| NDfarmer08 - 11/20/2015 13:23
Without the subsidies how do you afford to pay for the crop insurance coverage? Most farms would most likely just not take out the crop insurance but one crop disaster would force farmers to file bankruptcy.
It's fairly simple, a farmer would simply be forced to bolster his/her Balance Sheet with more cash. If you don't have enough cash on hand to survive a total crop failure or can't afford insurance to manage the risk without government intervention, you're simply swimming naked. When the tide goes out, others quickly find out who is in their birthday suit and who isn't. It would take precisely one nationwide drought (think 2012) to solve this "amateur" problem. Those that can't/didn't manage risk properly are forced to sell out to those that can/did. Now, if a million farmers go out of business due to utterly weak cash assets or insurance management, well...then guess who comes to buy all the assets at incredibly low prices...Wall Street. Don't worry...someone will always be in line to farm if the current owners go under - in fact, it will probably be the same people...they simply won't own the land.
In reality, if you went a few years without a major weather or geopolitical event that decimated crops and or prices, farmers, grocers, insurance companies, banks, and all the other stakeholders dealing with agriculture would quickly adjust the risk models and prices accordingly. Mr. Market would be working overtime to achieve equilibrium again.
I'm reminded of a saying my accounting professor always repeated to us in college, "CASH IS KING!"
Take my comments above with a grain of salt. :)
Edited by SEbie 11/20/2015 16:35
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Agriculture's image problem
