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Did Overstated Forecasts of Crop Insurance Claims Prevent Ad Hoc Disaster Aid?

G. Art Barnaby, Jr.

Summary

In August of 2012, some analysts were forecasting crop insurance claims of nearly $40 billion. Those overstated insurance claim forecasts set the stage for a “no ad hoc disaster aid policy in 2012”. The press ran with the story and made it appear that most farmers had record profits and received “big” insurance checks. Citing national aggregated profit and crop insurance data provided a very incomplete picture.

Individual farmers with record profits had good yields, but no crop insurance claims! Farmers receiving insurance checks may have had an “average” year, but most farmers still needed a 20% yield loss or more to collect insurance payments. Some had a 19% yield loss and collected nothing. The only exception would have been those farmers with GRIP coverage that does not require a farm level loss.

Iowa corn farmers with crop losses would have had greatly reduced claim checks without the harvest price built into Revenue Protection (RP). Some academics have argued the harvest price should be eliminated or have a reduced harvest price subsidy. Without the harvest price, many Iowa farmers would not have had claims in 2012.

Is it believable that policy makers would have retained a “no ad hoc disaster policy”, without those Iowa corn farmers collecting crop insurance payments in an election year?

Reduction in harvest price subsidy is only one of many ways to reduce the taxpayers’ costs. This presentation will cover alternatives and consequences caused by reduced taxpayer support for crop insurance.

Details

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