Crop Insurance Subsidies Impact Land Costs

Lyons, Nebraska – The Center for Rural Affairs along with Mike Duffy, Professor Emeritus of Economics, Iowa State University, released a report that explores the impact subsidized crop insurance places on land values.
“My greatest concerns are whether unlimited crop insurance subsidies interfere with smaller farmers and beginning farmers getting access to land affordably. And whether the way in which crop insurance programs work undermine our nation’s collective efforts to conserve our soil and water. I’ve seen and heard about things happening with crop insurance here in the Midwest for years that make me believe those concerns are well-founded.”
Bill Furlong, farmers, Iowa City, Iowa
“Farmers have told us the program was helping mega-farmers outbid beginning, and small and mid-sized farmers on farmland, putting upward pressure on land values,” explained Traci Bruckner, Senior Policy Associate with the Center for Rural Affairs explained. “We decided to investigate. And to explore the impact subsidized crop insurance places on land values, we worked with Mike Duffy, Professor Emeritus of Economics, Iowa State University.”
Duffy’s research shows that subsidized crop insurance indeed has an impact on land values. He identifies a couple of ways the program impacts land values.
The first is subsidization of the insurance premium. Duffy points out that the premium farmers pay is not the actuarially sound premium. Rather, it is the premium minus a subsidy from the government. That premium subsidy is a benefit the farmer receives.
Second, crop insurance reduces the income risk associated with crop production, either through loss of revenue or crop failure. This risk reduction adds value because future returns are not as uncertain as they would be without crop insurance.
Duffy used data available from the USDA Risk Management Agency (RMA) to examine if federal crop insurance programs influence land values by the amount of the subsidy and the reduction in risk. The RMA provides detailed summaries of their business for the nation, by crop, by state, and by year going back to 1989. For this study, he used Iowa as the example.
A full copy of the report can be viewed and downloaded at:
The table below displays the impact. The first two columns show the value of risk reduction per acre. The last three columns show the percentage impact to land values in three ways: 1) with only the premium subsidy and no risk reduction factored in; 2) with a low factor of risk reduction; and 3) with a higher factor of risk reduction.
“These findings demonstrate that subsidies have value to producers, and some of those subsidies get bid into land costs. When those subsidies also serve to reduce risk, they have an even greater value than the subsidy alone,” explained Bruckner.
“While we agree that federal crop insurance is an important tool in the risk management toolbox, we can recognize it drives up production costs by increasing the cost of land,” added Bruckner. “The net effect is to prop up the nation’s largest and wealthiest farms, often at the expense of smaller farms.”
The full report also examines the impact crop insurance subsidies have on cash rental rates.
“We intend to use this analysis to further our efforts to come up with policy reforms that will ensure federal crop insurance programs work in the best interest of small and mid-sized family farms,” concluded Bruckner. “These are the people that those who oppose reform often suggest the program is designed to benefit. We beg to differ. And we know that the nation needs reform that targets the root of the problems created by unlimited crop insurance premium subsidies.”

Crop Production Clinic Date Set

By John Wilson, Extension Educator

One of the most popular winter programs offered by Nebraska Extension each winter are the Crop Production Clinics. These are offered at nine sites across the state. These programs will feature presentations from UNL extension staff on soil fertility, soil water and irrigation management, crop production, ag business management & policy, pesticide safety, and disease, insect and weed pest management.

If farmers only attended one meeting a year, this should be the one I’d recommend. An additional benefit is farmers needing to receive their private pesticide applicator certification or recertification can do so by attending one of these meetings.

In addition to timely information, the CPCs also give commercial and noncommercial applicators the opportunity to renew their applicator license in the Ag Plant, Regulatory, and Demonstration/Research categories. Certified Crop Advisors may earn 6 CEUs in the following categories: Integrated Pest Management, Crop Production, Water Management, Nutrient Management, and Professional Development.

There is a registration fee for the clinics which includes a noon meal, refreshments, the 2015 Guide for Weed Management in Nebraska and the 2015 Crop Production Clinic Proceedings.

The two closest locations for the Crop Production Clinics are Norfolk and near Mead. The session in Norfolk will be held on Wednesday, January 21, at the Lifelong Learning Center at Northeast Community College and the session near Mead is on Thursday, January 22, at the Agricultural Research and Development Center (ARDC).

Both sessions start at 8:45 a.m. and wrap up at 3:30 p.m. if you don’t need the initial training or to renew your pesticide certification… or 4:00 p.m. if you do. Registration is available online ( or at the door. On-site registration is from 8:00-8:45 a.m.

Program topics are tailored to meet the needs of cropping systems in different parts of the state, and vary by location. The clinics will feature presentations from extension specialists and educators on soil fertility, water management, crop production, agribusiness management and marketing, and disease, insect and weed pest management.

Some of the topics that will be covered at both locations include:

* What’s New in Pest Management?

* Corn & Soybean Disease Management Update

* New Issues in Insect Management

* Weed Resistance & Management

* New Issues in Insect Management

* Soil Fertility Update

* Water Management: Irrigation Apps

* Land Lease Update & Controlling Crop Input Costs

* O-Farm Research

* Cover Crops: What We Know & Don’t Know

* and many other topics

For more information, including specific programs at each location and online registration, visit the Crop Production website at On-line pre-registration closes at 3:00 p.m. the day prior to the clinic.

John Wilson

John Wilson

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