Wednesday, Jun 20, 2018
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Record crop-insurance payment stirs up debate

Farmers’ claims total $16B after U.S. drought

DES MOINES — Farmers will be paid a record $16 billion in crop insurance claims for 2012 because of the widespread drought, a staggering amount that has critics calling for changes to what they say is an inefficient taxpayer subsidy the government cannot afford.

While farmers buy crop insurance from private firms, the federal government subsidizes their premiums and picks up the tab for losses over a certain amount.

One analyst estimates the federal tab for 2012 will come to about $11 billion.

It is the second straight year farmers have received record insurance payments as flooding and drought in 2011 was followed by an even worse drought last year.

The $16 billion in payments also comes as lawmakers working on a new farm bill have been considering a shift from disaster relief to crop insurance as a more predicable way of protecting farmers.

Farmers can buy insurance that covers from 50 percent to 85 percent of the revenue they would have earned and pay premiums based on their coverage.

“It’s not a money-making proposition,” said farmer Ben Steffen, near Humboldt, Neb. “It’s a way to keep you from getting buried by a disaster.”

The most recent report from the Federal Crop Insurance Corp. put the total payout at $15.91 billion, but some claims for 2012 are still pending. Even so, last year’s loss represents at least a 47 percent boost from the $10.8 billion record loss in 2011.

The program, run by the Risk Management Agency in the U.S. Department of Agriculture, is a three-way venture in which insurance companies sell farmers policies to cover crop losses. The government subsidizes the program by paying about 62 percent of the cost of insurance premiums, and farmers pay about 38 percent.

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