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Crop Insurance Saves Taxpayers Money

September 2012

The same farmers who faced record flooding last year are facing severe drought this year, which underscores the need for effective risk management tools in agriculture. The Sept. 2 article “Highest cost of drought falls on taxpayers” misses the reasons why crop insurance has gained such broad public and political support.

Farmers purchase crop insurance as a way to shelter themselves from the whims of nature. Most Iowa farmers purchase crop insurance yearly, but rarely collect indemnities. For example, in 2011, Iowa farmers spent $444 million of their money to purchase 124,000 crop insurance policies, of which only 15,000 were indemnified.

The crop insurance system saves taxpayers money. It has all but eliminated the historical response to agricultural disasters, which was 42 supplemental ad hoc disaster bills — measures that cost taxpayers

$70 billion since 1989, according to the Congressional Research Service. And spending on farm programs has gone down substantially over the last few years, roughly 36 percent, as crop insurance use has risen.

Unfortunately, the Environmental Working Group is critical of crop insurance and was quoted that “farmers are praying for drought, not rain” this year. The statement shows a lack of understanding of how crop insurance works and a callous attitude toward the American farmer.

Americans are accustomed to a bountiful food supply that remains affordable. This is possible only through stability and reinvestment in agriculture by America’s farmers and ranchers. For most of them, crop insurance is the best risk management tool, or only such tool, available.

Steve Hamilton, Oakland, Iowa

 

Cedar Rapids Gazette

September 24, 2012

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