Farm Bill: New Analysis Of Costly Crop Insurance

In a just-released working paper, American Enterprise Institute (AEI) agricultural economists Vincent Smith, Bruce Babcock, and Barry Goodwin find that the Price Loss Coverage (PLC) and Supplementary Coverage Option (SCO) programs in the House version of the farm bill could cost taxpayers over $20 billion.

Key findings:

  • High cost of PLC: If crop prices remain at historically high levels, program costs will be approximately $1.1 billion. However, if crop prices drop to their recent historical average levels, program costs could exceed $18 billion annually – almost four times the current cost of subsidies paid under the Direct Payments program, which the PLC would replace.
  • Crop insurance boondoggle continues: If prices remain at current high levels, the SCO will cost taxpayers $2.6 billion annually. Half a billion of those dollars would flow directly to crop insurance companies – who already receive $3 billion per year in other taxpayer subsidies. If prices drop to recent historical average levels, SCO costs would drop to $1.5 billion.
  • Skewed priorities: If crop prices moderate to recent historical average levels, the House PLC and SCO programs will cost taxpayers over $20 billion per year, more than all current spending on farm-oriented programs. This includes current programs that enhance farm incomes – like subsidized crop insurance, direct payments, disaster aid, and loan rate programs – in addition to publicly funded R&D and education programs that benefit consumers, processing companies, and farmers by improving agricultural productivity.

Read the full report here.


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One comment on “Farm Bill: New Analysis Of Costly Crop Insurance

  1. The Senate Farm Bill should NOT be passed if still includes this section: SEC. 12211. DEFINITION OF RURAL AREA FOR PURPOSES OF THE HOUSING ACT OF 1949 would increase the pool of recipients and also increased rural community population requirement to 35,000. This population level would be a small City not a true rural community. Also, changing the Census date to 2020 insures those who have already received fair share of benefits over past years and now self-sufficient to continue receiving such benefits. This means less money available to true rural area communities, because others would continue receiving more after they are now self-sufficient and no longer rural. It is not suppose to be a Welfare System for self-sufficient communities who have already received past benefits wanting more. Furthermore, why would our SENATORS want to add more communities to a government entity who has had Property Right violations occurring under the USDA Mutual Self Help Program? Until this problem is fixed and no longer happening, then the USDA certainly should not have more communities or area to manage. You can consider this past news article as an example of property right violations: Per this article the owner put $384,000 into their house and after their Property Rights were violated sold instead of staying for the planned 10 years. Per the County Records "Sales and Conveyance Information” on 12/06/2010 they sold their home for $245,000 dollars (bottom of this page: Now while the market may have fallen slightly in 2010 do you really think it affected the value by a difference of $139,000 for a home at that time? That was a huge financial LOSS mostly because of the actions of an entity who violated governing documents and state laws backed by our various federal, state, city, etc. tax dollars! The “marketability” of their home was affected because an entity purchased with the intent to take from consumers who themselves had prior VESTED property rights and also potentially violating their Consumer Protection rights. We have citizens who are suffering due to the decline in home values and those same citizens do not need to have the marketability further harmed by any government backed entity. The USDA should not be in the housing business … that is HUD area of expertise not the USDA.

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