Farmers may gain amid drought with U.S.-backed insurance

Dust Bowl

Federal crop insurance dates to the Dust Bowl droughts of the 1930s. The program and subsidies were boosted in 2000 as lawmakers sought to use it as a way to avoid what by the 1980s had become near-annual disaster payouts. Those payments cost taxpayers $68.7 billion from 1989 to 2009, according to the Congressional Research Service.

The program reflects a long-standing desire in Congress to protect farmers, who are considered essential to the economy and at unusual risk of losses because of weather, said Keith Collins, a former chief economist for the U.S. Department of Agriculture who is currently a consultant for the crop-insurance industry.

The share of government support for crop insurance could rise by the time the next disaster hits, as lawmakers are working on a new agriculture-policy law that would expand support both for farmers and the insurers. The Senate has passed a bill with a provision that reduces premium costs for new farmers, expands insurance for cotton growers and allows farmers to buy a supplemental policy.

The Senate changes would cost the government an additional $5 billion over the next decade, according to the nonpartisan Congressional Budget Office. The House Agriculture Committee has approved a similar measure.

‘Good Example’

That expansion partly compensates for the proposed elimination of another form of subsidy, direct payments, which growers can receive regardless of crop prices. House Agriculture Committee Chairman Frank Lucas, an Oklahoma Republican, called the insurance plan a “sound risk-management program that serves as a good example of a public-private partnership where producers pay for coverage.”

Lawmakers have moved “substantially in the direction of having risk management be the farmers’ safety net,” David Graves, manager of the American Association of Crop Insurers in Washington, said in an interview. The droughts last year and this year show the program is working, he said. Farmers will “have a loss, but they’ll be able next year to ante up and go at it again.”

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