Obama seeks to reduce U.S. subsidy of crop insurance

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President Barack Obama proposed reducing the most expensive part of the farm safety net by cutting the subsidy to farmers for buying crop insurance.

At present, the government pays 62 cents of every $1 of insurance premium. Farmers collected a record $16.2 billion in payments on 2012 crops, chiefly due to drought. They paid $4 billion for the policies and the government added $7 billion.

Obama on Wednesday proposed a reduction of 3 percentage points in the federal subsidy for policies with higher levels of coverage - the most popular policies - and a reduction of 2 points in the subsidy to buy so-called harvest price policies that pay more if commodity prices go up during the year.

Farm income is forecast at record levels, said the White House, so it is time to adjust farm supports. As part of that, it proposed elimination of the $5 billion a year "direct payment" subsidy that is paid regardless of need.

Besides lowering the premium subsidy, Obama said the government should pay less of the administrative cost for the privately run system and insurers should be held to a "reasonable rate of return" on crop insurance, forecast to cost $9 billion a year.

Roughly $1 billion a year would be saved under the administration's proposal.

Leaders of the House and Senate Agriculture committees oppose major changes in the federally subsidized crop insurance system. Senate Agriculture chairwoman Debbie Stabenow said on Tuesday, "We need to make sure it is affordable to farmers."

Last year, the Senate voted to reduce the premium subsidy for farmers with more than $750,000 a year in adjusted gross income and to require farmers to practice soil conservation to qualify for subsidized insurance. The House farm bill omitted those reforms.

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Bill Stanley    
Texas  |  April, 11, 2013 at 08:29 AM

This is one of the rare occasions I agree with Czar Obama; however, the cuts are not big enough. Get farmers off welfare. newsandopinions dot net

Don Heller    
Texas  |  April, 11, 2013 at 02:31 PM

I disagree with this move. Crop insurance is in place as a governement/private partnership for the same reason people have flood insurance subsidized by the government and sold by private insurance companies. The risks are too large for private insurers to tackle this and charge affordable rates for coverage. By moving towards a farm policy which is geared more towards crop insurance for risk management the farmer pays into this and decides how much he is willing to pay vs the risk he wants to bear on his own. Some of the cost of this program is paid for by farmer paid premiums. Some of the cost is borne by private reinusance companies who buy a set of risks and become responsible for losses it has. They hope to make money on it but may wind up paying out more than they get for it. This program is vital to having a viable food supply here. Without it most farmers cannot get bank loans to operate each year. Without a healthy farming sector we become dependent on other countries to provide the bulk of our food. We see that with energy... and that is not good. Crop insurance is not farm welfare. The farmer never sees the subsidy. Crop insurance is public food assurance so that people are able to make investments into infrastructure to feed out country. It is part of national security... unless you don't like to eat...

Robin Newell    
Johnston, Iowa  |  April, 12, 2013 at 08:46 AM

Dairy farmers and hay growers should be concerned about the disparity between the crop insurance programs for hay and haylage versus grain and row crops. The participation rates are telling, with 90%+ participation for wheat and corn, 80%+ for soybeans, and 99% for cotton. Alfalfa is just 3-7% participation with very low payout ratios versus other crops. Whatever the total federal crop insurance subsidy ends up being, it needs to be more equitable across crops so as not to disadvantage those farmers who grow and purchase hay and haylage. This should be of high concern in drought-stricken areas. And with proposed re-coupling in the upcoming farm bill, look for lenders to advise farmers to plant the crops with the best crop insurance. These factors will likely put hay production at a disadvantage versus other crops at the farm level when considering production risk. Consider the potential for future ramifications to hay price.

April, 12, 2013 at 09:19 AM

I agree with the cuts. Infact, they should be cut all the way to zero over about 5 years. To do this, we need to eliminate income taxes on farmers and allow money to stay in farmers hands so they can provide their own safety net. Currently, too many take depreciation right offs and such to avoid taxes. Insurance programs have historically been a bad investment on farms except the last few years due to higher than cost of production fall projected grain prices

Iowa  |  April, 12, 2013 at 09:58 AM

Don, we now have more people living in flood plains and other high risk areas because of the flood insurance subsidies. What about the risk to the taxpayer that subsidies this insurance and the other expenses when the reinsurance companies fail. The risk may be too large for someone to grow corn in Texas with an average rainfall of less then 20 inches, but that is not a good reason have the current program. Also, equating farm programs to national security is an old bogus argument. How many feedlot calves are born in Mexico and fed in Texas? Do you see any bananna plantations in the US? How much of the seafood that we eat comes from other countries controled waters? Etc., etc., etc. We currently import a great deal of food products from other countries and around the world. This give the average consumer a great deal of variety of choice in what they consume. Importing food, like energy or any other widget, is not an inherently bad thing. One of the reasons that our energy sector is messed up is because of companies/industries looking for a hand out and the politicians that want to control the people. The less of that we have in agriculture the better.

SD  |  April, 13, 2013 at 02:49 PM

It hasn't been very long that cattle ranchers had ANY sort of protection for our crop, most especially the native grasses and hay crops which are desperately difficult to be sure of growing in our drough plagued grazing lands. It has helped greatly to have some subsidized insurance, but the prices have been too high. If weather forecasts were more reliable, we would be better able to determine our needs, but until that day comes, we are dooming ourselves to excessive costs we won't recoup IF we DO buy the insurance and it rains, and to disaster if we DON"T buy and it doesn't rain. I would like to end all government subsidies, but maybe we should do it slowly and across the board, not just hitting farmers. Maybe people need to learn what others across the world have to spend for food. Last I heard, the USA was about the least, at less than ten percent of income. That is just ONE of the perks of ag subsidies, folks! Robust rural communities is another!

iowa  |  April, 16, 2013 at 07:50 AM

We could solve the money problem very easily. Quit giving money to the free loaders. Farmers support all our food stamp and welfare programs. Make them work like we all have to evryday. If they don't want to work they don't deserve to be here. I know I'm putting this pretty blunt but I'm tired of paying for the worthless ones.

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