Current Perspectives on the Crop Insurance Farm Safety Net (original) (raw)
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Federal policy-makers increasingly emphasize the Federal Crop Insurance Program as the primary federal risk management program for farmers. Farm leaders need to understand the underlying mechanics of insurance products if they are to effectively argue their interests and contribute constructively to future agricultural policy dialogue. Further they need to understand the unique circumstances created by the fact that the Federal Crop Insurance Program functions as a public-private partnership between the U.S. government and private insurance companies. This manuscript describes both the fundamental features of insurance products and the political economy of the federal crop insurance program.
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The 2014 Farm Bill adds the Stacked Income Protection Plan (STAX) and the Supplemental Coverage Option (SCO) to the suite of insurance choices for producers in 2015. Unlike other crops with the ARC and PLC programs, cotton only has access to crop insurance under the new Farm Bill. Therefore, the crop insurance choices that farmers make will constitute the only government safety net for farm income. The overall objective of this research is to understand the impact of the new crop insurance policy options for cotton on farmer decisions regarding risk management strategies. A mail survey was conducted in February 2015, at the time when farmers were making insurance purchase decisions. Our results suggest that cotton farmers are taking benefits of 2014 Farm Bill, which enables them to take separate dry land and irrigated insurance policies.
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The Federal crop insurance program sav^ indemnities exceed premiums by $2.5 billion in the 1980's, a decade of widespread drought and rapid grov^ in insurance participation. This excess loss, after small surpluses for most of the Federal Crop Insurance Corporation's history, masks the wide variation in performance among crops and regions. More than half of program excess losses were for soybeans (mostly those produced in Arkansas, Georgia, Louisiana, and Mississippi) and wheat (mostly that produced in Montana and North Dakota). An alternative meUiod of crop insurance, with payments based on yield losses in a geographic area rather than those experienced by individual producers, may help to reduce excess losses. A pilot program using such a method is being tested for soybeans.