Administration’s Proposed Crop Insurance Cuts Would Eliminate Harvest Price Option and Limit Farm Size06/09/2017
The Administration’s budget would cut $58.7 billion from crop insurance or about $6 billion a year over 10 years. Over the last five years, the total share of the crop insurance premium cost paid by the Risk Management Agency (RMA) (“subsidy”), has been between $6 to $7 billion per year2, with the balance paid by farmers. A $58.7 billion cut over 10 years would nearly eliminate the government’s share of the premium cost. Therefore, these numbers only add up if there is a large reduction in the number of farmers buying crop insurance. It would require a reduction of about 70% in farmer participation in crop insurance. Would these cuts make the insurance program so bad that it would reduce participation by 70%? One would doubt that there would be a 70% reduction in participation, because one would expect farmers to hire accountants and lawyers to create new “paper farms”. However, the reduction could be significant and likely in the lower risk states.
The administration’s budget would save $38 billion by requiring a limit on premium “subsidy” to $40,000 per “farm”. They would also eliminate the Harvest Price Option (HPO), saving $11.9 billion, based on their math. Their budget would eliminate crop insurance eligibility for any farm with an Adjusted Gross Income (AGI) greater than $500,000. Farmers would likely hit the $40,000 premium cost-share limit long before they hit the AGI limit.