In the News

Crop insurance reforms needed, some farmers and groups say

Jan 2, 2024 | 5 min read | Print Article

This article by Michael Standaert first appeared in News-Monitor (North Dakota News Cooperative) on January 2, 2024

Federal crop insurance subsidies grew to record highs last year and a growing chorus of farmers and other groups say the system needs reform.

They say a lack of transparency about where the money goes and a system that favors a small segment of farmers on large commodity crop farms unfairly puts smaller, beginner and more diversified farmers at a disadvantage.

Todd Leake, who farms 2,000 acres near Emerado just west of Grand Forks, said the crop insurance program, as currently constructed, is unfair to smaller and more diversified farms like his and said that the premium subsidy – the portion covered by taxpayers — should be capped.

“There’s no limitation on how much crop insurance subsidy you can get,” Leake said. “It could be millions and millions, but for a smaller farmer it is much less. So larger operations are getting their risk management paid for by the federal government to an unreasonable degree.”

Another impact the current system has had is inflated land prices leading to larger farms either buying up or renting out more land from smaller farmers around them, he said.

“They can keep growing and swallowing up land at the expense of family farms,” Leake said. “They’re getting their land taken out from under them because the big operations can’t lose.”

In the past two decades, crop insurance payouts have grown from just $2.96 billion in 2001 when the federal program started, to a record $19.13 billion in 2022.

Increasing fluctuations between years of drought and years of heavy precipitation as climate swings intensify have increased the number of claims.

Only an average of 20 percent of farms across the country can access crop insurance, and this favors commodity crops, including those grown primarily for energy use.

There are several bills circulating in the U.S. Congress aimed at reforming the crop insurance program — and if not individually passed — they could make their way into how that insurance system is reformed in the next Farm Bill.

Legislation under consideration largely focuses on transparency, caps on amounts received by individual farmers, including more support for beginning farmers and ranchers as well as support for sustainable agricultural practices like cover crops.

On the tax side, the group Taxpayers for Common Sense is pushing for greater transparency since current laws do not make details on what individuals and businesses receive in crop insurance subsidies available to the public.

Taxpayers end up paying around 65 percent of the costs of the insurance through the premium subsidy.

The Congressional Budget Office estimates the program will cost taxpayers around $16.3 billion in 2023 and at least $10 billion per year over the next decade.

“Crop insurance subsidies are currently non-transparent, so we don’t know who they go to,” said Sheila Korth, a senior policy analyst with Taxpayers for Common Sense based in Nebraska. “There’s no limits if you’re a billionaire or a millionaire or if you live on a farm or not.”

Korth said it would be “nice to know, from a public good perspective, and a taxpayer perspective” where the money is going and to ensure that payments are not going to anything unnecessary.

Former legislator and tax reform advocate Rick Becker said the crop insurance system is “fraught with problems” and that it leads to inflated prices of agricultural land.

“When you have a guaranteed income, especially for specific crops, with no loss, that suddenly makes land more valuable,” Becker said.

“And so what we’re seeing is, of course, farmers expanding but the biggest ones are the ones that can afford to absorb that cost,” he said. “So the bigger ones get bigger and the new farmers and the young farmers are squeezed out.”Bernt Nelson, an economist at the American Farm Bureau Federation and native North Dakotan who continues to participate in a family farm here, said with the push for transparency, reforms need to be careful not to “create opportunities for there to be winners and losers” adding that calls for full transparency could undermine privacy.