I feel that I should start this post by saying I grew up on a farm , my father has been a farmer his entire life, as was his father. This post is not about farmers , it is about another case of government stepping in , in a way that may not be the best for anyone , including the farmers.
Delawares 2009 fiscal year budget will include a $150,000 funding increase for the Delaware Crop Insurance Cost Share Program (DCICSP). This will bring total funding for DCICSP to $750,000 . The DCICSP bill was also removed from the “ one time funding status ” and makes it a permanent part of the Dept. of Agriculture’s base budget.
The program was started in 2004, and has paid out $1,957,589 in crop insurance cost share to Delaware farmers. The program pays 30% of a farmer- paid premium of crop insurance up to $3 an acre. If total calculated benefits exceed available funding , benefits are prorated among participants.
In 2007 calculated benefits exceeded the $600,00 available , so pay out benefits were prorated to about 91%.
I think we can all agree that farming is a demanding and risky enterprise , and that farmers are one of the most valued sectors of our economy and should be protected with the best possible policies we can devise. I’m not sure this is one of them.
First let us get something straight, what is being called Delaware Crop Insurance Cost Share Program is really just another farm subsidy. Subsidies are rarely beneficial to anyone including those they are intended to help.
In 2008, 8.5% more Delaware crop insurance policies were purchased then in 2007. Part of this is due to the drought we suffered last year, farmers received $17.5 million in crop loss payments for 2007. But some of the increase in the purchase of insurance could be the result of the availability of the DCICSP. When you offer these sort of programs it encourages farmers to buy more insurance. This brings me to why this program may hurt farmers in the long run. Farming without insurance is a huge gamble, but so is buying insurance. The program pays 30% of the cost of the insurance, the rest is paid by the farmer. This sounds like a good idea for the farmer after a drought year or a year of too much rain. But what of all the money spent in years when there is no significant crop loss. If farmers are being encouraged to buy more insurance , then their out lay in those years is wasted money which they will add to the price of their crops , but wait a minute in good years when there is a bumper crop the sale prices go down , so how will they retrieve the cost of the insurance ? Ah , once again Nanny State steps in with more subsidies.
Look I’m sure there are arguments for and against whether this sort of subsidy is or isn’t a good idea for farmers. But what truly bothers me is that DCICSP has been made a permanent part of DDA’s budget. This only lessons the amount of debate of the program at budget time. We all know that when these sort programs become entrenched in our budget they never go away, and every year the bureaucrats will find a way to increase funding to justify the need to continue the program.
Maybe a better way to handle the problem of crop loss would be to offer low interest loans to farmers to cover the cost of insurance that must be paid off either after the harvest season or after a crop loss claim has been paid. Or another way could be for the state to step in only after some predetermined level of loss was reached in a single year and declare an economic crisis, this would mean the state would only be paying out to help farmers in years when there was a real need and not paying money annually to insurance companies .
There has to be some better way then to create more and bigger budgets and departments and agencies and programs.