Crop Insurance Subsidies Cut, Farmer Premiums Stay the Same
U.S. crop programs undergo significant changes, although farmer premiums remain unaffected.
July 22, 2010
Although crop insurance programs have undergone significant changes in recent months, farmers’ premiums are not expected to increase. News for the 16 companies that offer private crop insurance isn’t as positive; by signing a five-year standard reinsurance agreement with the USDA’s Risk Management Agency (RMA), the insurers agreed to accept $6 billion less in government subsidies over the next decade. The news could have been worse—the Obama administration originally sought cuts of $8 billion—but even at the lower number, the industry is almost certain to undergo consolidation.
USDA Secretary Tom Vilsack said in a statement that the agreement, which has been under discussion since 2009, “lays the foundation for a more sustainable crop-insurance program, reduces the federal deficit, and improves the farm safety-net,” but insurers insist they had little choice in the matter. Companies that didn’t agree to the 20% cut in subsidies would have received none at all if they didn’t sign the agreement.
The cuts were proposed by RMA, which says that higher cotton prices led to excessive profits for the insurers. Two-thirds of the $6 billion saved will go toward reducing the deficit, and the remaining $2 billion will go to land conservation programs.