Crop Insurance Under Attack Again
After having a proposed $3 billion reduction in crop insurance funding included in the Budget Bill passed last month, farmers now face another attack by crop insurance critics that want to increase that reduction to at least $25 billion over 10 years. Their proposal includes the following changes:
- Eliminating the Harvest Price Option (this would save about $19 billion). Farmers are allowed to get crop insurance based on the discovery price right at planting time. The Harvest Price Option allows farmers to receive a higher amount if the final harvest price is greater than the discovery price.
- Eliminating any crop insurance premium subsidies for farmers with adjusted gross income (AGI) over $250,000. President Obama had previously suggested eliminating this at the $750,000 level.
- Capping any premium subsidy for all farmers at $40,000.
- Capping crop insurance administrative and operating costs at $900 million per year.
These changes would be dramatic compared to the changes in the Budget bill which only directly affected the crop insurance companies. However, as we discussed in previous posts, Congress needs to be careful for unintended consequences. If these changes pass, then more profitable farmers (and likely more efficient farmers) will abandon current crop insurance completely and likely self-insure or obtain completely private insurance. This would drive up premiums for the remaining farmers who appear to be the farmers that they are trying to help. With help like this, who needs enemies.
For additional details on the proposal, see an article here. Again, this is simply a bill being introduced. The chances of it passing on its own is very slim, however, it can easily be included with other bills that are in process right now. We will keep you posted.
Paul Neiffer, CPA
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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