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Programs > Agriculture & Food: Focus on the Farm Bill > Crop Insurance Subsidies

Crop Insurance Subsidies

Crop insurance is purchased by farmers, ranchers, and other agricultural producers to protect themselves against either the loss of their crops due to natural disasters (such as hail, drought, and floods) or the loss of revenue due to declines in the prices of agricultural commodities. The two general categories of crop insurance are called crop-yield insurance and crop-revenue insurance.

Taxpayer subsidies for crop insurance are now the largest single item in the farm  part of the Farm Bill budget -- bigger even than commodity farm payments -- with the federal government paying 60 percent of crop insurance premiums on behalf of the farmer or landlord.

Despite their high costs, the program has never had payment limitations. Hence the taxpayer is on the hook for subsidies no matter how large the farm or how wealthy the farmer. If a landowner buys and farms an entire county, the public -- under current law -- would still be required to pay for a majority of the owner’s insurance costs, on each and every acre. 

We view this as a fundamental design flaw of current farm programs. 

Furthermore, not even the basic conservation requirements are attached to insurance subsidies. Congress eliminated previous farm bill requirements to control excessive erosion and protect wetlands back when the program needed more farmers to enroll in crop insurance to make it viable from an insurance standpoint. That problem has long since been cured, as the escalating participation rates and escalating costs of the program attests.

There is no longer a valid policy reason for the public to shell out huge insurance subsidies with no assured natural resource protection in return. 

Coverage Limits. The new reality is that crop and revenue insurance, very small programs just a dozen years ago, have become the biggest farm safety net programs.  The Agriculture Committees need to deal with the new reality head on.  We cannot and should not be in the business of providing insurance subsidies on every acre no matter how large a farm grows.

We advocate that the insurance subsidy system should be a safety net, not a publicly funded farm consolidation promotion mechanism. 
We agree with the National Sustainable Agriculture Coalition, which recommends phasing out subsidies on crop and revenue insurance coverage, starting with a 50 percent reduction on production exceeding $1 million and reaching 100 percent on production exceeding $2.5 million.

This reform will both save money now and decrease taxpayer exposure in the future. It will align insurance subsidies with commodity program policy and target spending in a manner that reduces farm consolidation and the destruction of family farming in America. 
Whole Farm Insurance. As crop and revenue insurance reform takes shape, we also urge consideration for highly diversified farms that currently lack an effective insurance option. We do not oppose the continuation of products that serve agricultural monocultures, but we believe there needs to be a level playing field for those who use diversified systems to reduce risk and create environmental benefits.   
Again in concordance with the National Sustainable Agriculture Coalition, we recommend that the Risk Management Agency be given authority to establish a new Whole Farm revenue insurance product that is available in all states and counties.

This insurance for all diversified operations would include, but not be limited to specialty crops, mixed grain/livestock or dairy operations, contract growers, and organic and conventional farms. The new Whole Farm product should be offered at the same buy-up coverage levels and options as other revenue products, with a strong risk management-through-diversification bonus. The product should work for farmers engaged in value-added agriculture and alternative marketing and should enable beginning farmers to access the program in a fair and equitable manner. 
Conservation Compliance and Sodsaver. The 2012 Farm Bill should re-establish compliance requirements for federal crop and revenue insurance benefits so that all existing and new crop and revenue insurance or other risk management programs are subject to conservation compliance provisions. These subsidies are now the largest farm program public benefits and should be part of the same social contract that applies to commodity, credit, and conservation programs. 
In order to protect critical habitat and biodiversity, reduce the cost of subsidy programs, and take the pressure off of already over-subscribed conservation incentive programs, “sodbuster” rules should be strengthened. The rules should prohibit all commodity and insurance subsidies on all native prairie and permanent grasslands, as well as remaining native land that does not have a cropping history but is cropped in the future. (The last farm bill included this “Sodsaver” provision, but only as a voluntary pilot project that never got off the ground.) The time has come to enact it as permanent, nationwide law, reducing government outlays and protecting vital natural resources in the process. 
Conclusion: The farm bill budget should include strong, loophole-free payment limitations as well as conservation requirements for both commodity and crop insurance programs of all types. Continued public and taxpayer support for the farm safety net programs hinges in large part on these provisions to create economic opportunity in farming, preserve natural resources, and protect future food security. 


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