Minding Ag's Business
Marcia Zarley Taylor DTN Executive Editor

Monday 02/25/13

Don't Chop Crop Insurance
Attendees at last week's USDA Outlook forum couldn't help but notice the silence. Yes, U.S. agriculture just survived its near-death experience with the worst drought since the 1950s, but unlike comparable disaster years of 1983, 1988 and 1993-- and scores of localized weather losses -- there's been no uprising or revolt from the nation's crop farmers calling for supplemental aid.[Read Full Blog Post]
Posted at 2:04PM CST 02/25/13 by Marcia Zarley Taylor | Post a Comment
Comments (46)
Why do I have to subsidize someone else's security? Crop Insurance is completely uncompetitive. I fully support crop insurance, as long as it is without federal backing.
Posted by Unknown at 2:54PM CST 02/25/13
Crop insurance needs a major overhaul. The young farmers that i know have new pickups, equipment, shops, houses, lake homes, and more trucks then most trucking companies. I really think there is some room for reform. Im not really feeling to sorry for them.
Posted by Jon Davis at 7:06PM CST 02/25/13
Crop insurance surely isn't the only insurance subsidized. Any flood insurance for anyone that lives in a residental flood area is subsidized. The gov't helps underwrite many higher risk insurance policies. Do a little more investigating before being so critical. Many of those expensive homes that got bailed out lately have been indirectly subsidized thru reduced interest rates or underwriting guarentees. Lets not forget the federal disaster bill including the Hurricane Sandy victoms. Remember living in those coastal areas is a risky proposition too but we seem to find the humanity into helpiing the many, don't forget the few that help feed and fuel the world. We even payed for as taxpayers the majority of the security at the Super Bowl which amounted to Millions.
Posted by Young Farmer at 7:25PM CST 02/25/13
In the custom cattle feeding game there is no guranteed floor for me by the government. I have to rely on my management, marketing, and day to day costs all on my own. Still make a living and still feeding the world. Crazy concept I know! Lol
Posted by unknown writer at 7:58PM CST 02/25/13
All interesting comments, but I guess I'm a pragmatist. Crop insurance is an 80-year-old program so I think it's here to stay. The big question is how much of the premium cost should Congress subsidize. By the way, for those of you who think crop insurance is overly generous, just look at the county yield data USDA released last week. Some southern Illinois counties averaged 19-20 bu. corn in 2012. That must mask a lot of zeros. I don't think many young farmers would be left standing if they'd just lost a decade or more of earned equity. See Gary Schnitkey's Illinois yield maps at https://twitter.com/Gschnitkey/status/306125453154975744/photo/1
Posted by Marcia Taylor at 8:25PM CST 02/25/13
Lost $300 a head on fat cattle in 08 during the crash. Worked two jobs still standing.
Posted by unknown writer at 8:44PM CST 02/25/13
As things are now, crop insurance is the best and most efficient food security program. As it is, government cost is comparable to the cost in the medical areas. Lon does have very valid concerns. As in everything, crop insurance needs some tweaking. The catastrophic is to cheap. If one wants a 100% revenue coverage, pay the premium.
Posted by Bonnie Dukowitz at 6:12AM CST 02/26/13
Marcia you are ignoring all facts just to please your audience. How about this fact, I am a multimillionare and collect hundreds of thousands in crop insurance susidies paid by poor folks working non-guaranteed town jobs. The entire program is set up to make farmers wealthy to buy votes. Tell the real story of this pathetic welfare to millioaires while I head to the lake in my Corvette.
Posted by Bill Billson at 8:03AM CST 02/26/13
Bill and Lon, For what its worth. You are describing more than just the food production farmers. How about green energy, developement grants and guarantees which the corporate giants have used to destroy independent business with. Cities using grants to build stadiums to think they can generate revenue to save them from their own stupidity. All while dangling a carrot in front of the gullible in America. Grants Grants Grants. By making a few in all business, rich, the plebians are content as long as their belly is full and they are entertained. One can certainly attack crop insurance, in 80 years plus of food programs in this country, I believe the crop ins. has been the most sensible. Unfortunatly what you descibe occurs in whatever Uncle Sam gets his fingers in, not just food production.
