Death comes to us all. Life's but a walking shadow | I think there is a major difference between the straight subsidy programs like ARC/PLC and crop insurance. First of all the straight subsidy programs are generally limited to the major crops (I know it doesn't work quite like that but). On the other hand, insurance is available for a lot of different crops. The tree fruit and wine grape producers here in NY would have a much tougher time without access to insurance. For instance, last year (2016) we had a unusually warm March & April only to have a late frost after the buds had broken resulting in a total crop lost for cherries and very reduced apple crop. Those fellows with midsized orchards, those people bigger than just a part-time enterprise, pretty much full time won't be able to stay in business in today's cash economy without insurance. And we know that completely private insurance is generally too expensive without subsidy.
In addition, having crop insurance available for lots of different crops helps with market diversity which keeps producers from growing just one or two crops.
On the other hand, I suspect that straight subsidy programs are essentially "landowner and bank" protections programs. Bankers in the corn belt know that they can at the very least, get the mortgage interest payment. Likewise, landlords know they'll get some of their rent money.
By the way, the major problem with ARC/PLC isn't the subsidy itself, but rather the formula used to calculate payments. The idea of ARC/PLC is to protect producers given a precipitous decline in price. The problem with the formula is that it's too generous in years, two, three & beyond. By using the olympic average instead of the straight average (or some aggressive price average) it doesn't encourage producers to reduce acres fast enough. For example, instead of 90 M acres of corn we should be planting 83-85 M and prices probably won't be anywhere nearly as low, as long. |
Do You Agree With This Headline (Trump Budget Related)
