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Next Generation Farming

The Trouble with Subsidized Crop Insurance

It makes farmers take riskier bets on crops.

It's been triple-digit heat outside for the past week here on the High Plains, and the tale of two crops couldn't be clearer: Milo is the superior crop over corn.

The difference is most evident in the two fields sitting side by side right off the highway near my home.

On one side of the road sits a field of corn baking in the heat with the leaves shriveling into a semblance of yellow crepe paper. On the other side of the road is a fantastic field of milo that looks like it just got a 5-inch rain. The stand is impeccable and couldn't look greener or healthier – even with a heat index as high as 113 degrees.

 



The two pictures are of side-by-side dryland fields of corn and milo by my house. The milo clearly outperforms the corn when both are under stress.

With a few more days of intense heat in the forecast, the crop on one side of the road is ready to coast to the finish line while the crop other side is destined to be a total loss.  

Unfortunately, this isn't an uncommon occurrence to see corn fields burning up on the Plains. We see it all the time in western Kansas where precipitation hovers around 16-17" per year and where open pan evaporation rates are comparable to the Sahara Desert. Add the searing heat of August into the mix, and the chance of a moisture-hungry crop like corn surviving the summer in a drought-prone area like the High Plains drops virtually to zero.

So why plant a crop that struggles in the heat when another crop does perfectly well? The answer probably isn't much of a surprise: subsidized crop insurance.

Thanks to the government's generous crop insurance subsidies – crop insurance companies received $3.8 billion last year from the government while posting a profit of 26.4% – farmers are defying Mother Nature and planting crops that otherwise wouldn't pay.  

On the surface, the concept of government support sounds great: They help keep the business of crop insurance profitable so we farmers can easily reduce our risk. After all, in such a high-risk business as ours, how many of us could farm without insurance?

But here's where it gets turned on its head. Subsidizing a risk management tool only results in one thing: taking on more risk. If the penalty for failure is reduced or eliminated, what's the point of making conservative or smart decisions?

In the age of ObamaCare and massive government spending, we ought to be looking harder at how these dollars are being spent. But I doubt farmers are willing to let these subsidies go quietly.

As one farmer put it when asked on a recent panel discussion of how he recommends making farming profitable, he put it very plainly: "Call your congressman."

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