What if Crop Insurance Subsidies Disappears?

There is continued discussion in Congress about reducing or eliminating the subsidies for crop insurance premiums for those producers who adjusted gross income exceeds a certain level — $750,000 is a current number being mentioned. CliftonAllenLarson Principle and Farm CPA Today blogger Paul Neiffer warns of the possible unintended consequences of a subsidy reduction or elimination.
Neiffer: “Most of those producers if they are no longer getting the subsidies, they not going to want to deal with the government. So they are just going to go to a private insurance company or create their own captive insurance companies of large producers. So let’s say you get a group of 25 farmers from around the United States — so they spread their risk. They will come together and form what is called a captive insurance company and they will go ahead and insurance the risk of somebody in Washington and somebody in Colorado and somebody in Illinois. There is some potential tax savings to that. Most of these guys are likely larger producers and perhaps better producers and a lot of them are irrigated producers, so they are worried about the price risk not necessarily the yield loss. Likely that would drive up the premium for the rest of the farmers out there — that are likely smaller farmers probably in areas of higher risk than the other ones that would opt out of the system. So that is going to drive up the premium for everybody else.”
Farm CPA Today is one of my favorite informative blogs, if you haven’t yet visited it, go to Farm CPA today.com.