Economists Study Crop Insurance Costs

As important as it may be for farmers, crop insurance is costing the federal government a great deal of money, NPR's Kathleen Masterson recently wrote.

According to 10-year projections, the government may pay $8 billion a year to producers and crop insurance companies. This would make it the most expensive farm program, leading some to question whether the level of government expenditure is justified.

Starting in 2000, the federal government began paying 60 percent of the premium for crop insurance, up from 42 percent previously. Since then, farmers have bought higher level coverage and more expensive revenue insurance policies. Because crops require steady investment, but can be ruined by weather events, pests or diseases that farmers have limited ability to combat, the coverage is a wise investment for many.

This represents a success for the program in the sense that high enrollment and overage means farmers are being protected against otherwise damaging losses. At the same time, government efforts to cut the budget are pressuring officials and legislators the determine what programs to cut, and the significantly increased liability average associated with crop insurance is causing many to give it a second look.

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