Drought highlights the controversy surrounding crop insurance
The worst drought in 60 years has established a stranglehold in the U.S. The severity and persistence of the disaster is threatening to cause widespread food shortage as the country’s corn and soybean crops begin to suffer. The onset of the drought has brought attention to the country’s crop insurance program. The program was initially formed as a way to provide farmers with the protection they needed but has been subjected to several changes throughout its existence. Now, concerns are rising over the potential economic impact of crop insurance rather than that of the drought itself.
Drought could cost as much as $50 billion, not including auxiliary costs
As it stands, the drought itself is expected to cost the U.S. economy some $50 billion, according to the National Oceanic and Atmospheric Administration (NOAA). The country’s farmers are on the verge of seeing more than $18 billion in losses, $10 billion of which may end up being paid for by consumers, according to Vincent Smith, an economist at Montana State University. Another $9 billion can be added to the sum due to the federal government providing sums to farmers to assist with crop insurance premiums. These costs and their potential impact on consumers have brought the federal crop insurance program under fire.
Federal government aims to expand crop insurance program
Despite criticisms and the potential economic implications of the crop insurance program, the federal government has shown favor for expanding the program rather than limiting it. Critics suggest that the crop insurance program, in its current form, encourages farmers to take inappropriate risks as they will not suffer any significant consequences. Environmentalist groups note that these risks have led to the destruction of areas that are valuable in an ecological sense and may actually be contributing the problems facing agriculture in the country.
Government plans to provide assistance to livestock farmers
The federal government announced on Monday that it will be purchasing $170 million worth of meat and poultry in an attempt to help livestock farmers mitigate their losses caused by the drought. These farmers are either not eligible for the crop insurance program or can make use of it only to a modest extent. The current projections concerning the cost of the drought are subject to change as the disaster itself changes.