Each year, farmers choose from a menu of insurance options -- and by law, insurers are obligated to cover all who apply. More than seven in 10 policies guarantee income rather than yield.
The Washington-based Environmental Working Group, which supports more federal aid for conservation, says subsidies give farmers an incentive to buy “Cadillac” policies that over- insure their holdings and drive up costs. Some policies protect as much as 85 percent of a farm’s average yield.
Record Income
Taxpayers are helping farmers pay their bills even as farm income this year is expected to top $120 billion, its highest inflation-adjusted mark since 1973, according to the USDA’s Economic Research Service. Farm income has doubled over the past four years thanks to rising land values and surging exports.
In 2011, the median income of commercial farm households -- those deriving more than half their income from farming -- was $84,649, almost 70 percent higher than that of the typical American household.
Even as manufacturers and retailers struggle to rebound from the recession that ended four years ago, farm equity ended 2012 at $2.5 trillion, up 37 percent since the start of the recession in December 2007 -- compared with a less than 1 percent gain in net worth for all U.S. households over the same period.
Citing “the record-breaking prosperity of American farmers,” Ryan, a Wisconsin Republican, said in March that “taxpayers should not finance payments for a business sector that is more than capable of thriving on its own.”
Policy Shift
The planned expansion of crop insurance reflects a decisive move in the nation’s farm policy away from direct payments to farmers.
The Congressional Budget Office says crop insurance will cost taxpayers about $90 billion over the next decade. If droughts like last year’s become more frequent, that could prove a conservative estimate: A February USDA report warned that even if greenhouse gases tied to climate change stabilize, “land surface temperatures will continue to rise for decades,” permanently altering planting zones.