Farmers use crop insurance to financially recover from natural disasters and volatile market fluctuations; pay their bankers, fertilizer suppliers, equipment providers and landlords; purchase their production inputs for the next season; and give them the confidence to make long-term investments that will increase their production efficiency.
This may explain why most farm leaders across the country have called crop insurance their top risk management tool and a policy priority heading into the Farm Bill debate. Of course, others also benefit when farmers have proper protection against uncontrollable risks. For example:
- The rural economy is largely dependent on farmers’ ability to rebound after disaster strikes. A study by Farm Credit Services of America explained this relationship following the historic 2012 drought, noting that crop insurance saved 20,900 jobs – with an annual labor income of $721 million – in Iowa, Nebraska, South Dakota, and Wyoming alone.
- Absent crop insurance, the cost of natural disasters that harm farmers would fall directly on U.S. taxpayers, which happened repeatedly before the widespread use and availability of crop insurance. In fact, 42 emergency disaster bills in agriculture cost taxpayers $70 billion from 1989 to 2012, according to the Congressional Research Service. Since crop insurance emerged as the cornerstone of farm policy, farmers shoulder a portion of the risk along with private-sector crop insurance companies, and the federal government.
- Every American consumer relies upon agriculture for food and clothes, and agriculture accounts for nearly five percent of America’s economy and around 10 percent of U.S. employment. Therefore, it is in the public interest to have a financially stable agricultural sector and a publicly-supported safety net for farmers, who increasingly face variable weather patterns and unfair competition from foreign countries that subsidize heavily and violate international trade rules. Crop insurance is a critical part of this safety net.
* Updated August 2018