These policies, subsidized by the federal government, help protect against losses.
When plants fail to grow or are damaged by poor or severe weather, or even when prices plummet, the government is footing the majority of the bill through a crop insurance program for farmers.
This coverage helps both the growers and the insurers who write the policies.
It functions by providing subsidies to the farmers and the insurers in the case that losses from crops should grow too large. These subsidies are partially paid for by taxpayer dollars. The most recent farm bill that is currently faced by the Senate will mean that this coverage will cost an estimated annual $9 billion.
Farm groups, lawmakers, and insurers alike have agreed that the crop insurance program is a critical safety net for growers, which will make certain that farmers will be able to remain in business, even when their plants have been destroyed by weather, or when the markets send their prices sky high or through the floor. Those opposed to the program, however, claim that this is a waste of money – which is already in short supply – and that the consequences of this rapidly increasing subsidy will hurt not only taxpayers, but also rural lands.
This increased importance of crop insurance in the five-year bill currently in the senate is being described in Washington as a reform to the current system, which has been supporting growers for many years.
Senate Agriculture Committee chair, Senator Debbie Stabenow (D), says this is a massive overhaul.
She claims that this isn’t just a small change to the existing bill but instead “represents the greatest reform of agriculture policy in decades.” The bill’s Senate version – which is still waiting for House action – is reducing the spending from the program to $969 billion over the next ten years, which will lower the amount by about $24 billion. This will be accomplished primarily by ceasing the direct payments to the owners of farmlands, which are currently paid regardless of whether or not they grow anything.
These crop insurance payments currently total approximately $5 billion per year and accounted for almost 10 percent of the income of the farm sector in 2011.