Federally subsidized crop insurance has become the largest taxpayer support for agriculture. But not all parts of the agriculture industry share in the benefits from this Washington-based program. Subsidies for crop insurance disproportionately benefit growers of a small number of crops. In addition, many small scale, niche, and diversified producers have low participation rates or few options under federal crop insurance.

Both the Senate and House farm bills, S. 3240 and H.R. 6083, include programs to increase Washington’s role in managing the market risks faced by agricultural businesses. Yet neither bill reforms crop insurance into a more efficient, equitable, and fiscally sound program. In fact, both bills propose expanding subsidized crop insurance by mandating development of new insurance policies and creating new programs to cover smaller losses not currently covered by crop insurance. As Congress debates a new farm bill in the long shadow of a $16 trillion national debt, lawmakers should seize this opportunity to improve crop insurance and find savings in what is by far the most expensive and fastest growing part of the agricultural safety net.

Federal Crop Insurance

The federal crop insurance program, first created in 1938, was designed to help farmers get back on their feet after severe flooding or drought, while reducing the frequency and cost of ad hoc emergency aid bills coming out of Congress. But through changes made by Congress and the U.S. Department of Agriculture (USDA), the program has essentially morphed into a cash guarantee scheme for a select group of agricultural businesses. Crop insurance has now outgrown its original mandate to create a safety net for producers. With many crops experiencing record or near record prices, farm country is estimated to achieve a record $122 billion profit in 2012 , while taxpayers are hit with a record high price tag for the federal crop insurance program that could easily cost taxpayers more than $20 billion in 2012 alone.

Unfortunately, making common-sense reforms to the farm subsidy maze is not easy. Opposition to reforming crop insurance has arisen from two special interests benefiting from billions in taxpayer subsidies. Special interest commodity groups including those representing corn, soybeans, wheat, and cotton (the “big four”) are mobilizing in defense of lucrative subsidies that help producers lock in annual business income. In addition, crop insurance companies and agents seek to retain billions of dollars in subsidies for administrative expenses, underwriting gains, and sales commissions that are consistently higher than the industry average.

The “big four” crops got 80 percent of all crop insurance subsidies from 1995 to 2010. Meanwhile, smaller, diversified, organic, livestock, and specialty crop producers do not substantially purchase crop insurance or receive pennies on the dollar compared to traditional beneficiaries. Separating the haves from the have-nots and identifying the should-nots – crops or producers that are already managing risk without government intervention and taxpayer subsidies – is important when trying to make common sense reforms to crop insurance.

Read the full fact sheet here: Haves and Have-Nots in Crop Insurance