Posted by Bonnie Dukowitz at 10:03AM CST 02/26/13
Lon, Take a powder, man. She is a writer doing her job not your Congressional rep doing nothing in the name of ideology.
Posted by Don Thompson at 12:15PM CST 02/26/13
Thanks Don. I guess Lon didn't see my earlier comment about Illinois yield losses. Anyway, after reporting on crop insurance since 1979 (ouch!) I can see the pros and cons of our insurance system. Yes, it is capitalized into land. I just don't think it makes sense to completely dismantle a program that offers some economic stability to crop producers and some indirect stability (more feed supplies) to livestock producers. But as I have pointed out before, the fact that farmers pay only about a third of their premiums now may be a position that will be hard to defend in an era of government austerity. Bonnie's position sounds reasonable to me--just charge more for some of these high protection plans.
Posted by Marcia Taylor at 2:35PM CST 02/26/13
Ummm, grain farmers paying double for rent on my hay ground to break it up and put soybeans and corn...how is that stabilizing feed supplies???
Posted by unknown writer at 7:38PM CST 02/26/13
Livestock producers can lock in a price floor with a product called Livestock Risk Protection (LRP). Many choose not to buy it, but it is effective and available. We have Congress to thank for increasing the subsidy paid on Enterprise Unit policies greatly in 2009 crop year and forward. Don't blame farmers for what Congress does. Many producers I talk to do not agree one bit with the ideas behind the SURE and ACRE programs nor the current programs being discussed for the new farm bill. Most say just drop those programs since crop insurance is the most sensible approach to a safety net. Just 3 years ago, revenue insurance could not even cover every farmers costs. Largely due to 3 below trend line yield years in a row, we are faced with much higher than avg. crop prices. So the producers of those precious crops are having good years if they can produce the crop or insure at a high level.
Posted by Eric Sorensen at 9:51PM CST 02/26/13
Do Not shoot the messenger Lon. We all need to be thankfull there are writers who will publish articles that may be controversial and that they allow us the opportunity to respond. I do not see where Marcias' integrity can be questioned. Marcia, I hope I am not abusing yours and the other blog opportunities on this site.
Posted by Bonnie Dukowitz at 6:01AM CST 02/27/13
Lon, So in Marcia next article she would compare a 40,000 acre farmer to a 1,000 acre farmer. It would show that the larger farmer would get 40 times the amount of crop insurance as the smaller farmer. However she should leave out the fact that both farmers recieved the same amount per acre. Then you would have a article that is like the ones you posted above, opinion blogs.
Posted by Jim Scheetz at 9:54AM CST 02/27/13
Jim here is where you are wrong. Crop insurance guarantees income for both the 40000 acre guy and the 1000 acre guy and the both receive the same per acre subsidy. The problem is when you guarantee income there is a huge incentive to create volume by farming mega acres and putting your neighbors out of business. Many of us have figured this way to get rich and it has hurt rural America. As are neighbors leave we tap into ur other huge subsidy, illegal mexicans, to do the work cheap and tap every welfare program available to supplement the wages we pay. It is either get rich or get run out until crop insurance is no longer susidized.
Posted by Bill Billson at 11:03AM CST 02/27/13
I think the big/small arugment about pushing out smaller producers because of income guarantee's is interesting. However, I think if you ask your bankers, I think you'll find you have the argument bass akwards. Most "small" farmers, beginners also falling into this category, could not get the operating loans they need without affordable crop insurance. However, most of your large, mega, or whatever you want to call them may not need operating loans, or have enough other capital/assets/etc. to get the loans without counting crop insurance. If the smaller operator can't get operating money, you can guess whom the farms will be rented to. Please do not let the Stamp situation be the only example put forth about the capability of management in your large farms grouping. Do I agree that some farmers have spent their recent profits on some questionable items, yes, but that day of judgement's coming. For the "unfair" argument on livestock operators, I'll make a different case. Cow/calf guys can buy NAP on their pastures and hay ground, which is also subsidized, however most do not particpate. Feedlot guys, your operations are not really outcome based on the weather. Weather can drive your feed prices up, but if you didn't lock in feed costs, is that really the weathers fault? The "big" crop insurance checks everyone likes to throw stones at do not happen without signifcant weather events. Do thousands of smaller claims a year happen because of poor management, yep, but at the end of the day, crop insurance as we know it exists because we as humans can't quite control Mother Nature.
