Some defenders of the federal crop insurance program claim the recent hurricanes demonstrate just how vital it is for farmers. So why do these same special interests constantly undermine the program’s focus on helping farmers recover from natural disasters?
The contention that today’s crop insurance program exists to help with disasters is one big myth. This taxpayer-subsidized program serves primarily to make sure that the largest agricultural producers do well financially, even when the weather is perfect and the production is great.
{mosads}In 2015, commercial farms, including the largest farms, represented only 10 percent of all U.S. farming operations, yet they received 78 percent of the federal crop insurance indemnities. And about 80 percent of the crop insurance policies are revenue policies. They don’t require a disaster or crop loss, but rather kick in simply when farmers don’t meet their revenue expectations.
This hasn’t always been the case. In 1980, Congress created the modern crop insurance program as a new way to address disasters. The program eventually strayed far off its mission. In 1997, revenue policies protecting farmers against dips in expected revenue became an option. But it wasn’t until 2003 when these revenue policies covered more acreage than the yield-based policies designed to help in the event of disasters and crop losses.
This desire to insulate farmers from market forces, instead of protecting against disasters and crop losses, isn’t just a feature of the current federal crop insurance program. Farmers enjoy several other so-called “safety net” programs, such as the new agricultural risk coverage program, which pays farmers when they experience even minor shortfalls in expected revenue, referred to as “shallow losses.”
Congress needs to weave some common sense into the safety net. Farmers are capable of managing ordinary business risks, just as any other business does on a daily basis. Federal farm aid, including the federal crop insurance program, should focus on helping farmers cope with real disasters, events such as hurricanes that result in substantial and unforeseen losses. And refocusing on disasters shouldn’t be much of a stretch for the federal crop insurance program, given that this is the historic focus of the program.
Most agricultural producers — indeed, entire sectors such as produce and livestock — receive little to no assistance, particularly when it comes to revenue protection. The Congressional Research Service just released an important report showing that, from 2014 to 2016, just six commodities received 94 percent of the farm program support, and these six commodities accounted for only 28 percent of farm receipts. In other words, the safety net isn’t about helping agriculture in general so much as it’s about helping a small number of cronies.
Why should scarce taxpayer dollars be used to help agricultural special interests meet their bottom lines? Why does such a small number of agricultural interests need so many handouts, including duplicative programs, when the vast majority of farmers do just fine without any handouts at all?
The agricultural producers growing those six commodities need to be treated like everyone else, including other farmers. Members of Congress and the American people should be outraged about these current programs. Legislators should be working now to restore focus and discipline, given that the next farm bill is about to be debated.
If the federal crop insurance program and the other safety net programs were focused on helping cope with natural disasters, the federal government could concentrate on working out how to deliver needed assistance in the most effective and timely manner possible. Until then, however, these programs themselves are disasters.
Daren Bakst is a research fellow specializing in agricultural policy in the Institute for Economic Freedom at The Heritage Foundation.