April 25 (Bloomberg) -- Here’s the first thing to understand about federally subsidized crop insurance: In an era when direct payments to farmers are increasingly difficult to justify, crop-insurance subsidies are becoming the main way in which public policy supports commodity crop farmers.
The farm bill negotiations taking place this week in the Senate Agriculture Committee will undoubtedly enshrine insurance subsidies -- and fund them -- at an unprecedented level. Look at any chart showing the rate of growth in federal spending on crop insurance over the past decade, and you will see what I mean.
Large corn and soybean producers that I know in my area love this program. They would go to the mat to defend the insurance subsidies as important vehicles of public policy. As one agriculture researcher recently told me, current insurance programs and federal subsidization levels have made it almost impossible for an Iowa corn producer to lose money in a given season.
There are many reasons public support for agriculture is critical to rural economies, to the security and stability of our nation’s food supply, and to the American public. The point isn’t to argue that support should be eliminated or even reduced; with 2 percent of the nation’s population producing all the food, society has a strong interest in providing a safety net for this tiny minority.
Farm Safety Net
But as a vegetable producer interested in seeing a diversity of crops return to parts of the Grain Belt, I am troubled by the U.S. Department of Agriculture’s increasing reliance on crop insurance as the primary element of the farm economy safety net.
Here’s the second thing to understand about the issue: Crop-insurance subsidies have the effect of picking winners and losers among crops on the farm landscape. When the Agriculture Department rewards four commodity crops -- corn, soybeans, wheat and cotton -- with 75 percent of the public crop-insurance subsidies, and when the absolute value of those subsidies is rising at a double-digit rate for yet another year, it’s no wonder these crops dominate.
With Agriculture Department support and big money so firmly behind commodity crops, there are inevitably other crops -- and producers -- that are left out in the cold. As a practical matter, it is impossible for me to purchase insurance for any of my vegetable crops, federally subsidized or otherwise. In fact, in the first 15 years of its existence, my farm received not a single dollar of federal support of any kind.
Decades of research have demonstrated that Americans should be eating more fresh fruits and vegetables, and fewer processed foods sweetened with corn syrup. My farm’s history of steady growth has shown that there is a huge market for quality fresh vegetables throughout the Midwest; the public is crying out for locally and regionally grown produce. Why then is federal policy so skewed?
There is a glimmer of hope in the farm bill negotiations on Capitol Hill and lawmakers have an opportunity to address this issue. The Agriculture Department’s Risk Management Agency created a pilot whole-farm revenue program in 2006, allowing farmers like me to insure revenue rather than crops.
The trouble is that a report released yesterday by the Union of Concerned Scientists found that the program, as it stands, has significant design flaws. The policy’s premiums are too high relative to the level of coverage, making the policy less effective. It’s also not available nationwide, with Washington, Oregon and California accounting for almost 80 percent of the whole-farm revenue policies sold in the past two years.
Yet, research funded by the Risk Management Agency itself has demonstrated that a few critical changes to the program’s structure could make it a viable tool to manage risk for farms like mine. Congressional negotiators should include whole-farm revenue insurance -- and the funding for it -- in this year’s bill.
Fairness and Priorities
The crop-insurance issue is ultimately one of fairness and public priorities. By directing so little money and attention to vegetables and alternative crops, Congress and the Agriculture Department are rewarding some farmers at the expense of others. Many of these neglected farmers are producing healthful crops for a part of the food economy that has been booming in recent years: local food. But federal policy has the effect of discouraging the production of fresh fruits and vegetables for local and regional markets.
If the American public wants to see more and better fresh produce options on supermarket shelves, it will want to see growers like me step up and take risks to expand their production. The way to do that is to correct the imbalances in federal crop-insurance subsidies.
(Jack Hedin owns Featherstone Farm in Rushford, Minnesota. The opinions expressed are his own.)
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