Posted by Unknown at 1:22PM CST 02/27/13
Nope. Didn't miss the Rosentreter news. In fact it's over a year old. Didn't see the word insurance anywhere in the article though either. Doesn't appear to me that he was "guaranteed" profits either. Doesn't seem he was driven to do it by crop insurance. Comes down to simple jealousy, making bad business decisions, and a really poor job by his bank by letting it get that far. Crop insurance didn't get him to 30,000 acres, and it certainly didn't keep him in business.
Posted by Unknown at 3:28PM CST 02/27/13
Lon, Calm down. I am a banker. My banks policies don't allow use of my name in blogs, etc. I'm shocked DTN doesn't remove some of your blog entries. See the end of this entry for some informed facts. I never said that large farms don't use crop insurance, but I do firmly believe that the scales are not tipped in their favor from a crop insurance standpoint. In most cases, the aggressive cash renters have a LOWER yield guarantee on that new piece of ground because they don't have the yield history. The lower yield guarantee dovetails right into lower revenue guarantees. I do fail to see what advantanges large operations have. Your statements of "unlimited investment/profit guarantees" are not accurate. If a bank decides to back the agressive cash rent person, it's their choice, but if you look at the Rosentreter or Stamp situation, crop insurance isn't getting the creditors anywhere close to paid. In fact, it has virtually nothing with the situation. Of the large farms that get in trouble, which by the way most don't, the cause is mildly poor production. Poor enough that cash flow is lost, but high enough that the revenue assurance never kicks in. Do this 2-3 years in a row, and you can call the auctioneer. You can be as angry as you want at large operations, but almost all of my successful operators rarely collect a revenue check. Now some admittedly localized facts. Our bank's affiliated insurance agency loss ratio on revenue assurance has a 10 yr average of 31%. Yes, 2012 had a 126% loss ratio, but the 10 yr average has only returned 31 cents on the dollars spent on premium - a pretty poor payout. It just doesn't seem to be this rosey cash generating machine you make it out to be.
Posted by Unknown at 5:03PM CST 02/27/13
To compare crop insurance to LRP is insane. LRP is nothing but a glorified put option. As far as livestock there is no taking a 3 year averarge of proven income, performance, feed costs ext.. and buying insurance to make up the difference from previous years. Livestock people are not bailing out of the business and young people are not getting in the business because it is so great. The young guys have it figured out play the game of insurance and take the winters off. I know this I am the only young guy out of a half a dozen that is dumb enough to play the livestock game. You cant even get insurance to cover heat loss in the summer. Livestock is in a major crisis and the lack of leadership is to blame.
Posted by unknown writer at 6:49PM CST 02/27/13
The other thing is, i know for a fact that guys are padding their wetland acres and collecting multiple year claims on false wet acres in return boosting their proven yield acres. Adjusters have told me that themselves! So forgive me for being a little bitter. My gosh, is anyone even overseeing this cluster *!@#.
Posted by unknown writer at 8:17PM CST 02/27/13
Take a chill pill, Lon. It appears obsession is interfering with intelligence which impedes deliverance of your message. Obsession will chase away the audience you are trying to address.
Posted by Bonnie Dukowitz at 6:05AM CST 02/28/13
So Mr. Banker I suppose most of your customers request smaller investment/profit guarantees as well as smaller subsidies due to your recommendations? By the way the statement is not unllimited investment/profit guarantees but nearly unlimited investment/profit guarantees which is in contrast to the zero investment/profit guarantees most small businesses receive. Obviously in a period of lower prices these policies have a lessor value. I have nothing against large farmers, I just don't like all my smaller neighbor farmers being forced out of business by the overwhelmingly larger investment/profit guarantees and subsidies some of the greediest receive. So fci had virtually nothing to do with Stamp and Rosentreter?
