Taxpayers Pay High Costs for Crop Insurance Subsidies

by Fran Smith on September 13, 2013 · 1 comment

in Agenda for Congress, Agriculture, Features

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Bloomberg on September 9 published an in-depth article on the high costs of federal crop insurance – likely to be increased even more if the House version of a proposed farm bill gets passed. The article noted that last year the U.S. Department of Agriculture spent $14 billion insuring farmers against losses due to crop failure or income. Proposed House legislation would up that to cover so-called “shallow losses” – that would guarantee up to 90 percent of a farmer’s income.

It’s estimated that U.S. taxpayers fund about 60 percent of the premiums farmers pay. And there are no caps on those crop insurance subsidies, which encourages farmers to plant on unproductive land, take higher risks, and claim losses. The names of the crop insurance recipients are also not public.

As the Bloomberg article noted:

In 2011, the latest year for which data is available, 26 farmers each got annual subsidies of more than $1 million; more than 10,000 received $100,000 or more. One grower of tomatoes and peppers in Florida enjoyed a subsidy of $1.9 million, according to the Environmental Working Group. Congress has barred the USDA from revealing the identities of payout recipients.

Farmers are not the only ones getting subsidized by the crop insurance program. The federal government also pays the administrative costs of the 18 approved insurance companies that write the policies. Last year those administrative costs amounted to $1.4 billion paid out by the government.

The House and the Senate farms bills are expected to be reconciled by September 30. While a host of lawmakers are calling for cuts in the crop insurance program, agricultural and insurance interests are lobbying hard to continue and even expand the program. Here’s what the Bloomberg article noted:

Yet the president and the Republicans’ chief budget expert are no match for the farm and insurance lobbies, which spent at least $52 million influencing lawmakers in the 2012 election cycle. Rather than thin the most expensive strand in the nation’s farm safety net, Congress is poised to funnel billions of dollars more to individuals who already are more prosperous than the typical American.

“We have been subsidizing some of the farmers who least need it in a way that is really costing taxpayers a lot of money,” said Senator Jeanne Shaheen, a Democrat of New Hampshire. “We’re never going to solve our budget challenges if that’s what we’re doing.”

J.E. September 16, 2013 at 6:26 pm

Crop insurance varies greatly depending on the crop and the state even though it’s a federal program. Apples in Oregon will receive less money than the apples in Washington even though our orchard is 10 miles from the border. Most farmers are getting by with crop insurance, not getting rich. On a good year we can gross over $300,000 on cherries. A few years back we had a freeze so our crop was 1/3 of normal. I received less than $10,000 from my crop insurance. All the costs of caring for the trees were the same as good years. The only difference was the cost of labor was reduced. Needless to say we lost money that year.
News articles like to go for sensationalism. People don’t want to hear what the average farmer received or what they received per acre. They want to tell the big payouts to make it look like the program is a waste of money. If farmers go out of business because they don’t have crop insurance our food will come from other countries with less food safety restrictions.

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