Drought puts federal crop insurance under scrutiny

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WASHINGTON — This year’s historic drought is turning the spotlight on an obscure form of aid for America’s farmers: federal crop insurance.

With crop losses soaring, farmers are headed toward some $18 billion in losses, and taxpayers might foot up to $10 billion of that, according to Vincent Smith, an economist at Montana State University who has studied crop insurance for nearly two decades.

That’s on top of the $9 billion this year that the federal government provided farmers to help them afford crop insurance premiums.

Partly because of the costs involved, the insurance program has come under scrutiny from both sides of the political aisle. Budget hawks and environmentalists alike are calling for tougher limits that they say would discourage farmers from taking risks with their finances and the land.

But Congress seems to be interested in expanding, not curbing, the crop insurance program, and farmers say the insurance program is a critical lifeline, especially this year.

In large part due to the hottest July on record in 118 years, the U.S. Department of Agriculture on Friday lowered its expected yield for corn and soybean harvests for the second time in two months—with corn predicted to be at its lowest yield in more than 15 years.

Under the insurance program, which dates back to the Great Depression and the Dust Bowl of the 1930s, the government pays 60 percent of the premium for coverage. The farmer pays the rest. Though policies are offered by private insurers, the government reinsures them against their losses and helps fund their annual operating costs.

Environmental groups complain that the government-subsidized insurance has encouraged corn farmers to take risks and till lands they otherwise wouldn’t. They say that, in turn, destroys areas critical for both wildlife and livestock struggling to find grazing places that aren’t parched.

More than 23 million acres of American grass and wetlands were plowed under for cash crops like corn and soybean from 2008 to 2011, according to a report released last Monday by the Environmental Working Group (EWG). Land losses were greatest in counties that received the largest amount of crop insurance subsidies, the study said.

“That’s equivalent to plowing the entire state of Indiana or 31 Yosemites,” said Scott Faber, the group’s vice president of government affairs. “It’s a huge impact to take an area the size of Indiana and cover it from one end to the other in fertilizer.”

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