Posted by Lon Truly at 7:14AM CST 02/28/13
I have to ask Lon do you farm?
Posted by Young Farmer at 5:19PM CST 02/28/13
Yes Y.F. full time, many decades, many different crops. By the way banker the fmv of a multimillion dollar investment/profit guarantee with subsidies would be larger than the fmv of a $50,000 investment/profit guarantee with subsidies. Also banker, one article about Rosentreter that does not mention crop insurance is no reason to jump to the conclusion that Rosentreter had no crop insurance. Also in both the Stamp and Rosentreter cases, a whole lot of credit was extended to these individuals that was not for operating expenses and obviously crop and insurance proceeds did not cover all of this. I suppose banker you would also think that fci had nothing to do with the Tom Grabanski case either. See http://www.agweek.com/event/article/id/17593/
Posted by Lon Truly at 6:48PM CST 02/28/13
I'm a small to medium size farmer. In regards to the few occasions I have collected crop insurance (once even at $100,000), after trying to pay down my fertilizer and fuel bills there certainly was not enough money to buy a new pickup much less a Corvette or a house at the beach.
Posted by WARREN HARDY at 10:29PM CST 02/28/13
Instead of pointing fingers at crop insurance maybe they should look at inheritance tax rates. Those are the battles young farmers face that are not fortunate enough to inherit there way into the business. It is tough to compete against someone that doesn't even have to be profitable to be in business. Inheritance tax rates are at one of the lowest rates in history.
Posted by Young Farmer at 10:07AM CST 03/01/13
Lon, I am just curious, what state do you farm in, and what is the name of your farm?
Posted by Aaron Cross at 1:21PM CST 03/01/13
I live in a state of bloated federal crop insurance schemes and I am an anonymous family farm.
Posted by Lon Truly at 5:33PM CST 03/01/13
For what its worth I believe the govt should leave the crop ins alone & cut the dcp payments to the welfare farmers. Too many farmers can only stay afloat by collecting govt payments, that goes for big & small farmers alike.If you cant farm without govt programs get out!!!
Posted by KEITH PEARSON at 9:55AM CST 03/03/13
Lon; Farmers like me have been paying hefty premiums for years on crop ins & your going to begrudge us for getting some of our money back on ins claims.I dont know where you get your info from but the govt doesnt pay us anything on insurance claims. So get your facts straight for once!!!!!
Posted by KEITH PEARSON at 5:14PM CST 03/03/13
Keith - you may think the premium you pay for fci pays for the total cost of your policy but you are wrong. The taxpayer pays a very large part of the total premium. See http://static.ewg.org/pdf/Sumner-Zulauf_Final.pdf
Posted by Lon Truly at 9:30PM CST 03/03/13
Lon is not a farmer. He is an advocate for breaking the farmer. I know this by his response of not giving his farm name. But he does go by the name of "splined" on ewg and grist web sites. He writes to good to be a farmer. He is just jealous of us.
Posted by Cypt Frms at 11:46PM CST 03/03/13
Still more crop insurance facts - see http://www.gao.gov/assets/590/589305.pdf
Posted by Lon Truly at 11:50AM CST 03/04/13
Ladies and gents: DTN requests that you avoid personal attacks, disagree respectfully, avoid advertising for personal gain and that you stay on topic. We're not trying to pick fights here, we're trying to open a public forum for rational discussion of important topics.
