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Re: subsidies

Thank you, DS. As I am regularly lectured here on Econ 101 from folks who got their PhDs at AM talk radio U, it is nice to find somebody who I think gets it as far as the intersection of economics and politics.

 

It pretty well sums up the larger debate as a microcosm. You have plenty of folks who aren't particularly well served by the current system (OK, granted, most everybody is feeling fat and happy right now)  but they have been cleverly diverted to focus their fears against the "enemies of ag"- animal welfare, greenies and the like, not to mention the unspeakable injustice of having food assistance in their farm bill. To view their greater threat as the neighbor BTO or livestock integrator would constitute the ultimate sin of "the politics of envy, class warfare" etc. yada yada. Which we all know is bad and even worse, makes you seem rather declasse'.

 

The big guys have been hugely favored by public policy over the last ten years or so. My basic conservatism says that it isn't right to try to take that back even if they benefitted from poor policy. What you can do is quit favoring them.

 

Using the hypothetical example of a pretty stringent crop insurance subsidy cap, can anybody explain to me why a 1000 acre corn belt farmer and a 15,000 acre one getting the exact same subsidy constitutes class warfare?

 

Actually the current system is a lot like our larger situation. Yes, it constitutes class warfare by the big against the not so big.

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Veteran Contributor

Re: subsidies

Shaggy you are electing to improve you acres because that is what you can do to stay competitive.  Some of the BTO's have that quantity over quality mentatlity and crop insurance promotes that.   If they didn't have crop insurance to back them the would have to change their business model.  You wouldn't and could in fact pick up more land and slowly improve it as well.

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Honored Advisor

Re: subsidies

yep --------- it's all crop insurance's fault.  

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Highlighted
Veteran Contributor

Re: subsidies

Hardwheat was just trying to get his head around the subsidy thing.  Shaggy thought I was accusing him of "milking".   I wasn't blaming crop insurance or thinking Shaggy was milking, however I would state the crop insurance with out a doubt distorts reality.  We do the best to live within the reality.   At least Hardnox and I understand the reality and presumably are preparing for the reality to change which it will.    Economics laws are similar to natures laws.  They can be distorted for a while.   The best analogy I can think of is jumping out of a plane without a parachute.   Gravity doesn't kill you.   It's the sudden stop that proves fatal.  SW I'd make sure you got a parachute on board.

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Re: subsidies

I think CI is a bigger deal for dryland plains than other places.

 

I think that highlights one of the problems with ag legislation- the regional blocs. Legislators hold fast for their constituencies and trade off with legislators from other places for what they want.

 

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If there was a cap, maybe state legislators in those states would like to double or triple it?

 

You can't be talking more than a few thousand producers above a $20K cap even in Kansas. It's only cost the state maybe $50-100 million?

 

Or maybe the voters of those states would choose not to.

 

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Honored Advisor

Re: subsidies

As in the past ----- the limits you impose will determine the number of producers.  Smiley Happy

 

 

But overall we agree ---- I think ------ Trying to make one shoe fit all creates real problems for CI.  

 

We might differ on this one --------- The overall cost of the program per acre in our region is way too high and the taxpayer is stuck with the overage.

 

example from a dry land field ins schedule on my desk for the 2013 season  160 acres, 28 bu aph, 75% coverage

Total potential liability to the ins co --- $12,393

Base Premium                                 ----  $5,148

Insured Premium                             ----  $2,317

 

Taxpayer share                             ------  $2,831

 

That is the foolishness of trying to cover everything for everybody------ From DC.  

 

Regional problems should be handled seperately to address local issues  -------- now we are writing leaky blankets and asking the taxpayer to eat the expensive leaks.  just my opinion----------- and I guarantee you my feelings on the issue come from my concern for the small farmers locally who are trying to survive on dry land acres and limited budgets ----- Lots of acres to cover and limited resources ------ one cap won't fit all.

 

just my opinion --- hope that explains it a little  ------ good discussion on the subject.  thank you

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Honored Advisor

hey Nox??

From my side of the fence,  the CI looks self destructive

In low risk areas the aph's stay high, premiums stay cheap but they seldom need it --risk factor ---

So it gets bought up to cash in on the revenue protection in a down market.  Seems ok but pushes planting.

Otherwise all it is doing is transfering $$ from taxpayers to insurance writers if their are few claims.  Yet those transfers should be lower because of the risk factor.

 

In high risk areas-- like down here in SF, wht, milo rotations.  premiums are high  ---risk factor--

APH goes down because every claim event drops aph immediately------- land with 70 bushel milo potential (60-70 bu proven yields prior to CI)  in average rainfall years takes too long to rebuild history when that crop comes around once in three years.

Coverage shrinks over time to an ineffective level.

 

Am I way off?   when I set back and stare at it long enough,  it doesn't look like insurance at all to me.  Just a transfer of a subsidy to someone other than a farmer (rich or poor) and the farmer gets the blame when the claims are quoted.  Most years the claims are just mist in the air compared to the crop value nation wide.  

Is it insurance or just a reaction to political pressure like EWG.

Appreciate your thoughts

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