There is no evidence to support the contention that crop insurance distorts agricultural markets.
In the case of the market for cropland, there is a large body of research that has examined the effect of farm programs on agricultural land values. Much of that research indicates that the value of land depends on the net income expected to be earned from owning the land. Many factors affect land values, such as commodity prices and non-agricultural use values, including recreational and natural amenities; resource endowments of the land, such as water; population; distance to urban centers; general economic conditions; interest rates; and so on.
While a portion of government support does benefit land owners, it should be noted that farmers and consumers are major beneficiaries. One study that examined the potential effects of eliminating the farm safety net found about 40-60 percent of benefits went to landowners, with the remainder going to consumers and farmers.
Recent research results also indicate the crop insurance program has limited effects on the quantity of farmland in production and related environmental impacts. In an analysis of the corn belt region, where crop insurance is used extensively, results suggest that crop insurance will have small impacts on conversions of non-cropland to cropland, and a somewhat higher impact on crop choice. Similarly, changes in crop mix were also found to have only small impacts on the environment.
Research into the effect of crop insurance on commodity prices also suggests a negligible impact. A study by the National Bureau of Economic Research concludes that crop insurance has a small negative effect on prices for specialty crops. The results of research on the effect of crop insurance impacting the level of production and prices for other commodities is mixed, though predominately suggesting small positive increases in production which would lead to some potential downward pressure on prices (Study ; Goodwin, Vandeveer and Deal, 2004; Goodwin and Smith, 2012; Lau, Schropp and Sumner, 2015).
* Updated April 2020