Crop insurance subsidies continue to grow

Founding Father Benjamin Franklin was on the spot nearly three centuries ago when he noted—in print, no less—that two inevitable facts of life are death and taxes.

If Benn were in the Almanac business today, he could add two more modern facts of American life to his list: the increasing dependence of farmers and ranchers on crop insurance, and the growing concern of taxpayers about the rising cost of that dependence.

The nonpartisan congressional watchdog, the Government Accountability Office, has put hard numbers on the widespread use of today’s federal crop insurance program, its rising costs and where most federal subsidies end up. The findings were shocking to taxpayers who, like nearly all American outdoor working farmers and ranchers, have no idea about the program’s growth, functions and costs.

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For example, explained the Environmental Working Group, one of the longtime critics of crop insurance, “The top 1 percent of crop insurance policyholders, farmers with the highest incomes, received more than $2.5 billion in premium subsidies in 2022 d.—an average of nearly $500,000 per farm.”

By any standard, this is an incredible sweetener to entice already wealthy farmers to use a monetization program many would have joined anyway due to pressure from lenders or the market. The GAO acknowledged this, noting that a 15% reduction in government subsidies for this group would have “minimal effects on participation … and the financial stability of the program.”

Without simple adjustments, such as a graduated subsidy rate based on farm size, EWG says, in 2022 “the 19 largest policyholders received more than $3 million in subsidies, with the recipient receiving the most , has received $7.7 million…”

These subsidies aren’t chicken feed: “In 2022, subsidies averaged about 62 percent of policyholder premiums and totaled $12 billion,” the GAO explained, “making up the largest share of total program costs in the 17 .3 billion dollars.”

Policyholders aren’t the only players in this federal crop insurance program—really revenue—to receive hefty participation subsidies. The insurance companies hired by the USDA to run the program also continue to collect huge dollars.

In fact, a third of the program’s annual costs, EWG estimates, “or about $3 billion a year, go to insurance companies instead of farmers. That money,” he continues, “goes to just 13 companies, 9 of which are publicly traded, billion-dollar corporations whose CEOs make millions of dollars every year.”

Crop insurance reform, the centerpiece of today’s federal farm program and the still-delayed 2023 farm bill, appears impossible. Pressure from farm groups, Big Agbiz and insurance companies is keeping Congress on the back foot as talk begins on Capitol Hill of examining and updating the outdated, bloated and deeply secretive program.

Worse, Republicans on the House Agriculture Committee are now using the farm bill’s delay to push for an expanded — but still unreformed — crop insurance program that would send even more subsidies, critics say, to even more -wealthy farmers.

For example, reports AgriPulse, a good agricultural information service, “Legislators are looking to increase subsidies for supplemental acreage insurance policies to get producers to buy higher levels of coverage, which could potentially reduce demand from farm groups for ad hoc disaster relief.’

Did you catch all the words surely to a greater cost in this sentence: “increase in subsidies”, “additional policies” and “challenge” compared to the only hope of saving costs for “potential reduction of ad hoc disaster …”?

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Specifically, AgriPulse continues, “Economists say that expanded … coverage may especially benefit farmers during periods of relatively high prices and input costs, when farmers are unlikely to receive payments from two [of the biggest crop insurance] programs, Price Loss Cover and Agricultural Risk Cover.’

In short, today’s call to expand crop insurance in the face of new efforts to reform it is just like death and taxes: regardless of the circumstances, it is inevitable.

Alan Gubert is an agricultural journalist. See past columns on farmandfoodfile.com. © 2023 ag comm

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