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Paying Farmers to Farm Poor Land

Written by Gary North on June 11, 2012

One of the oldest and most entrenched boondoggles is the crop insurance program. The federal government pays the premiums for privately sold, highly profitable insurance to farmers. If crop prices fall, farmers get paid.

Why pays them? Taxpayers who live in cities.

So, if food prices are high, taxpayers lose. But if food prices fall, taxpayers lose.

What a deal! If you’re a farmer.

Why did the program get started 70 years ago? Officially, to help small farmers.

Who gets most of the money? Agribusiness giants. The percentage of Americans still on farms is about 2%.

So, the broad mass of urban voters pay high prices to very, very rich farmers, in the name of small farmers who quit farming back in 1948.

The amber waves of grain are farmed by gigantic companies. We wouldn’t want them to suffer losses, would we? Of course not.

How much money are we talking about? About $3 billion a year.

Congress says this is good news. The existing program pays $5 billion a year.

I feel so much better.

You see, the existing program pays farmers for crop land they do not plant. This new one will pay premiums on crops they plant but can’t sell at a profit.

Senator Debbie Stabenow of Michigan is the chair of the Agriculture Committee. She says this is a great improvement, because “payments are going to people who are actually farming.” What she meant was that the payments will go to incompetent people who are farming — businessmen who cannot accurately predict the price that their products will receive from customers.

Farmers need a safety net, we are told.

Where is you safety net?

Sam Willett is senior director of the National Corn Growers Association. He is an exert regarding the needs of incompetent farmers, who are represented in Washington by the National Corm Growers Association. Mr. Willett says: ““Cuts in the crop insurance program would reduce the effectiveness of the most important risk-management tool farmers have.”

It is a very effective risk-management tool. It takes away the risk.

In the good old days, the federal government paid farmers not to farm. The government paid them to take marginal land out of production as a conservation measure.

That was great for incompetent farmers who held onto marginal land.

But times have changed. Rising food prices have made it profitable to put marginal land back into production.

Now the threat is a recession. That might push down food prices and crop profits. So, all those incompetent farmers who used to get paid not to farm now need a safety net for farming.

Risks change, you see. There are new ways for incompetent farmers to lose money. So, federal bailout programs must be modified.

Then there are incompetent insurance companies. They don’t need a safety net. They need subsidies.

Crop insurance is sold to farmers by companies that then charge the government for the premium money. That subsidy was $7.3 billion in 2011.

It was under $1.2 billion in 2000, adjusted for price inflation.

This will rise to $9 billion a year over the next decade.

And the beat goes on. And the beat goes on.

Continue Reading on www.nytimes.com

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9 thoughts on “Paying Farmers to Farm Poor Land

  1. Mutantone says:

    tie this to the drought on the slopes of Colorado where farmers and ranchers are not allowed to use the water on their own land by government decree, we are looking at a drought-government-induced bad year from that region. No farmer worth their salt did not insure their crops and livestock to stay in business. this is going to hit the crop insurance program with a lot of losses again all paid for by we the Citizens

  2. Why, anyway, does the government have to pay (taxpayers, really) anything to the farmers. The food supply would be better if they would just let them alone. Do they still pay them "not" to grow certain crops?

  3. By the way, I am not against the farmers. I had a cousin, now deceased, who was a very good farmer and successful without any interference from the government.

  4. I have no problem with the ag programs over the years. Farmers had suffered for years and years with $ 2 corn and $ 5 beans. Tell me what in life is greater than the need for food. Farmers are hard workers and have to make huge capital investment in equipment just to generate revenue and see if they can make a profit 4/5 months after planting. Big risk.

    I despise government waste of funds, and we have 100's of billions per year at all government levels. Whether it's 3 or 5 billion a year this is good money spent compared to most of the crap government wastes our money on.

  5. scot_belle says:

    The question rests with…do you want to have food, or not? I can see where the larger agribusinesses should not get the full amount, simply because they have more resources, but there are more small farms than huge agribusinesses. The smaller farms don't have much (if any) resources to fall back on, and without a subsidy of some sort, they would soon be out of business. Weather droughts…were why this insurance program was created. Now, not only do farmers have to contend with mother nature's droughts, but now they have to contend with government made droughts.

    It does NOT take a rocket scientist to figure out that if the small farmers are forced out of functionality, if not just made into parking lots, that the result will be less food on your table.

    I suppose, that we could just allow the foreign countries like Venezuela to provide us with food, but don't you think that we would end up "over a barrel" just like with our current dependency on foreign oil?? Talk about an untenable position!!

    NO THANKS. I want American grown food, and I don't mind paying the relatively small of tax revenue…to know it will be there whenever I am hungry.

  6. You cannot be sure that you will have American grown food when you want it. The government will pay the farmer more for it and sell it to foreign countries. Don't you know that the government is now making it very difficult for even a private individual to raise a garden in their own back yard? Subsidies and regulations need to be stopped and everyone should be allowed to live their lives as they choose.

  7. Most competent farmers can easily survive without most crop insurace I have 80 acres of Illinois crop land and what I get in crop insurance paymens seldom exceeds the cost of the premiums. I would accept the risk of no insurance for the additional freedom in what I coud plant where on those 80 acres. Yes the risk is big even on 80 acres, but a large part of the blame for those ;ow corn, wheat, and soybean prices in the past also goes back to the way the USDA manipulated the production reports and used the grain it had in storage to keep prices down. The world has gotten richer and hungrier and most of the grain surpluses are gone.

  8. Bullshit! I pay the premiums for my crop insurance, not uncle SAM!!

  9. As a corn, soybean, and wheat farmer who buys crop insurance I'd like to explain how crop insurance works.

    The USDA has developed an array of crop insurance plans of different types and calculated the"break-even" premium for each level of each type of policy. Then they subsidize that (original 100%) premium by close to 60%. The farmer (or landowner if paid by a share of crop) is then presented with a chart showing their options with the premium being the 40% unsubsidized portion as their cost. This means that any insurance policy will be a GREAT deal. Often the farmers who are the best managers of money buy the greatest amount of Revenue Protection insurance because it is such a great deal. Even good land can commonly produce insurance claims when you can insure that your land will produce 90% of it's historic average yield at a sales price that is in-part stated before the policy is bought!

    Most crop insurance customers are farmers; then come landowners; then come big agribusiness corporations (+$10m).

    The Conservation Reserve Program is what pays landowners not to have a crop on land; and it's not just for marginal land. They bid higher for more profitable land to come out of production. I have competed in bidding against the CRP for land! That program continues on a contractual basis.

    Farming is high risk with several ways to lose and the cost is high. In a free market there would be private crop insurance and it would still be a business tool, though not such a guaranteed payoff.

    You can talk about "rich farmers" now, but up until a few years ago few farmers had much disposable income. My brother went into education.

    The current depression has left a lot of economic sectors struggling, while grain farmers are benefiting from producing a commodity in worldwide short supply with increasing demand, notwithstanding the flood of speculators preferring commodities to stocks.