New insurance protection for American crop growers

New insurance protection for American crop growers

The new reformed US farm bill making actually its way through the senate will be costly, around USD 9 billion annually and will newly include a far reaching insurance protection for American crop growers

Beforehand it has to be stated that the Senate version of the bill, does cut spending by about 24 billion over the next decade to a total of USD 969 billion by largely eliminating direct payments to farmland owners being paid whether they grow crops or not! These direct payments amounted so far to USD five billion a year and flew mostly to large farms growing commodity crops and were accounting for around 10 % of the farm sector’s USD 109 billion income.

Crop insurance is not all new. It was created in the late 1930s after the devastating impact of the Dust Bowl. For decades, the government supported a modest program that covered farmers’ losses from bad weather or pests. New crops and insurance products were added and as recently as 2000 crop insurance cost the government just USD 951 million. However, last year the amount was USD 7.3 billion and with the new proposed extension around USD 9 billion per year or USD 90 billion over the next decade. With it the farmers are entitled to be protected quasi against all risk and possible losses, including falling prices and the government will pay for it (60 % of the farmers premiums and subsidises the cost of private insurance companies)!

It has to be seen if these amendments are in line with the rules of WTO World Trade Organisation and already in the past there were extensive claims under the Doha Round and cotton growers from other countries.

The American farming community counts 486867 operations getting federal crop insurance in 2011 and more than 10000 received federal subsidies between USD 100000 to USD one million and 26 got more than USD one million. If the proposed amendment to cap insurance subsidies at USD 40000 per farmer and year, as it was proposed by two senators it would save USD 5.2 billion over a decade.

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