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Crucial crop insurance program helps farmers weather the storm

Crop insurance is an absolutely critical title in the farm bill because it is one of the most heavily used programs.

Crop insurance is an absolutely critical title in the farm bill because it is one of the most heavily used programs.

In the United States, almost 90 percent of acres are enrolled in federal crop insurance, which is made possible by the farm bill, noted Shelby Swain, Indiana Farm Bureau associate policy analyst. The remaining 10 percent, mostly specialty crops, are either fully privately insured or uninsured.

Crop insurance is the second largest program in the farm bill, behind the nutrition program. Due to improvements in the economy over the past two years, spending on the nutrition program has decreased by approximately $35 million.

However, the amount of money the federal government spends on crop insurance programs has increased over the past 10 years. It is projected to cost between $8 billion and $9 billion over the next five years. This increase in cost has caused some in Washington to want to decrease spending on the program, according to the American Farm Bureau Federation.

Crop insurance through the farm bill is a public-private partnership with approved lenders. It allows farmers to purchase policies specifically tailored to their operation. Depending on the amount of coverage farmers choose, the federal government subsidizes between 38 and 80 percent of the cost of crop insurance premiums, essentially giving farmers a discount they need to purchase affordable insurance. The average subsidy is 62 percent, providing a much lower cost for coverage, something that fully private insurers simply cannot offer.

It cannot be overstated how necessary crop insurance is for farmers to access operating capital, Swain said. As the farm economy tightens, it will become all the more important. Crop insurance is also necessary for some stability in times of disaster. Similar to any other form of insurance, nobody needs it until they need it.

The University of Illinois’s Farm Doc Daily describes crop insurance as “in essence, the nation’s insurance policy for the food supply.” They add, “When Mother Nature strikes and farmers lose their crops, those with crop insurance policies in hand can bounce back and plant again the next year.”

Crop insurance protects against enormous spikes in food prices, and also eliminates some financial risk from taxpayers, because without it, a wide-scale disaster (i.e. the drought in 2012) could result in enormous disaster relief bills from Congress, which are always written on the fly.

Questions to consider

1. What kinds of tools would be helpful to you and your farm in managing risk?

2. How do you feel about disaster payments being tied to the farm bill?

3. How do you feel about payment limitations or subsidy caps on crop insurance products?

Contact the Editor

 1.800.327-6287
 kdutro@infb.org
 P.O. Box 1290 Indianapolis, IN 46206