Revenue insurance—a certainty in an otherwise unknown farm bill
As of the first week of December 2013, Congress has made little visible progress toward reconciling two different visions of the farm bill. The Senate passed a traditional-all-encompassing farm bill while the House chose to split the farm and nutrition legislation into two different bills in order to impose significant cuts in the Supplemental Nutrition Assistance Program (SNAP, often referred to by its older name: food stamps) separate from must-pass farm legislation.
But one thing is certain: the next farm bill will include crop/revenue insurance as a primary component of the farm program no matter what happens to the SNAP cuts.
Providing support for this sense of inevitability, Thomas Zacharias, President of National Crop Insurance Services (NCIS), and Keith Collins, retired Chief Economist of the United States Department of Agriculture (USDA) and an economic and policy advisor to NCIS, wrote an article for Choices: The magazine of food, farm, and resource issues, a publication of the Agricultural and Applied Economics Association, titled “Ten considerations regarding the role of crop insurance in the agricultural safety net.” As they write, “in this article we offer a within-the-industry perspective on the [crop insurance] program status and key issues.”
Zacharias and Collins pose their considerations in the form of ten questions, many of which we believe provide a rationale, more for farm policy in general, than for crop insurance in particular. Their first question: “Is there a public interest in a resilient, financially sustainable and competitive industry that produces the nation’s food and is subject to natural disasters and other shocks?”
The public definitely has a vested interest in supporting US agriculture’s ability to provide a reliable supply of food. It’s the throwing “other shocks” in with “natural disasters” part that we question, since multiple years of devastatingly low prices presumably would be just an “other shock.”
Crop insurance is well suited to deal with the natural disasters like drought, flood, and untimely heat during critical periods of crop development, as well as late and early frosts. In fact, crop insurance is far superior to the ad hoc disaster payments that Congress used to use to compensate farmers for the financial losses caused by such events. With crop insurance, protection does not depend on the timing of Congressional action or the extent of the disaster. Rather it provides immediate compensation as well as protection even if the disaster is confined to a small area and it tends to not make payments to farmers who are geographically included but happened to realize no losses.
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