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Jessica Murphy and Victoria Yates/MEDILL

In an effort to slash spending, Congress is considering reducing government subsidized crop insurance. Farmers say the cuts could have dire consequences.

Farmers still grappling with drought see lifeline in budget crosshairs

by Jessica Murphy and Victoria Yates
Feb 28, 2013

Last summer Stephen Ward watched forces beyond his control ravage his livelihood. Ward grows corn and soybeans on his 2,550-acre family farm in Sycamore.

“We’re in an industry where we plant the seed and watch it grow and that’s very rewarding to us,” Ward said. “When that plant dies, especially on a large scale, a disaster like that, it’s really disheartening.”

Fortunately for Ward, his farm is covered by crop insurance – an insurance policy that is partially funded by the U.S. government.

“From the drought we had in 2012, it saved us,” Ward said.

The federal crop insurance program helps farmers pay their premiums and acts as a safety net for unpredictable events. It was put into place in 1938 to help agriculture recover from the Great Depression.

“Government programs have been around since the ‘30s,” said Tim Stoner, a corn and soybean farmer in Valparaiso, Ind. “They soften the blows when the economy is against you.”

Since 1994, Illinois has received $19.7 billion in agricultural subsidies from the government and $3.12 billion of that went toward crop insurance. Over the same period Indiana received $9.78 billion in agricultural subsidies with $1.63 billion going toward crop insurance.

The 2012 drought prompted the U.S. Department of Agriculture to declare much of the Grain Belt a disaster area. It also resulted in record crop insurance claims. But some people are asking whether the government and taxpayers should be responsible for footing the nearly $16 billion expected bill.

At the same time, the country’s debt levels are rising and lawmakers are scrambling for ways to slash government spending. Treasury Secretary Timothy Geithner said that cutting farm subsidies would be one way to do this.

Dan Sutton, a corn and bean farmer in Lowell, Ind., was a crop insurance adjuster for 10 years and knows the ins and outs of the program. “There are a lot of other things they could cut that would be less missed than crop insurance,” Sutton said.

Making farmers shoulder more cost would not only be devastating to farmers but to consumers as well, according to Doug Yoder, senior director of risk management for the Illinois Farm Bureau.

“If farmers go under we face food shortages and if they continue to go under then we are looking at relying on foreign supplies of food,” Yoder said. “We know how much it costs us to protect our foreign oil interests? Asking the public to rely on foreign food supply especially in this day and age of bioterrorism is very scary.”

Farmer income is the second highest it has been in 30 years, according to the Department of Agriculture. This leaves some wondering why farmers still need so much help.

“If you can guarantee I’ll have a crop this year and prices to have an income, I would agree,” Sutton said. “But no one can guarantee that.”

And while government-funded crop insurance does provide a safety net, farmers are still required to pay their share.

“There’s been some misinformation portrayed to the general public especially given the drought year,” Yoder said. “One that farmers don’t pay into the program, that it’s free and that’s just not true.

Illinois farmers alone have paid three-quarters of a billion dollars in premiums over the last two years.

“Crop insurance is a very important part of the economics of our farming operation and built right into the budget and cash flow,” Ward said. “If we had to pay the full amount I’m not so sure we could afford to do it anymore.”

And if farmers can’t afford it and crops fail, food prices could go up. Corn production affects everything from the cost of eggs and meat to how much drivers pay at the pump.

“I think in the end, we’re all consumers,” said Donna Jeschke, a corn and soybean farmer in Mazon, Ill. “Even though I’m a farmer, I’m a consumer too. I buy my food at the grocery store just like everyone does.”

After failing to pass a new farm bill in 2012 under pressures related to the fiscal cliff, Congress extended the 2008 bill. It now has until September to determine the fate of agricultural subsidies like crop insurance.