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Crop Insurance

An Annual Disaster

November 5, 2015

Crop Insurance: History of Disaster and Crop Insurance Programs

Crop insurance has largely replaced the ad hoc relief programs authorized by Congress in response to disasters. Crop insurance has come under attack for its increasing cost, environmental impacts and secrecy, but the farm lobby, the crop insurance industry and their political patrons argue that despite its flaws, crop insurance is cheaper and less likely to lead to environmental harm than disaster programs.

The facts tell a very different story. As shown by a review of the history of federal farm assistance, crop insurance actually costs billions of dollars more than disaster payments.

Federal disaster assistance has been dispensed to farmers through three main programs: emergency loans, disaster payments and crop insurance.

The Farmers Home Administration began providing emergency loans in 1949 to compensate for crop losses from natural disasters. The U.S. Department of Agriculture’s Farm Service Agency continues to provide disaster assistance through emergency loans.

The Agriculture and Consumer Protection Act of 1973 and the Rice Production Act of 1975 authorized a standing disaster payment program, which provided payments without the need for Congressional action in response to a specific disaster, and the program was reauthorized in the Food and Agriculture Act of 1977. The 1980 Federal Crop Insurance Act terminated the standing disaster payment program over concerns about its growing cost coupled with other criticisms of the performance of the program.

The 1980 act also increased taxpayer-funded subsidies for the premiums farmers paid for crop insurance – the first overt attempt to replace disaster payments with crop insurance payouts. Congress increased premium subsidies again in the 1994 Federal Crop Insurance Reform Act. Six years later, the Agricultural Risk Protection Act of 2000 nearly doubled the share of premiums paid by taxpayers and accelerated the shift to the revenue guarantee policies that dominate the program today. On average, taxpayers subsidize 62 percent of farmers’ crop insurance premiums.

Despite the dramatic increase in premium subsidies, Congress sent disaster payments to farmers through ad hoc disaster assistance measures in most years between 1995 and 2008.

In another attempt to end ad hoc disaster assistance Congress authorized a new standing disaster assistance program for crop producers called the supplemental revenue assistance payments program, or SURE, in the Food, Conservation and Energy Act of 2008. SURE paid farmers who experienced a loss in whole-farm revenue, meaning they only received a payment if their revenue from all crops on all their fields fell below a certain guaranteed level.

In addition to the SURE program, the 2008 Act also authorized four other standing disaster programs:

  • LIP, the livestock indemnity program.
  • LFP, the livestock forage disaster program
  • ELAP, the emergency assistance for livestock, honeybees, and farm-raised fish.
  • TAP, the tree assistance program.

Between 2010 and 2012, the SURE program cost $3.5 billion, and the high price tag prompted its removal in the Agriculture Act of 2014. The authorization of big ad hoc disaster bills disappeared after passage of the 2008 Act. LIP and the other standing disaster programs continue, largely for farmers producing livestock.

Congress has finally succeeded in replacing disaster programs with the federal crop insurance program. But the switch created a different kind of disaster – for taxpayers and the environment.