Wallace's Farmer, IA
05-25-07
Crop Insurance Should Be Part of Farm Bill
Compiled By Staff
In Congressional testimony in early May, Bruce Babcock, director of the
Center for Agricultural and Rural Development at Iowa State University,
offered information on how federal crop insurance policy could be reformed to
benefit both farmers and taxpayers.
U.S. crop insurance has failed to prevent costly disaster assistance for farmers
even though its cost to taxpayers doubled with Congress's 2000 reform of the
program, said the ISU economist. Babcock told the House Oversight and
Government Reform Committee on May 3 that "too much crop insurance money
is spent on program administration and not enough is spent on supporting
financially stressed farmers.
"Every dollar in net payments provided to farmers through crop insurance costs
taxpayers that dollar plus another 78 cents to deliver," he pointed out.
Recommends farm bill include crop insurance
Much of the reason for this inefficiency, he explained, comes from the way
Congress subsidizes the program to keep costs low for farmers. "This premium
subsidy is now so large that the average farmer in the program can expect a rate
of return on producer-paid premium of 143%," he said.
However, when there are widespread events, such as drought, these losses still
trigger disaster assistance packages such as the one funded in the Iraq funding
bill. Babcock recommended to the committee that crop insurance be integrated
with farm bill programs so that the two can work in tandem.
He said that replacing current farm programs with a crop insurance program
based on either county yield or county revenue would "directly transfer risk from
the crop insurance program to the federal government, thereby reducing
excessive underwriting gains paid to companies."
Babcock's full statement to the Committee is available on the CARD Web site at:
www.card.iastate.edu/presentations.