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Senior Advisor

Re: Crop Insurance Cuts: Will You Be Affected?

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Get out your checkbook when you price that cheapo.  It is **bleep** expensive in my neck of the woods.

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Re: Crop Insurance Cuts: Will You Be Affected?

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I agree on the 1000 acre thing, or less, but think it should be a dollar amount- a thousand acres in dryland wheat country isn't even full time employment for 1 but it is close to being in row crop country.

 

As to local government consolidation, a number of years ago the Lilly Foundation (Lilly runs Indiana politics and former Gov, now self appointed Purdue President Daniels is a former "governmental affairs" VP of the company) funded a study on the savings of consolidating local governments.

 

As it has often been pointed out, when the counties were formed they were limited to the distance to travel from the furthest border to the county seat by horse and get home before night.\

 

Anyway, they came back with some impressive projections of cost savings and extensive recommendations and then the whole thing just died and disappeared.

 

When it came down to it, the foot soldiers of both parties are those county employees working in the courthouses and not unremarkably, they weren't too interested in the prospect.

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Senior Advisor

Re: Crop Insurance Cuts: Will You Be Affected?

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Here is an alternate view of crop insurance.

 

http://www.farmgateblog.com/article/1784/has-the-crop-insurance-pendulum-reversed-direction

 

"Summary:

 Crop insurance users were put on notice with the inclusion of a means test in the Senate Farm Bill, which could be the first of many efforts to reduce the program. Such changes could result in a reduced number of users, and that would result in higher costs of premiums for the remaining users."

 

That quote and cite above are a sumariztion of this article by Dr. Art Barnaby of KSU.

 

http://www.agmanager.info/crops/insurance/risk_mgt/rm_pdf13/AB_MeansTest.pdf

 

Barnaby argues that if the $750,000 AGI cap is imposed, the first thing mega-farms will do is get the lawyers busy to establish smaller entities that fall under the limit.  Then, he suggests that if they can't or choose not to take that route, they may opt out of insurance.  The result is the crop insurance agents would receive less income and their adminsitrative costs and income would have to be spread over a smaller number of farmers with fewer acres, which owuld result in the insured farmers paying higher premiums.  

 

Barnaby gives examples of where it might be cheaper for the big farms to use CAT, which has only an administrative processive free of $300 and no costs, but which pays at about the same rate as 50/100 buyup insurance which does have a premium.  

 

What the government seems to be missing is that when it acts, the people respond in what they think is a logical manner.  That may not be the way the government expected.

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Re: Crop Insurance Cuts: Will You Be Affected?

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Went through Story County Iowa in August 1977 and saw 3 foot corn everywhere. That much rain on our soils and we wouldn't grow a ragweed. Sure hasn't happened there since, in fact I'm not sure they've had what you'd call a bad crop other than '93.  So OK, that's 2 in 35.

 

I don't recall his name but one of the old Ag Econ guys at U of I used to do a bit on old crop insurance and show how even one big  loss in 50 years paid for all the years' premiums when you figured the compounded cost of making back the losses. Particularly true the earlier it happens in your career.

 

I'd say that revenue insurance is still a pretty good deal at full bill but I understand that many would be tempted not to take it if they had to pay the full freight. I'd say fine, and then pass a law that says no matter how bad the disaster, no more ad hoc disaster payments.

 

I'll suggest that if there is a cap or something of the sort, there will be some not insignificant amount of producers who choose to opt out and that some will bitterly regret it. If you're farming three  thousand rented acres at (soon, or currently) $300 per and get totally smoked I'd say you'd probably lose a goodly portion of the retained earnings that have built on your balance sheet in 7 years (leave aside appreciated assets over that time.)

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Honored Advisor

Re: Crop Insurance Cuts: Will You Be Affected?

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Well prior to the early 90s we never took crop ins. we ran our crop through livestock.  If we had a short crop we`d save less gilts for the next yr, if corn was light and wet it was getting fed anyway, alot of the farms were in pasture and hay and many of our neighbors did the same.  We could handle disasters, we had options, a slough drowns out in June you seed Sudax and chop silage.  Now everyone is so big and specialized, that isn`t good in my opinion. 

 

Look at what happened when crop insurance got juicy, farms got bigger, food is as cheap as food can be, there`s less than 20¢ of wheat in a $4 box of cereal.  It`s a cheap food policy no matter how you cut it.  This is just my opinion so no one flame me but I`ll admitt that BTOs are more efficient than the patchwork of small farmers (400 acre, sows and cows)  However the BTOs are only sustainable with the government propping them up with cheap interest, with the debt write offs of the 80s, with the LDPs of the 90s and early 2000s, with the government sponsored Ethanol.  Smaller family farms of sows and plows are in our nation`s best security, but like everything these days short sightedness for the short term gain wins whether it`s a athlete taking steroids or free trade shipping jobs over seas or bringing in below the cost of living workers for cheap labor or farm policy.  This stuff has all been figured out in a `think tank` at some point.

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