Posted by Marcia Taylor at 5:27PM CST 03/04/13
Dear Marcia, Nice article, and good points that it has been here a long time and that we need it. I view it a "business interruption" insurance which provides for catastrophic interruptions (plant explosions) and most corporations maintain. But such interruptions are localized and thus almost never affect large swaths of an industry (multiple hurricanes hitting the gulf coast refineries and offshore production platforms being an exception. And in that case government actions freed oil from the strategic petroleum reserve AND acted swiftly to forbid fuel price increases). In this context, and the fact that floods and droughts will affect huge areas, I wholly support government participation in an agricultural production disaster insurance. Where I believe the current program is flawed is by allowing the use of crop prices at planting or harvest. The amount paid by insurance should use crop prices at planting, not harvest, as stands to reason that prices will rise following a disaster. Producers made their decision at the time of planting and purchased insurance -- or not -- at that time, based on those economics. To provide the equivalent of a "lottery Premium Gain" for a minuscule incremental payout is not appropriate -- nor is government participation in such a scheme/scam. Ag Production Disaster insurance should operate as it does in the corporate free market: you get paid what you would have earned at the market price which would have prevailed had consumers been supplied with the closed plant's production. Doing otherwise allows the insured to gain from the loss, rather than being compensated from his/her loss -- which is the purpose of insurance. Thank you for your insights and forum. Jerry d'Aquin President Con-Sul, Inc.
Posted by Marcia Taylor at 5:28PM CST 03/04/13
Jerry, I can see both sides of the argument, but hereâ?™s my understanding. Replacement cost insurance (Revenue Protection) was designed for farmers who have forwarded contracted but donâ?™t have enough grain to fill their contracts at harvest. In addition, livestock feeders would have wherewithal to buy feed on the open market, to replace what they didnâ?™t grow. I do know a few farmers who couldnâ?™t meet their margin calls when markets took off last summer, so crop insurance revenues covered up some costly exits for them. That's the plus side and it seems like legit replacement cost insurance to me. On the opposition side, in 2012, failure to offer harvest price adjustments would have negated crop insurance payments in most of Iowa, KSU economist Art Barnaby says. It would have saved money for insurers and the government, but at a pretty steep cost to farmers. So if farmers really want this harvest price coverage, they should make the case. One argument is that the government might not subsidize that feature so heavily.
Posted by Marcia Taylor at 5:40PM CST 03/04/13
The harvest price option (HPO) is not intended to be an additional revenue stream, it is designed to be mostly for grain marketing reasons. It would be very, very difficult to forward contract with the HPO. In most years (not recent), forward contracting was one of the most important marketing moves you could make. If the policies had a "dual payment" clause, where you could choose to get paid by check, or the insurance company would "deposit" your guaranteed bushels into your account at your specified grain merchandiser; then there is no need for HPO. However, the current model only pays by check, so if you forward contract, don't have the physical grain, and the market moves against you, how do you cover the spread? Most banks would not allow too much forward contracting without the HPO, however there are some (most) years when timely marketing is the difference between profit and loss. It is my belief, without the HPO and forward contracting, you'll slowly bleed more and more operators out of the business.
Posted by Unknown at 7:41PM CST 03/04/13
DTN asks that comments avoid personal attacks and name calling. I have deleted some comments from this blog post. If you wish to contact me about that, my email address is cheri.zagurski@telventdtn.com.
Posted by Cheri Zagurski at 2:39AM CST 03/05/13
i think there is a need for some crop insurance,like 50% coverage subsidized by the tax payer and if you want more you have to pay the full amount.See to many big guys taking the high level then not following good farming practices planting to early to wet or late because they can't get over all that ground if they don't keep planting.I have never taken Fed.crop insurance or ever gotten a disaster payment,i do carry hail insurance from a private company,and do realize some parts of the country have more risks then west central Wis where I'm from.But seems like everybody wants every program in the Fed. budget cut except theirs, all for getting rid of direct payments to . Howard White
Posted by Unknown at 4:10PM CST 03/05/13
