When confronted with yield or revenue losses, farmers use crop insurance indemnities to financially recover from natural disasters and volatile market fluctuations; pay their bankers, fertilizer and seed suppliers, equipment providers, and landlords; purchase their production inputs for the next season; and give them the overall confidence to make long-term land improvement and infrastructure investments that increase their production efficiency.
This may explain why most farm leaders across the country have called Federal crop insurance their top risk management tool and a policy priority during recent Farm Bill debates. 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 Federal 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 total cost of natural disasters that harm farmers would fall directly on U.S. taxpayers.
- 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 strong, publicly-supported crop insurance safety net for farmers, who increasingly face variable weather patterns and unfair competition from foreign countries that subsidize heavily, and often violate international trade rules.
* Updated April 2020