underwriting risk and A&O formula. In addition, language in the 2008 Farm Bill directed USDA to safeguard the government from potential “windfall revenue” events such as occurred in 2008 due to a spike in commodity prices.

The industry was faced with a negotiating situation that is best described as “damage control”. USDA, in the 1st draft, offered up annual “savings” in the $840 million range and then launched a public relations campaign focused on their version of the “facts” as regards recent underwriting gains and agent commission. From that moment on, the industry played defense and we were able to mitigate the annual savings to somewhere between $500 million and $600 million. In addition, dangerous ideas such as using a reference price for corn, wheat, cotton and soybeans were eliminated.

With our US budget deficit expected to approach $1 trillion annually; and USDA touting their SRA negotiating effort as an example of budget discipline, it is apparent that we have the final terms for this agreement. Companies can either sign the SRA or plan an exit strategy.

The ProAg Board of Directors discussed the SRA terms last week and then voted to sign and move forward. We have much work to do in managing a volatile 2010 season plus rolling out the combo policy for 2011.

It is up to agents and companies to manage the financial terms of the new agreement and keep in mind that timing shifts on cash flow in 2012 add to the financial stress on the industry. An agent or a company can be “involved” in this business or they can be “committed” to crop insurance. 2012 will illustrate this difference and ProAg will prove that we are indeed committed to the crop insurance program for the long term.

Any questions or comments, please feel free to contact the writer at mc@proag.com.

The insurance products offered by Producers Ag Insurance Group, Inc. d/b/a ProAg® may not be a complete list of all products offered and may not be offered in all states. ProAg prohibits discrimination on the basis of race, color, national origin, sex, religion, disability, political beliefs, and marital or familial status.

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