Crop Insurance: Inaccurate FCIC Price Forecasts Increase Program Costs
PEMD-92-4
Published: Dec 13, 1991. Publicly Released: Jan 21, 1992.
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Highlights
Pursuant to a congressional request, GAO examined the accuracy of the Federal Crop Insurance Corporation's (FCIC) independent price surveys, focusing on how: (1) inaccuracies in the forecast affect FCIC program costs; and (2) FCIC can improve its forecast accuracy.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Federal Crop Insurance Corp. | The Manager, FCIC, should, to the extent possible, use available WAOB crop price forecasts because they have been shown to be more accurate. |
Closed – Implemented
FCIC now uses available WAOB forecasts for program crops.
|
| Federal Crop Insurance Corp. | The Manager, FCIC, should determine the feasibility of using or making forecasts prepared later in the year, closer to the insurance closing date. |
Closed – Implemented
FCIC is considering an option to move the price election process closer to sales closing dates. Feasibility of plans should be known during 1993.
|
| Federal Crop Insurance Corp. | The Manager, FCIC, should use price differentials for any crop where available. |
Closed – Implemented
FCIC currently offers price differentials on most fruit and vegetable crops; FCIC is studying the possibility of offering price differentials on field crops.
|
| Federal Crop Insurance Corp. | The Manager, FCIC, should implement a stronger forecast management process. |
Closed – Implemented
FCIC has begun a Decision Memorandum process to present various options for price elections in 1993. The memorandum provides supply/demand information for each crop, the assumptions used to make price forecasts, and price options for different scenarios. FCIC plans an assessment of this process after seasonal average prices are known next year.
|
| Federal Crop Insurance Corp. | The Manager, FCIC, should develop a more effective method for deducting harvest costs for participants who have total losses yet do not have to harvest a crop. |
Closed – Implemented
FCIC does not believe this recommendation can be supported. However, FCIC indicates further analysis will be done to determine if the recommendation has merit.
|
| Department of Agriculture | The Secretary of Agriculture should direct the Assistant Secretary for Economics to assess the cost-effectiveness of conducting additional forecasts and determining actual crop prices on specialty crops for which such information is currently not available. |
Closed – Implemented
Plans have been made to collect additional data on specialty crops to the extent that resources are made available through the budget process. A cost assessment and determination on additional price coverage for specialt crops will be completed by the end of fiscal year 1993.
|
| National Agricultural Statistics Service | WAOB should make the forecasts, and the National Agricultural Statistics Service should prepare actual seasonal average prices for crops that FCIC insures. |
Closed – Implemented
NASS has made plans to collect additional data, depending on budget funding for fiscal year 1994. WAOB claims it is not set up to establish price elections on many non-program crops. However, FCIC has begun formally participating in the interagency forecast process coordinated by WAOB.
|
| Other | WAOB should make the forecasts, and the National Agricultural Statistics Service should prepare actual seasonal average prices for crops that FCIC insures. |
Closed – Implemented
NASS has made plans to collect additional data, depending on budget funding for fiscal year 1994. WAOB claims it is not set up to establish price elections on many non-program crops. However, FCIC has begun formally participating in the interagency forecast process coordinated by WAOB.
|
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Topics
Agricultural productionAgricultural programsCost controlErrorsFarm income stabilization programsGrain and grain productsInsurance lossesPricing surveysProgram managementStatistical methodsCrop insurance