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crop insurance proposal

In light of the present federal budget situation i would propose this cutting measure. I say end all revenue insuring products and go back to the old multi-peril or bushel guarantee. this would come at a much lower subsidy and should be easier to implement. It is my contention that the revenue gurantee coverages have done much to increase consolidation of farming operations because we are taking away too much of the risk. I contend that these coverages have caused unrealistic rental offers, too.  These RP coverages(and their corresponding premium subsidy)  would seem to be almost too good to be true, from a taxpayer standpoint.  Also we have seen people raising crops not because they are suited to the region, but because one crop may have better revenue guarantee than the crops that are more traditionally planted  in those regions. Let's go back to farming and not farming the federal insurance teat. We're all becoming 47 percenters.

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13 Replies
BA Deere
Honored Advisor

Re: crop insurance proposal

I`d be for it Ida, however the whole thing with crop insurance is it`s part of the whole govt`s "cheap food policy" , they could probably kiss good-bye at least 10 million acres of corn from the fringes.  Farmers would get to be be better marketers if that did happen using options, heard a guy last night that said one his clients "bought a call to cover a put and has a dollar range in the $6 area, all that at a cost of zero".

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itsmetoo92774
Frequent Contributor

Re: crop insurance proposal

You are correct that the current crop insurance programs has taken a lot of the risk out of farming at some one elses expense.  However I agree that it would be very difficult to change this with the current demand we have for corn and the need to grow it in fringe areas where yields are usually much lower.  The change that I would like to see that may help with your concern over farms growing much larger is to limit the crop insurance premium that is paid for by the government.  Just picking a number for example, but the government pays the current subsidy on the first 1000 acres you insurance, but after that the farmer pays 100% of the premium.  I don't see that as being any different then limits on direct payments and such.  If you want to be a large farmer, then you should be willing to take on more of the risk yourself.  I'm sure there will be many finding all the loops holes to get around this by putting insurance in other peoples names, but this would be a start and would help keep some money in the pockets of our broke government.  We need to ALL be willing to give back to fix this mess DC has gotten us into.

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Shaggy98
Senior Advisor

Re: crop insurance proposal

Itsmetoo, that is probably one of the better suggestions I have heard of the late.  IMO,  But you are correct in saying people will find loopholes.  Look at the subsidy payments.

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SpringBrookFarm
Veteran Contributor

Re: crop insurance proposal

I was in D.C last spring working with other farmers, talking with congressman about the farm bill. We all had a meeting with the Risk Management Agency, who oversees the crop insurance. 2011 was one of the biggest payouts they had ever had in crop insurance (im sure this year might have been higher) but they commented on how they were still in the black. They had brought in more in premiums then they payed out. From everything i understood from them was that crop insurance is and has been a money  makeing thing.

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Re: crop insurance proposal

I'd like to see some figures on how RP supports consolidation.  At first glance, it doesn't seem logical to me that a big farmer benefits more from reduction of risk than the small guy, who may be wiped out with one bad year, does.  My guess is that consolidation includes many factors and I doubt that crop insurance is the make or break one.

In the old days before government subisdy, my dad and then I didn't use crop insurance.   Then I started using crop insurance because I, a small farmer, was pretty well extended financially.  Now, things are a little better off and if I need to, I'll go back to no crop insurance, or maybe just hail.

Every year, I look at the University of Illinois FarmDoc page where they do a financial analysis of the various insurance plans.  I usually take the one that has the highest return for me.  Sometimes in has been GRIP, sometimes RP, whatever.  The analysis tells you the chances of a payout.  If the chance of a payout gets too low, I won't buy it.

To some extent, I don't care what they do with crop insurance.

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Re: crop insurance proposal

"... people will find loopholes. Look at the subsidy payments."

 

What do we mean by the term loopholes?  Every time I hear that term, I think someone didn't think someone else deserved to benefit from what the law says.  If they didn't want someone to benefit, why didn't they write the law differently?  I'm probably one who benefits from "loopholes" but to me that means that I comply with the law and take the benefit.  I think it is smart business, not cheating or immoral.  

 

I see that if a law was intended to do one thing but ends up doing another, some might consider that because it has loopholes, but I go back to the idea of writing a better law.

 

Better yet, just cut out the programs and we cut out the loopholes.

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kraft-t
Senior Advisor

The way I see it is

that farmers that oppose subsidized health insurance for the general population shouldn't be in favor of subsidized crop insurance.

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Shaggy98
Senior Advisor

Re: crop insurance proposal

What I was referring to was many people are worried about the cap on farm subsidy payments, maybe there already is one, I don't know.  I am no where close to the maximum if there were.  The "loopholes" I was referring to was people putting part of the farm in their name, part of the farm in their spouses name, part of it in one of the kids names, etc, etc...  By spreading payments among several recipients, they can fall below the cap for any one entity, but still receive the same payments for the operation as a whole.

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Re: crop insurance proposal

Jim, i understand your question and have no support for this contention. It is obvious to most that consolidation in ag will continue with or without crop insurance. My contention is that well run operations (of all sizes) are "propped up" by very advantageous insurance guarantees. The lack of exposure to risk bolsters lenders confidence also. Consequently, well run, savvy, and aggressive  farmers are encouraged by taxpayer supported crop insurance. Next we'll be back to the old debate about wwhether efficient farms expand or expanding farms are more efficient.

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