Drought Could Put a Target on Crop Insurance
Agricultural economists say the crop insurance program could cost 15-billion dollars this year as a result of the drought. That price tag could make crop insurance a bigger target for reforms as Congress looks for ways to cut government spending. While the government and industry want to wait until late fall - when harvest is ending - to estimate costs - it's reported that 2.6-billion dollars has been paid so far in 2012 for crop indemnities. The Environmental Working Group has argued crop insurance favors big farmers and is in need of reform. Craig Cox of the EWG believes the rising cost will bring more attention to the issue. But American Farm Bureau Federation Economist John Anderson argues without insurance - or low levels of participation - there would be an outcry for intervention this year to deal with the effects of the drought. He says it would likely result in one of the biggest ad hoc disaster programs we've ever had - but notes there has been no call for that. Anderson adds that the availability of this insurance - the government involvement in this insurance - allows farmers to operate at a higher level than they otherwise would if they were having to take on all of the risk of farming on their own. He says consumers benefit.
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