If it wants them, Congress should act directly to include goals such as climate mitigation in the farm bill rather than resort to crop insurance “add ons” that could meddle with the soundness of the federally subsidized program, said two analysts on Tuesday.
Crop insurance is the largest federal support to agriculture, with an estimated cost of $15.5 billion this year.
Enrollment in the program has soared to nearly 494 million acres, a gain of 100 million acres in a decade, as coverage expanded beyond row crops into pasture and rangeland. Farm groups say the program should be strengthened as part of the 2023 farm bill. Reformers call for “reasonable caps” on the premium subsidy available to farmers. The government pays 62 cents out of each $1 in premium.
Former USDA chief economist Joe Glauber warned during a panel discussion at the American Enterprise Institute about the impact that “add ons” could have to financial health of crop insurance. If lawmakers believe practices such as cover crops are worthwhile, they should write legislation dealing with them, he said, rather than introducing additional requirements that would affect the actuarial soundness of the program.
Economist Barry Goodwin of North Carolina State University also cautioned against legislative “wedges” in crop insurance.
“Major change is unlikely to happen” to the crop insurance program during farm bill deliberations, said Stephanie Mercier of private consultancy Agricultural Perspectives. The program enjoys “very strong support” in Congress and past proposals for reform were short-lived.
Crop insurance “is an important risk management tool for farmers,” said Roger Cryan, chief economist for the American Farm Bureau Federation. The alternative, invoked frequently by Congress, is stop-gap disaster legislation.
So-called ad hoc disaster bills often are slow to disburse money and use different standards for who is eligible and how loss is measured. “It really should run better,” said Cryan.
Some lawmakers would like to create a permanent disaster program in the farm bill, so aid would be available quickly. But a standby program could be expensive to set up and House Republicans want to limit federal spending.
Crop insurance would cost an average $9.7 billion a year over the next decade, compared to $7.2 billion a year for USDA commodity supports and $5.8 billion a year for land stewardship, under current policies, estimated the CBO last month.
Costs are high this year because of drought damage and high market prices for 2022 crops. So-called revenue protection policies are the most popular type of coverage and premiums reflect commodity prices. Federal subsidies for insurance premiums were a record $11.6 billion for 2022 crops.
To watch a video of the AEI panel discussion, click here.