Taxpayers will face a tab of around $15 billion -- $7 billion in premium subsidies, $1.3 billion in overhead costs for insurers plus about $7 billion from underwriting losses, says agricultural economist Vince Smith of Montana State University.
Crop insurance blossomed into the biggest farm support because Congress seeded its growth. Lawmakers wanted to end unpredictable and costly aid bills every time there was a farm disaster, aid that cost $45 billion between 1989 and 2001.
So a decade ago, lawmakers agreed to boost substantially the premium subsidy so that farmers would buy higher levels of coverage. Policy value has tripled since then.
Weighing the popularity of crop insurance and the withering attacks on crop subsidies, the agricultural community made the cold-eyed calculation that insurance is the only sure survivor of budget austerity. The still-unfinished 2012 farm bill would kill an unpopular $5 billion-a-year farm subsidy and use some of the savings to expand the crop insurance program.
ONE ANSWER -- ACROSS THE BOARD CUTS
Leaders of the House and Senate Agriculture committees declined to comment on how record costs could affect crop insurance in the lame duck session.
Critics say there are plenty of ways to save money, such as cutting the premium subsidy across the board for all farmers by 5 or 10 percentage points and setting the subsidy rate as low as 52 percent. The idea is similar to the Senate vote to cut the subsidy for big farmers by 15 points.
Other potential reforms would require the industry to carry a larger share of losses or charge farmers for catastrophic coverage now available for free.
"We could also change the delivery system and save at least $1 billion a year that way," said Smith, of Montana State University, a fierce critic of the program.
Cuts are not guaranteed, however. House Republicans are on record. The Obama administration was rebuffed on a package of cuts that included a two percentage points cut to the premium subsidy in favor of insurance cuts but they are not in the farm bill.
A Farm Belt senator, Chuck Grassley of Iowa, argued farmers should not be forced to shoulder more than their share of budget cuts in any government-wide retrenchment.
"It has to be in the context of the entire situation ... It's got to be proportional," Grassley told reporters last week.
CENTERPIECE OF U.S. FARM POLICY
Crop insurance has become the favorite risk-management tool of American agriculture, replacing crop subsidies and the major U.S. farmer and banker groups have joined the insurance industry in opposing cuts to the program.