An Iowa State University economist is in Washington, D.C. today, to make the case that congress should make changes in federal crop insurance. Part of Bruce Babcock’s research focuses on the development of risk management strategies for farmers.
“I think crop insurance is very important to farmers,” Babcock says. “But I think that some reform of the program could save $20-30 billion over 10 years and really have no impact on the availability of the risk management tools that farmers need.”
The crop insurance program is “hugely expensive,” according to Babcock.
“One of the reasons why it’s gotten so expensive is the tremendous amount of premiums subsidies that farmers get, so the government pays a large portion of their insurance premiums and so farmers respond by buying more insurance,” Babcock says. “So I just think if we’re going to be cutting programs that impact farmers and the food supply and nutrition, we ought to be looking at those premium subsidies.”
The federal government provided $1.5 billion to farmers in 2002 to subsidize crop insurance. Last year, the federal government provided about $7.4 billion in crop insurance subsidies — a nearly 500 percent increase. Babcock estimates taxpayer subsidies cover 62 percent of crop insurance costs nationwide.