The federally subsidized crop-insurance program grew dramatically over the past two decades. It covers 44 percent more acres and, with creation of revenue insurance, the average level of coverage climbed to 75 percent in 2014, a 17-point increase from 1996, according to economists Carl Zulauf of Ohio State and Dan Orden of Virginia Tech. When both factors are taken into account, the insured liability as a share of U.S. crop value more than doubled from 30 percent in 1997 to 73 percent in 2014, the economists write at farmdoc daily.
Net payments to farmers averaged $6.8 billion annually in recent years, partly because Congress decided that growers would pay a smaller share of the premium and the government would pay more. The premium subsidy is roughly 62 percent, so farmers pay 38 percent overall. “A common argument … is that increasing subsidies would bring less risky farms into the risk pool,” write Zulauf and Orden. “Since 1996, this cost-to-liability ratio has not decreased and, if anything, has increased.
“This observation raises a policy question: Should crop insurance be a smaller program targeted to a well-defined set of farmers rather than seeking to be a program for all farms? Other risk management options exist, including self-insurance, and may be a more efficient use of a farm’s and society’s resources. The right size and structure of crop insurance needs exploration,” say the economists, who note that crop insurance has become the largest source of federal farm supports.
Farmers bought policies covering nearly 295 million acres of crops with an insured value of $110 billion last year.
In related news, Missouri’s attorney general filed a lawsuit against the USDA to get more time for growers to report their plantings for crop insurance coverage, reports DTN. The lawsuit says farmers will unfairly be denied coverage without a longer grace period. Record rainfall has delayed planting in the state.