Crop insurance faces opposition from conservative groups

WASHINGTON — With the 2018 farm bill extended until the end of 2024, and the timeline on a new measure uncertain, one factor that will be front and center is the cost of the new legislation.

Prior to the one-year extension of the 2018 farm bill, the new legislation’s total cost was estimated by the Congressional Research Service at $1.5 trillion.

While the nutrition titles of the farm bill, including the Supplemental Nutrition Assistance Program, the Special Supplemental Nutrition Program for Women and Children, commonly known as WIC, and the national school lunch program, make up some 84% of that spending, spending on the commodity titles, including crop insurance, is also likely to be under scrutiny when negotiations get underway on a new farm bill.

Conservative groups and think tanks have expressed their opposition to and desire for reform of the commodity titles of the farm bill, including the federal crop insurance program.

“Congress should eliminate federal revenue-based crop insurance policies,” stated the Heritage Foundation, an influential, conservative think tank, in its “Budget Blueprint for FY 2023.”

“The federal government should not be in the business of insuring price or revenue; agricultural producers, like other businesses, should not be insulated from market forces or guaranteed financial success at the expense of taxpayers,” the Heritage Foundation said.

“Revenue-based crop insurance is unnecessarily generous and should be eliminated. Taxpayer-subsidized crop insurance should be limited to yield insurance as it was in the past.”

More recently, the Heritage Foundation expressed opposition to raising reference prices in the yet-to-be-negotiated 2024 farm bill.

Raising statutory reference prices, currently $3.70 for corn and $8.40 for soybeans, is a farm bill proposal supported by farm membership and commodity groups.

“Increasing reference prices would be the latest instance of federal micromanagement of the agricultural sector at taxpayer expense,” wrote at the Heritage Foundation’s David Ditch, a senior policy analyst, and Rachel Greszler, a senior research fellow, in an Oct. 12 report, “The End of Business as Usual: On Supplemental Package, Farm Bill, and More, Congress Must Stop New Deficit Spending Immediately.”

“This is unhealthy both because of its baleful effect on the national debt and because of its interference with the market, the results of which are rampant political favoritism, inefficiency, and dependence on corporate welfare.

“In the case of reference prices, increasing PLC guarantees would make farmers less responsive to price signals that would otherwise cause shifts in how and what they choose to produce.”

The Heritage Foundation isn’t the only conservative group opposed to continuing the federal crop insurance program and the premium subsidy.

The Club for Growth, a conservative organization focused on economic policy and tax cuts, lists as one of its free trade policy recommendations: “Eliminate all agricultural subsidies like direct payments, crop insurance, and quotas.”

The Cato Institute, which brands itself as a libertarian think tank, headquartered in Washington, also opposes farm subsidies.

“Large farm subsidies ensure that farmer incomes are higher than the incomes of most other Americans,” wrote Chris Edwards, director of tax policy studies at the Cato Institute, in the 2022 Cato Handbook for Policymakers.

“Farm programs are welfare for the well‐to‐do. They also induce overproduction, inflate land prices, and harm the environment. They should be ended, and American farmers should stand on their own two feet in the marketplace.”

Taxpayers for Common Sense is a budget watchdog group, based in Washington. The group describes itself as “an independent, nonpartisan voice for taxpayers working to ensure that taxpayer dollars are spent responsibly and that government operates within its means.”

In a Nov. 28 fact sheet about the federal crop insurance program, “Cashing In On Federal Crop Insurance Subsidies,” TCS stated: “An insurance program in which payouts routinely exceed premiums cannot accurately be labeled as insurance, especially one that is highly subsidized by taxpayers.

“Farmer-paid premiums fall far short of covering indemnity payouts every year in the federal crop insurance program. For producers of particular crops and in particular regions, where payments exceed premiums every year, the program acts more like a federal income entitlement than actual insurance.

“We must make crop insurance more like insurance and less like an income guarantee for farm businesses year after year. Lawmakers should reform the complicated web of subsidies in the federal crop insurance program to make it a tool to manage risk rather than maximize payments for select businesses.”

The R Street Institute is a center-right think tank, describing itself as “engaged in policy research in support of free markets and limited, effective government.”

While the R Street Institute does not oppose the federal crop insurance program, it has called for reforms of the program.

“Because the subsidies predominantly go to Americans who would engage in the economic activity even without the subsidy (farming is profitable even without the FCIP), the program functions as a wealth transfer from taxed Americans to subsidized corporations and farmers. And as the subsidies grow, their negative economic impact worsens,” wrote Phillip Rossetti, senior fellow for energy and the environment at R Street Institute, in his Nov. 23 analysis “Federally Subsidized Crop Insurance Lacks Economic or Environmental Justification.”

In the analysis, Rossetti suggests several ways to reform crop insurance.

“Simple reforms could be adopted to eliminate the wasteful aspects of the FCIP. The subsidy component of the premiums could be reduced or eliminated to make the program function more like a conventional insurer that would need enough premiums to cover losses,” Rossetti said.

“Means testing could be incorporated into the FCIP to ensure that the subsidies protect only those farmers for whom the insurance makes or breaks their farm viability.

“And small reforms to the program could be implemented, such as eliminating the ‘harvest price option,’ which causes the program to pay out much larger subsidies than what is needed to cover expected losses to a farmer if the price of a failed crop increases after planting.”

The Environmental Working Group, an environmental activist and advocacy group that publishes the recipients of federal farm program benefits, excluding federal crop insurance premium subsidies, suggested several possible reforms to the program.

“The federal crop insurance program needs to be modernized to better serve farmers, cut costs for taxpayers and strengthen American agriculture against the extreme weather linked to climate change. Many of these reforms have had bipartisan support in the past,” wrote Anne Schechinger, of EWG, in her Sept. 7 analysis, “Crop insurance costs soar over time, reaching a record high in 2022.”

“Congress could pass multiple reforms to help: reduce subsidies to crop insurance agents; decrease underwriting gains paid to crop insurance companies; lower premium subsidies on high-risk land to reflect the risks that farmers are taking; improve transparency of crop insurance subsidies, in alignment with more-transparent farm subsidy programs; require a means test to qualify for crop insurance premium subsidies, like farm subsidy programs have; create a cap on how much money in premium subsidies farmers can receive.”