The government could save more than $2 billion a year if it replaced the public-private partnership of the crop insurance program with simpler and more tightly-targeted disaster programs, said two agricultural economists. In an analysis for the American Enterprise Institute, Eric Belasco and Vincent Smith said a template for the less expensive program was the Pasture, Rangeland and Forage (PRF) insurance product offered by USDA.
The PRF program uses weather data collected daily by NOAA to estimate precipitation and the extent of any drought-related forage losses in “grids” measuring 12 miles by 12 miles. Belasco and Smith say the approach could be expanded to include temperatures to assess frost or heat damage to a variety of crops. The weather and crop production data could be combined in a disaster program that would compensate producers for losses “likely would involve annual administration and implementation costs that are more than $2 billion lower,” they said.
“More importantly, if farmers are offered well-targeted protection through standing disaster aid progams that involve no out-of-pocket costs, many of those farmers may well prefer such coverage,” said the economists. Area-based approaches such as PRF are not as precise as farm-by-farm policies but net benefits could be comparable, they said. “Given the technologies and data now available for weather-based modeling of crop losses, it is time to toward more efficiently designed disaster aid programs.”