Many Illinois farmers took a beating from the weather this summer. As a result, crop insurance also took a few licks.
Anticipation of billions of dollars in drought-related insurance claims nationwide sparked debate over the taxpayer cost of federal crop premium discounts for farmers.
Cost estimates in media reports overlook the fact that farmers oftentimes pay premiums without filing a claim.
Policy consultant James Callan argues the 2012 drought illustrates the importance of insurance in “helping provide a stable food supply” and lower prices. Premium subsidies have helped farmers afford coverage and thus survive to raise food for human consumption as well as poultry and livestock feed for another year, according to Callan, a former U.S. Department of Agriculture official.
“It’s really making production agriculture viable in many regions,” he says.
Given its growing success in addressing weather- and market-related risks, the U.S. crop insurance program is becoming a model for international policymakers, Callan adds.
Sharing risks and costs with private insurers and farmers offers major budget savings over direct farm subsidies – an attractive prospective for developing nations and economically challenged European countries alike, Callan says.