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 Monsanto seed corn that contains chemicals that kill weeds and insects.
USDA officials say products such as Monsanto's seed corn were encouraged in a 2000 crop insurance law enacted by Congress. The idea is to give farmers a break on their insurance premiums if they use corn seed that is higher yielding 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 agriculture 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 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.
The pilot program with Monsanto covers the country's four most productive corn states. It involves corn that contains Monsanto's YieldGard Plus with Roundup Ready Corn 2 or YieldGard VT Triple technology from Monsanto, the company said. The deal with the Agriculture Department was completed last month.
The corn grown is generally used as cattle feed and as raw material for ethanol plants.
Stephen J. Hedges writes for the Chicago Tribune.