Just the FACTS…
… about corporate subsidies in the FARM BILL
The FARM BILL gives the government too great a role in the agriculture sector. By expanding the overly generous federal crop insurance program and creating new “shallow loss” revenue guarantee programs, Congress is proposing to further distort agricultural markets while wasting tax dollars at the same time:
Fact: Taxpayer-subsidized crop insurance not only insures against catastrophic losses like drought and floods, but also guarantees revenue for already-profitable businesses.
Fact: New FARM BILL proposals would create more crop insurance and shallow loss programs that would virtually guarantee producers profits every year regardless of farm income, crop prices, or other factors.
Fact: Producers already use several tools other than subsidized crop insurance to manage risk, via private futures markets, diversification of planting decisions, vertical integration, use of private crop insurance, and outside income.
Fact: Farm payments and unlimited crop insurance subsidies reduce producers’ business risks, increase returns to scale, distribute resources ineffectively, increase agribusiness income, encourage farm sizes to increase, and consolidate production in fewer hands. They also encourage excessive risk-taking by insulating agribusinesses and passing the risks to taxpayers.
Fact: Federal biofuels subsidies also pick winners and losers, causing producers to expand production and plant certain crops like corn and soybeans over others such as forage crops and fruits and vegetables. Mandates and subsidies also increase demand for biofuel feedstocks, causing crop prices to increase and production to expand onto sensitive land like pasture, grasslands, and highly erodible acres if yields cannot keep up with increasing demand.
Our Take: We need the next FARM BILL to rein in wasteful spending on crop insurance by allowing agricultural producers to assume more of their own business risks and better utilize private sector risk management options. In addition, proposals for new “shallow loss” business income guarantee programs should be scrapped since they would shift undue risks onto taxpayers and increase federal expenditures in the long run.