Red State ^ | 12/11/2012 | Daniel Horowitz Posted on 12/12/2012 6:12:05 AM by IbJensen Listening to the self-righteous protestations of the class warriors, one would come away with the impression that the rich don�t pay any taxes. In fact, the top 1% of tax filers paid 37.4% of all federal income taxes in 2010; the top 2% paid almost 50%. Unfortunately, when it comes to real handouts for the rich, liberals are silent. In their dyslexic worldview, a tax cut is a handout and a handout is a tax cut. That is why both Democrats and Republicans are plotting to surreptitiously slip in a farm bill to the final negotiations over the tax rates. At present, more than 3/4 of farmers who earn upwards of $250,000 a year receive subsidies from at least one farm program. Farm subsidies and crop insurance programs help promote income inequality in farming by offering larger subsidies to those who already have larger farms. These farmers can enjoy multimillion dollar insurance policies that are subsidized in order to guarantee their multimillion dollar investments that would otherwise not be supported by the free market. Also, federal guarantees of bankers� loans to rich farmers have further increased their borrowing capacity, thereby driving up the cost of land acquisition. This, in turn, has shut out small farmers from the business, making it nearly impossible for them to compete. While liberal politicians like to talk about income inequality, they fail to mention the corporate welfare inequality. Here is what AEI scholar Vince Smith observes over at �American Boondoggle� regarding inequality in farm subsidies: Since 1995, the top 10 percent of farm subsidy recipients have cashed 74 percent of all subsidy checks. In 2011, for instance, 26 individual holders of crop insurance policies collected more than $1 million each in subsidies to help pay their insurance premiums. Ironically, in the same deal where both parties plan to raise taxes on those who pay the most taxes, they want to renew and augment farm subsidies to rich farmers. Democrats in the Senate are pushing for a new shallow loss program, which extends the coverage of crop insurance from catastrophic benefits to a guarantee of 90% of the farmer�s annual revenue. The idea that the government could guarantee members of a specific profession 90% of their income, especially when food prices are so high, is an anathema to our system of free enterprise. It will also line the pockets of the very people they desire to tax. Last June, Senator Rand Paul illustrated this liberal hypocrisy by introducing an amendment to the Farm Bill, S. 3240, which would have eliminated farm programs for those with annual income above $250,000. Only 1 Democrat (Herb Kohl) in the entire Senate voted for this amendment. So what gives? Extending current tax rates for those earning more than $250,000 is bad; subsidies for those same rich people are good? Maybe we should just call the tax rates a subsidy, and Democrats will support full extension. This is yet one more piece of evidence that the fiscal cliff imbroglio has nothing to do with taxes on the rich. It�s all about growing government for everyone. The message from liberals is clear. It�s not evil to be rich, so long as that wealth is first transferred through the circuitous cycle of government, special interests handouts, and Democrat reelection favors.
Posted by Lon Truly at 7:28AM CST 03/06/13
Lon, I thought the intent of farm programs including crop insurance were to ensure a plentiful and steady food supply resulting in a more content population. Since man is imperfect, the Federal government thought we needed sort of an agricultural and political solution to man�s inherent nature to use violence as a means to ensure income inequality. At least that is what they said in �college�. It appears some well intended entrepreneurs may have come up on the short end in accordance with Darwin and Wallace�s natural selection theory supporting evolution and they now need to rationalize their self perceived short comings. Some folks just have the ability and drive to exceed the efforts of others. While not conducive to a content society, it aligns with the right wing mantra of survival of the fittest and is represented by that party�s insistence on draconian tax and spending cuts currently. The Tea Party represented by Senator Paul and others is just mad and doesn�t seem to know why. That is why no Senator votes for his amendments because they serve no purpose but to incite his/their supporters and do not solve the problem. Repeating slanted rants with only opinion and limited facts serves no purpose but to rile up the base and I assure you that no self respecting liberal would pay any attention to something from Red State, or to its messenger. I Truly hope you have a pleasant day.
Posted by Don Thompson at 11:17AM CST 03/06/13
"The problem is without crop insurance, boom-bust ag cycles impoverish farmers and make it far more challenging to feed the world's rapid population growth.In Argentina, land values and rents typically collapse after weather disasters and only those operators with deep cash reserves are left standing." - Marcia is right on, Lon. This is the point I've been trying to make to you on other threads. The tax payers have a vested interest in food production since food is a somewhat vital part of life. To maintain a stable supply flow, the government steps in on behalf of the taxpayer. Your microcosmic think-tank ideals are flawed when applied to real world scenarios. You want to destroy the system and expedite the consolidation of farms and destroy rural America. I believe you are an anonymous farmer. Quite possibly the rich millionare you so despise. This means you would want this collapse, so you can grab even more land in a down cycle.
