LSP Analysis Finds Crop Insurance is Keeping the Next Generation of Farmers off the Land

LSP Outlines Major Reforms for Making the Nation’s Largest Ag Program an Accountable & Reliable Safety Net for All Producers

LE SUEUR, Minn. — The nation’s largest federal agriculture program is a significant barrier to beginning farmers who are trying to get access to land and capital, according to a new white paper released by the Land Stewardship Project (LSP) today. Crop insurance has in recent years become a major publicly-funded mechanism for inflating land prices, concludes the “How Crop Insurance Hurts the Next Generation of Farmers” white paper, which is based on an analysis of government data and farmer interviews.

"Crop insurance should be an effective safety net for all farmers, not just a select few raising a small number of favored crops,” said Tom Nuessmeier, who raises crops and livestock near Le Sueur and serves on LSP’s Federal Farm Policy Committee. "Unfortunately, it’s become a program that is biased against some of our most innovative farmers.”

As two previous LSP white papers show, crop insurance cost the taxpayers over $58 billion between 2003 and 2012, and is projected to produce a $90 billion tax bill over the next decade. Launched in 1938 to provide a basic safety net for farmers facing severe weather catastrophes, public funding for crop insurance now mostly benefits 19 major insurance corporations and some of the largest crop producers in Minnesota and the U.S.

Because the program subsidizes as much as 60 to 70 percent of the cost of premium subsidies and has no limits on how much an individual producer can qualify for, it provides a publicly-funded source of cash for bidding up rental and purchase prices, according to Mark Schultz, one of the authors of the LSP white papers.

“Our interviews with farmers confirm that it has served to artificially inflate land prices by allowing the largest crop operators to lock in profits and aggressively purchase and rent farmland to expand their operations, driving up land costs beyond the reach of most farmers,” said Schultz, who is also LSP’s Policy Program director.

Crop insurance also makes it difficult for beginning farmers to access capital since it limits coverage for producers who have little or no yield history or who choose to raise a diversity of crops. Emily Hanson, who along with Klaus Zimmermann has been searching the past few years for a farm to raise crops and livestock on, said even marginal acres are out of their price range because of the inflationary market.

“In terms of land prices and the amount of money we had, it has not been economically feasible at all to start our farm business,” said Hanson. “We just realized that even if we could scrape together the money, get a loan and buy land, then we would have no money to start the farm.”

Along with its third white paper on crop insurance, LSP today released “Crop Insurance Principles of Reform." Among other things, LSP is calling for crop insurance that is more transparent and accountable when it comes to reimbursement payments made to insurance companies. LSP is also calling for limits on how much individual producers can benefit from the program. High crop insurance premium subsidies, in particular, are having a negative impact by creating an artificially large market for insurance companies and promoting the farming of environmentally sensitive land, according to LSP's research.

In recent months, both the U.S Government Accounting office and the Congressional Budget Office have highlighted a reduction of premium subsidies as a key way to make the crop insurance program more accountable.

“We need to cut back on premium subsidies and when they are offered at higher levels they should be tied to significant levels of crop diversity and resource conserving crop rotations,” said Nuessmeier. “That makes sense for the taxpayer and it makes sense for the land.”

The 2014 Farm Bill made some improvements in the way crop insurance can be utilized by beginning farmers as well as those who plant a diversity of crops and have organic systems in place. These are good steps, but major reforms are needed if crop insurance is to return to its roots as a basic safety net accessible and useful to all farmers raising any kind of crop, according to Schultz.

“The public interest is overwhelmingly on the side of major reform, while the interests of big agribusiness and the country’s largest crop operations stands against it,” he said. “Just because the current crop insurance system has been taken over by insurance corporations and the largest producers of a few favored crops doesn’t mean only their voices count. Federal farm policy, and the public money spent on it, affects everyone. We all have a voice when it comes to bringing about reform.”

"How Crop Insurance Hurts the Next Generation of Farmers” is number three in a series of three LSP “Crop Insurance—How a Safety Net Became a Farm Policy Disaster” white papers. The white papers, as well as LSP’s “Principles of Reform” document, are at www.landstewardshipproject.org/organizingforchange/cropinsurance.

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