Philip Brasher reports for the Associated Press, April 1, 1999:

For some farmers, the best crop is the one they don't harvest.

In west Texas last year, 200 farmers obtained federally subsidized insurance on a type of cotton that wasn't feasible to grow in their arid region. They paid $4.4 million in premiums and then claimed nearly $15 million in benefits when most of the crop failed.

Farmers in North Dakota and surrounding states recently rushed out and bought seed for durum wheat, even in areas not suited for the crop, to take advantage of a new insurance policy offering benefits far higher than they could earn if they grew and sold ordinary wheat.

Crop insurance provides a vital safety net for farmers, especially when prices are low and the government has been trying to phase out its role in agriculture. But government auditors say the insurance system is riddled with abuse, conflicts of interest and errors because taxpayers bear most of the risk for losses, not the private companies that sell and service the policies.

The companies "have little reason to effectively monitor risky policy holders, little reason to deny claims of questionable losses, and no cause to find fault with their own practices," said an internal report by the Agriculture Department's inspector general.

The companies "are supposed to ensure compliance, but they also have an aggressive sales function.... The two don't mix well," said Scott Stofferahn, who oversees USDA's farm programs in North Dakota.

Stephen Frerichs, a spokesman for the companies, dismissed the inspector general's report this week, saying it was merely "rehashing a bunch of old" allegations.

Besides assuming most of the risk for losses, the government subsidizes the premiums farmers pay for the insurance and pays the companies a fee for handling the policies. The program has been costing the government more than $1.5 billion a year, and Congress is considering doubling that to improve the coverage and make it less costly to producers.

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