Dependency on crop insurance growing

Founding father Benjamin Franklin was spot-on almost three centuries ago when he noted — in print, no less — that two unavoidable facts of life were death and taxes.

Had Ben been in the “Almanack” business today, he might add two, more modern facts of American life to his list: farmers and ranchers’ growing dependency on crop insurance and the growing taxpayer concerns about the increasing cost of that dependency.

Congress’s non-partisan watchdog, the Government Accountability Office, put hard numbers on the widespread use of today’s federal crop insurance program, its rising costs, and where most of the federal subsidies wind up. The findings were shocking to taxpayers who, like almost every American outside working farmers and ranchers, have no clue of the program’s growth, functions, and costs.

For example, explained the Environmental Working Group, one of crop insurance’s long-time critics, “The top 1% of crop insurance policyholders, farmers with the highest incomes, got over $2.5 billion in premium subsidies in 2022 — an average of almost $500,000 per farm.”

By any standard, that’s an incredible sweetener to entice already well-heeled farmers to use a revenue-insuring program many would join anyway because of lender or market pressure. GAO acknowledges as much, noting that shaving 15% off government subsidies to this group would have “minimal effects on participation … and the program’s financial soundness.”

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

These subsidies aren’t chickenfeed: “In 2022, subsidies averaged about 62% of policyholders’ premiums and totaled $12 billion,” the GAO explained, “comprising the largest portion of the program’s total cost of $17.3 billion.”

Policyholders aren’t the only players in this federal crop — really revenue — insurance program to receive hefty subsidies to participate. The insurance companies hired by the U.S. Department of Agriculture to deliver the program continue to reel in whopper dollars, too.

In fact, one-third of the program’s annual cost, EWG calculates, “or about $3 billion per year, goes to insurance companies instead of farmers. This money,” it continues, “goes to just 13 companies, 9 of which are publicly traded corporations, worth billions of dollars, whose CEOs make millions of dollars every year.”

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

Reforming crop insurance, the centerpiece of today’s federal farm program and the still-overdue 2023 Farm Bill, seems impossible. Pressure from farm groups, Big Agbiz, and insurance companies keeps Congress on its back foot whenever talk of examining and updating the aging, bloated, and deeply arcane program begins on Capitol Hill.

Worse, Republicans on the House Ag Committee now are using the Farm Bill delay to advocate 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 well-sourced ag news service, “Lawmakers are looking at boosting subsidies for supplemental, area-based crop insurance policies to induce growers to buy higher levels of coverage, which could potentially reduce the demand from farm groups for ad hoc disaster assistance.”

Did you catch all the certain-to-costmore words in that sentence: “boosting subsidies,” “supplemental policies,” and “induce” compared to the single costsaving hope of “potentially reduce ad hoc disaster …”?

More to the point, AgriPulse continues, “Economists say the expanded … coverage could particularly benefit farmers during periods of relatively high prices and input costs when farmers are unlikely to get payments from two [of the biggest crop insurance] programs, Price Loss Coverage and Agriculture Risk Coverage.”

In short, today’s call to expand crop insurance in the face of new efforts to reform it just like death and taxes: No matter the circumstances, it’s inevitable.

Alan Guebert is an agricultural journalist. See past columns at farmandfoodfile.com. © 2023 ag comm