Researchers at the University of Illinois are also looking closely at crop insurance and how farmers in different areas can pay significantly different rates.
Since 2015, they found supplemental coverage has paid out less for corn and soybeans in Midwest states, and farmers are putting in much more than they receive. When looking at the whole picture, they say certain areas are helping subsidize other growing regions. It is something ag economists say farmers should be paying close attention to.
“So why does this matter? Well, what it means is that farmers are paying too much for their crop insurance payments, and that allows other farmers in other parts of the country to pay too little. That causes crop insurance payments in the Midwest to act as a subsidy that flows from the Midwest to the South. This becomes more important as we increase the coverage levels on crop insurance and increase the subsidy rates as suggested by negotiations for the next farm bill. If those continue, we will see more of the subsidies move from the Midwest to the South,” said Gary Schnitkey.
Researchers say with low loss performance, it is hard to justify supplemental and enhanced coverage options in the Midwest.
