Federal Crop Insurance

November 1, 2006

November 1, 2006

When the next farm bill is written, everything will be in the spotlight. Some might say in the cross hairs for elimination. Federal Crop Insurance will not be an exception.

The federal government pays 60% of farmer premiums for their crop insurance. With a bad crop, insurance will pay a farmer as much as 95% of the income he would get from an average crop. If you are farming marginal land, that is a deal that is hard to refuse. The result -- farmers plant land that would be otherwise left in grass or fallow. So, the government is spending billions of dollars encouraging production. Is that not a cheap food policy?

On my farm, I buy hail insurance. It isn't government subsidized. Insurance can provide needed protection, but it should not be subsidized, because that distorts a farmer's cropping decisions. The market should tell us what to grow. In the same vein, I don't support government subsidies for insurance for housing in flood plains such as 'New Orleans. If the government subsidizes insurance in such risky places, we will build where we should not.

One additional problem with Federal Crop Insurance is that disaster assistance for draught or floods often is heaped on top of the crop insurance money. Congress knows this is redundant. When the plan to subsidize Federal Crop Insurance was passed, it was supposed to make disaster relief unnecessary.

Not surprising, the Congress still has not been able to resist the temptation to spend on disaster relief. In fact, disaster relief is on the Congressional agenda when they come back after the election. When I was Secretary ofAgriculture, I tried to fix Federal Crop Insurance. Couldn't be done then and can't be done now. If something is insurable, private companies will do it, that is the way it should be.

Any thoughts you have, I can be reached at jblock@ofwlaw.com. Have a great week!