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Thu August 2, 2012
Drought forces some to rethink crop insurance
Corn prices surged to a new record high on Monday, as the worst drought in more than 50 years continues to plague more than half the country.
Despite the drought many crop farmers are expected to emerge largely unscathed thanks to taxpayer-subsidized crop insurance. As Congress moves to make the program even more generous, some are beginning to question if the subsidies are necessary at all.
Steve Turner farms about 2,700 acres in Cass and Mason counties in Illinois. About a third of those acres are irrigated, but they rest he says are parched, withered and effectively dead, like this field we’re standing in.
“That planted just literally died. And some of this is dying and falling over, and even this it’s not going to take much to break it over," Turner said.
Turner says this summer is the worst drought he’s seen since the 1980’s, and the 2 tenths of an inch rain mean what little corn survives will be of poor quality. With much of his corn already toast, Turner says if he doesn’t get some rain over the next couple weeks, his soybean crop might also be wiped out.
Thankfully for Turner, and 85 percent of corn farmers, there's crop insurance, which will compensate him for most of his losses.
Nathan Fields is an economist for National Corn-Growers Association. He says it’s years like this which prove the necessity of the crop insurance programs -- which are supported by hefty federal subsidies to both farmers to pay the premiums and to the crop insurance companies to cover losses.
““When you have large weather events like this, if the insurance companies are hit with this number of claims all at once, it threatens the viability of that industry as well," said Fields, "It acts as a stabilizing agent, it’s what allows us to move through years like this and still have a viable and functioning food production system.”
As bad as the drought is, Fields estimates that national corn production will only be down around 12-15 percent over last year. But even that small of a decrease could translate in to additional tens of billions in payouts from the government in crop insurance subsidies, which is how the system is designed to work.
Bruce Babcock is an Agricultural Economist at Iowa State University. He says that despite the drought, high prices for grain and meat mean the strength of the agricultural sector has never been better, and the argument that our food security depends on crop insurance just isnt’ true, even if some farmers are forced out of business.
“The competition for land right now is fierce. There would be so many people bidding on that land next year because the prices are so high, that it’s not like agriculture is going down because of this drought. You know, that’s what people who justify these subsidies want you to believe,” Babcock said.
Babcock claims crop insurance should be treated like any other farm expenditure, say, fertilizer or diesel fuel.
But back in Illinois, farmer Steve Turner says removing all safety nets for farmers would only take agriculture back to the boom and bust of the dust bowl era, and the idea that farmers aren’t vested in the outcome of their harvests is just ridiculous.
“This is an insurance product; the government might have subsidized it and paid a little bit of it out here for me. But, I’m also writing a check for an insurance policy right here. And by gosh, when you write a check for an insurance policy you’ve got to have the coverage and you’ve got to have it come through on a year like this.”
Earlier this week Missouri Governor Jay Nixon announced a cost share plan to help farmers pay the additional cost of deepening wells to get more water to livestock and crops. More than 600 Missouri farmers submitted applications in the first two days.