Droughts and floods could require $15 billion in U.S. taxes to subsidize this year’s program.
Taxpayers in the United States may be facing a record breaking $15 billion in order to be able to continue subsidizing the privately operated crop insurance program, following the devastation from massive droughts throughout the Farm Belt, and flooding in other agricultural regions.
Congress is currently seeking a way to help to control the skyrocketing costs.
It has been a topic of a great deal of debate and discussion as Congress tries to reduce the amount of government spending, as the expenses related to crop insurance are currently increasing at a runaway pace.
Both the industry and the government intend to wait until the end of harvest before making crop insurance cost estimates.
That said, as of October 15, crop insurance payouts for 2012 had already risen to $2.6 billion. Next month, when federal lawmakers make their way back to Washington, they will face both the issues of the farm bill – of which crop insurance makes up an important element – and the fact that it must slash its spending quite broadly in order to help to rein in the country’s deficit.
According to the Environmental Working Group’s Craig Cox, “I think the rising cost of crop insurance will bring even more attention to crop insurance than has been paid so far.” That group feels that the coverage is in dire need of reform and provides large farm companies with undue favors.
Currently, the federal government subsidizes 62 cents for every dollar that is spent on premiums for crop insurance. It also provides the funding for a large portion of the losses in years that are exceptionally tough, such as this one.
Back in June, the Senate voted in favor of decreasing the subsidy that will be received by large farmers. It is hoped that this effort will help to save approximately $1.1 billion over the next ten years. However, the House of Representatives held off having to deal with this controversial topic regarding reducing subsidies to farmers until after the elections occur in November.
There are 15 companies currently selling crop insurance in the United States. Though there are years in which this product can be highly profitable, this year has shown significant losses for those insurers.