Research & Commentary: Crop Insurance and Farm Subsidies

Published September 13, 2011

Farmers buy crop insurance for protection against the financial impact of natural disasters affecting their crops and the loss of revenue caused by declines in agricultural commodity prices. The federal government currently dominates the crop insurance market: It sets most prices, pays half of most farmers’ premiums, and decides what the program covers. 

Supporters of federal government crop insurance, including crop insurance agents and agricultural trade groups, say partially subsidizing crop insurance is an efficient and fair way to protect farmers from disaster and allow them to rebuild – more efficient and fair than private insurance or ad hoc government aid. They contend crop insurance is an important safety net for farmers, who are vulnerable to extreme weather events that can destroy their entire product at once. 

Opponents of government crop insurance say the current federal program has become excessively expensive, complex, overreaching, and inefficient. Those supporting reform or cancellation of federal crop insurance contend the defects of the current system have been exacerbated by stakeholders taking advantage of it, exploiting what was once a good program. 

The following documents offer more information about crop insurance and farm subsidies from differing perspectives. 

Double Indemnity: Crop Insurance and the Failure of U.S. Agricultural Disaster Policy
The American Enterprise Institute examines the federal crop insurance program and presents five options for reform or elimination. 

Green Scissors 2011: Cutting Wasteful and Environmentally Harmful Spending
The 2011 annual report from the Green Scissors coalition identifies more than $380 billion in wasteful government subsidies that damage the environment and waste tax money.

Why It’s Essential: 12 Strengths of Crop Insurance
This interactive document from Crop Insurance in America presents 12 reasons the organization thinks crop insurance is an essential business tool for U.S. agricultural producers. 

Farmers Say Crop Insurance Critical to Kansas Agriculture
The Insurance Journal canvasses several farmers and agricultural interests in Kansas on why crop insurance is important to them. 

The Bad Harvest: Crop Insurance Reform Has Become a Good Idea Gone Awry
Jerry R. Skees of the University of Kentucky discusses how the crop insurance program, once a good idea, was changed by its stakeholders into a program that has become so heavily subsidized that it may be more inefficient and inequitable than ad hoc assistance. 

How Farm Subsidies Harm Taxpayers, Consumers, and Farmers, Too
Brian Riedl of The Heritage Foundation examines the negative effects of farm subsidies, including crop insurance, on taxpayers, consumers, and farmers. 

Crop Insurance Subsidy Hurts Farms and Environment
Heartland Institute Vice President Eli Lehrer argues the nation’s crop insurance program is a $6.5 billion annual waste of taxpayers’ money and one of the most egregious examples of corporate welfare in the vastly overweight federal budget. 

Downsizing the Federal Government: Agricultural Subsidies
This article from the Cato Institute discusses farm subsidies and their effects on the economy and budget, and it offers several arguments on why these subsidies should be repealed.

Ryan’s Plan for Farm Subsidies
Sallie James of the Cato Institute discusses Rep. Paul Ryan’s (R-WI) plan for significant cuts in farming subsidies as part of his 2012 budget resolution.