Looming crop insurance cuts will decimate demand, trade assoc. says

If federal subsidies to crop insurance are cut, demand for coverage will plummet among farmers, one trade group says.

Insurance News


The current mood in Washington is one of slash-and-burn, and federal subsidies for crop insurance are headed for the chopping block. Both Congress and the White House have signaled they are prepared to cut subsidies to crop insurance by $100mn a year in an effort to save money—a move that could critically harm demand, the National Crop Insurance Services says.

“The additional cuts they are proposing would result in lower crop insurance participation, ironically shifting risk away from farmers and crop insurance companies right back to taxpayers,” said NCIS President Tom Zacharias.

Zacharias points to the 100 million new acres insured from 1998 to 2012 as evidence that the federal subsidies are valuable and needed. Without such subsidies, farmers may choose to go without crop insurance to cover issues like prevented planning or natural disasters.

Washington, however, argues that the time has come for large cuts in federal subsidies. President Obama’s administration is calling for nearly $12bn in cuts to crop insurance over the next 10 years.

Rep. Paul Ryan, R-Wis., who sponsored the House resolution to cut subsidies, even called such subsidized insurance “crony capitalism” and said the federal government needed to balance its budget.

Zacharias contends that such subsidies are not a drain on taxpayer resources, and farmers are actually willing to shoulder most of the financial risk themselves.

“Overall taxpayer spending on farm policy as a whole has steadily declined,” he said. “[Crop insurance subsidies] have become such a success, that most farmers agreed in 2012 to get rid of direct payments during the Farm Bill debate.”

Zacharias believes that the need for financial federal support will continue to decrease, but warns that eliminating such subsidies immediately is the wrong choice.

“As we go forward in the next Farm Bill, we would say do no harm to crop insurance,” he said.


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