Crop Insurance in Crosshairs
Summary & Opinion: I don’t think it is likely that federal crop insurance will be eliminated or replaced at this time. However, I do believe it is likely to see premium subsidy caps & reduced premium subsidies in the upcoming farm bill. In other words, farmers will pay more for their crop insurance.
Link to Article
In general, most farmers don’t give me the impression that Washington, D.C. has their back. Lot’s of dirty looks and four letter words. I understand why, but I’m going to ask farmer’s to engage with D.C. as the next Farm Bill approaches, because crop insurance will be directly targeted in the 2019 Farm Bill. Below is a brief summary of potential changes to federal crop insurance as we know it.
1 - Status Quo: Farmer’s best option, but farmers will really have to make their voices heard.
2 - Free Crop Insurance Through FSA: Crop insurance critics (& FSA lobbyists) favor this option as it would eliminate private sector delivery, loss adjusters & leverage underutilized FSA employees (no additional operation costs). This is free, but it would also be county based and for that reason, would perform more like the current farm bill. In other words, it will provide no field level protection and will likely force producers to purchase much more hail insurance to protect their farm’s risk exposure.
3a - Eliminate Subsidy on Harvest Price Option: This protects producers from having to replace forward contracted bushels at higher prices in fall should prices increase & producers experience a federal crop insurance loss. Federal crop insurance only covers about half of expected production, so the value of the Harvest Price Option only kicks in when farmers have large losses.
3b - Cap Subsidy Dollars a Producer Can Receive: Much like the ARC program has a $125,000 payment cap per person, crop insurance could employ similar methodology to cap premium subsidies.
3c - Reduce RMA Share of Cost: Pretty simple, if premium subsidy is 55%, cut it to 45% and move forward with program.
4 - Eliminate Federal Crop Insurance & Move to Free Market: Private insurance would be simple for producers to navigate as much regulation would be removed. However, a 75% policy would likely jump from $17/acre to $38/acre. Ouch!