Posted by Tim Haugen at 11:08AM CST 03/07/13
http://www.agroinsurance.com/en/pratice/?pid=14311 - link showing how few argentinia farmers have MPCI (3.13% of total contracts). Most of the MPCI purchasers are the large farmers that can afford them. Now, what happens to their food supply? http://www.myfoxny.com/story/20958959/argentina-freezes-prices-to-break-inflation-spiral - 30% inflation, government mandated price freezes at the grocery store, which might not have anything to sell anyway! This is what "Lon" wants!
Posted by Tim Haugen at 11:59AM CST 03/07/13
As I have said before, reasonable limits on fci subsidies and fci investment/profit guarantees would go a long ways in reducing the crony capitalistic aspects of fci. Also bankers would not be so busy driving smaller producers out of business when pursuing wild goose chases such as Grabanski, Rosentreter, and Stamp. As most of us who are farming know just about every community has a few individuals very similiar to these people pursing every dollar that they can find from bankers ever eager to grow loan volume based on the open ended nature of federal crop insurance.
Posted by Lon Truly at 12:01PM CST 03/07/13
Although we shouldn�t �chop� the crop insurance premium subsidy program, it surely needs a healthy pruning that would be good for family farms and our budget deficit� It should meet America�s budget constraints and public expectations that it be limited to supporting the family farm. The current program does neither. Instead, it puts family sized farms at a competitive disadvantage with industrialized agriculture because it subsidizes insurance premiums without regard to need or income. Now, about 4% of �farms� get almost 33% of this subsidy. In 2011, 53 farms received more than $500,000, while a three-county farm corporation received $2.2 million. In 2010, the average farmer received only $5,339. The report goes on to explain exactly how this program disproportionately benefits huge corporate farms while displacing family farms. See the report at http://www.gao.gov/assets/590/589305.pdf. In particular, note how the current system favors huge corporate farms for loans. Recently, the Environmental Working Group (EWG) discovered that 10,000 �farms� received more than $100,000 in premium subsidies. A report by an Iowa State University economics professor for the EWG highlights the problems and offers solutions at http://static.ewg.org/reports/2012/farm_ bill/babcock_free_ crop_insurance.pdf. The report notes that the insurance subsidy program gives a dollar to insurance companies for every dollar farmers receive. The ISU professor advises giving 70% yield protection free to farmers to cut insurance administrative costs by a $1 billion. This would still give farmers good protection while leaving farmers the free market option of buying additional coverage out of their own pockets if they want more. One of my farmer friends says that the FSA could administer a crop insurance program quite efficiently because their staff has all of the necessary information and experience. For more about unreasonable profits by crop insurance companies go to http://www.american.com/archive/2012/august/the-grim-reapers-of-crop-insurance/ . The list of organizations supporting the status quo on crop insurance is staggering . See it at- http://www.cropinsurers.com/images/reports/Crop_Ins_Coaltion_Senate_Letter_061412.pdf. Here�s a partial listing for those who don�t have home computers: American Bankers Association, American Farm Bureau Federation, American Soybean Association, Rural Community Insurance Services, National Council of Farmer Cooperatives, National Sorghum Producers, National Corn Growers Association, National Cotton Council and National Sunflower Association. Again, our crop insurance program is unsustainable because it lacks credibility, attacks our Nation�s heritage of family farms and provides unreasonable profits to insurance companies. Limits of some type are vital for correcting these bad effects. Suggestions include either limiting the subsidy to $40,000 per farm like other farm programs or by adjusted gross income (AGI). AGI is essentially net profit after operating expenses are deducted. AGIs of $200,000 (proposed by G. W. Bush Administration) to $250,000 have been suggested. Whatever limit is set, that will be the size of farms that we intend to have to survive into the next century. That limit must reflect our desire to have family farms not only survive but prosper for the benefit of future generations of aspiring young farmers and a public highly valuing a diverse network of family farms. Felix Revello
Posted by Felix Revello at 12:05PM CST 03/07/13
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