In February Senators Jeanne Shaheen (D-NH) and Pat Toomey (R-PA) introduced legislation to cap federal crop insurance premium subsidies at $50,000. The Congressional Budget Office estimates the cap would save roughly $2.2 billion over 10 years.
On average, federal crop insurance subsidies cover 62% of premiums. These subsidies are completely unlimited, meaning the largest and wealthiest farms receive premium subsidies on every acre they farm. A Government Accountability Office study from 2012 pointed to an example of one farm who insured crops in eight counties and received about $1.3 million in premium subsidies.
The same study suggested that only 2.5% of producers nationwide would have been affected by a $50,000 premium support limit in 2011. Those are the largest and wealthiest farms. Their premium subsidies help them bid land away from beginning farmers and their smaller neighbors.
The cost of federal crop insurance has risen sharply the past few years. According to a 2012 Congressional Research Service report, crop insurance costs have gone from $3.9 billion in 2007 to over $14 billion in 2012. This year it is projected to cost $9 billion.
While we firmly support helping farmers manage risk, insurance isn’t the only tool, conservation is also crucial. But Congress continues to attack federal conservation spending despite the fact there is more farmer demand than resources available. Capping premium subsidies saves money that could be reinvested in conservation.
The crop insurance program should be restructured to work for small, mid-sized, and beginning farmers, not against them.
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