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Posts: 3,228
Registered: ‎04-30-2010

Risky Growing Areas Get Most Insurance Payout

This Illiniois study will put some facts and figures to a commonly held assumption that areas whre yield variability is greatest are getting the biggest insurance payouts.

It sounds logical that areas with most risk will get the biggest insurance payouts.  the policy implication is that some wil argue that insurance should not support growing the risky crop in that environment.  

The public will probably not like the pictures in this article.


"Summary Observation

What this post ultimately illustrates is that the general public is becoming more involved in the discussion over the operation and performance of crop insurance. This change is consistent with other policies that evolve from being a small spending program to a large spending program. The resulting increase in spending brings other actors to the discussion because the size of spending on the program is such that it now potentially impacts the amount of money available for other spending priorities. In addition, the higher is the spending on a program, the greater are the impacts of the program, both its positive and negative impacts. Supporters of crop insurance need to understand this shift in the political, social, cultural, and economic environment in which crop insurance is being discussed. Supporters of crop insurance need to adjust their arguments so that they speak not just to agents, farmers, and insurance companies; but also to the general public. Simply put, crop insurance supporters need to address the negative impacts that others see in crop insurance, either by supporting research that in an unbiased way refutes the criticism or by offering alternatives that mitigate the concern. Failure to do so is likely to lead to a smaller program and perhaps its disappearance. Ultimately, it was the inability or unwillingness of the farm community to address concerns with direct payments that has led to its questionable future. It will be interesting to see if the supporters of crop insurance can make this transformation.

Issued by Carl Zulauf
Department of Agricultural, Environmental and Development Economics
The Ohio State University


Gary Schnitkey
Department of Agricultural and Consumer Economics
 University of Illinois"


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