Given the choice, Corn Belt farmers vastly prefer revenue guarantees for their crop, whether through crop insurance or farm subsidies, over coverage that is based on yields, says economist Gary Schnitkey of the University of Illinois. The research shows why proposals to revamp the federally subsidized crop insurance program typically bog down in Congress.
The 2014 farm law made crop insurance the largest strand in the farm safety net, with outlays forecast at $9 billion a year. Critics say the premium subsidy should be lowered or the rate of return guaranteed to insurers should be smaller. Often mentioned as a target are policies with the so-called harvest price election, purchased on 80 percent of policies, which indemnifies growers for losses at the harvest-time price for a crop if it is higher than the price guaranteed at planting time.
Schnitkey said revenue protection policies are purchased on more than 90 percent of corn acreage in many counties in the Farm Belt, meaning few sales of yield-only coverage. “Use suggests farmers prefer revenue insurances that allow guarantees to increase if harvest prices are above projected prices,” Schnitkey writes at farmdoc Daily. Growers typically buy high levels of coverage. In the heart of the Corn Belt, coverage levels exceed 80 percent range of normal revenue. “High coverage levels suggest that farmers desire risk protection offered by crop insurance,” said Schnitkey.