HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.
![handle is hein.amenin/aeiaepa0001 and id is 1 raw text is:
Key Points
The Fedry ubsdied rop insurane prograr uarantees that farmers wvin receive close to
their expected reveres every year while relying on a costly del very syster operated by private
insurance cornpanies.
S he Pasture, Rangelard, Forage risurarce program, which uses existing data frn the
Natiornai tcearic and Atmospheric Adi is tration to calculate pavouts based on weather in a
i2-by 2-rmile grid systemp, prs a c m. f- a nore efoicent alternative to crop insurnce.
Such a progra rn wou d protect tarrners rom semic risk without sending biions of federal
dollars to orivate isuraInc coranries wh i- -rving a broader portfolio of croos.
Several Monthly H arvest reports have focused on the
waste, adverse producton and input use impacts, ennv-
ronrnental concerns, and other ncgative effects asso-
erated with the current heavily subsidized federal crop
insurance program; These we] i-established concerns
are fotunded in a substantial body of research. Howecvr,
i. the short terin, from a political perspective, Tnding
the current program is infeasible. Thus, it is import-
ant to consider how improvements to the federal crop
insurance program woud look.
In this report, we argue that replacing the current
crop insurance program with a weather-based area index
program would overcome many of the issues associated
with the eurrent crop insurance program. A weather-
based program would not only substantially reduce
administrative costs, focusing insurance on major
disasters rather than paying farms for small decreases
in expected revenues, but also mitigate discrepancics
across commodites. A recent estimate demonstrated.
tnat if such a weather-based program were to replace
the current crop insurance system, program costs could
be reduced by around 30 percent, with few impacts on
the average subsidies paid to farrers
In what follows, we go through each reason replacing
crop insurance with an index insurance program woutd
deliver a consistent safety net to farmers and ranchers
while eliminating much. of the waste irwoivedi ini cur-
rent programs. Much of what is discussed is based on
previous work by Eric J.r Belasco, ,itsph CoopEr, and.
Vincent H. Smith, who use weather data to predict
crop yields that can be used to trigger payments when
droughts occur.
The High Ad inistrative Cost of Existing
Crop Insurance Policies
As discussed in a Febnrary co2a Monthly Harvest
report,4 the cost of delivering crop insurance as thte
major agricu lu ral saferyt-net program in the United
States includes an approximately 6o percent subsidy](ViewImageLocal?handle=hein.amenin/aeiaepa0001&div=1&collection=&method=preview&ext=.png&size=3)