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IOWA STATE ECONOMIST: FARMERS SHOULD PAY MORE FOR THEIR CROP INSURANCE
BrownfieldAgNews reports:

Iowa State University economics professor Bruce Babcock says it's time to ask farmers to pay more for crop insurance.

Babcock says generous federal subsidies of crop insurance encourage farmers to buy high levels of coverage and ultimately drive up the cost to taxpayers.

"The premium subsidies incentivize farmers to buy Cadillac coverage," Babcock says. "The Cadillac coverage increases the indemnities paid out. Taxpayers are paying three-quarters of those indemnities, so the subsidies have a direct impact on taxpayer costs because taxpayers are paying for part of that premium - but they inflate the overall indemnities and taxpayers pay the lion share of those in high-loss years."

Babcock says he is not being critical of the crop insurance program itself as a security net for farmers.

"I'm a critic of the subsidies, and those two are two separate items," Babcock says, "and I just think that you could cut the subsidies a tremendous amount - or restructure them - save tens of billions of dollars over ten years and still provide a high-quality assurance safety net.

"If that's what Congress wants, you could do it at a far lower cost."

Babcock says crop insurance has become more of a farm income support program than a risk-management program.

Babcock has released a new report on crop insurance. He made his comments Wednesday during a media conference call set up by the Environmental Working Group


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