By Steve Ford
Critics of agricultural support tend to be fairly vocal, but they are particularly so during each Farm Bill season as Congress debates the extent to which government will support farmers. Unfortunately, some senators and representatives tend to listen to them.
One source of criticism of the need for farm programs surprisingly comes from Land Grant university agricultural economists. Vince Smith at Montana State, Barry Goodwin at North Carolina State, and Bruce Babcock at Iowa State have penned reports for a conservative, free-market think-tank and an environmental lobbying group, both of which would like to dismantle agricultural programs. The reports include suggestions that farmers don't need farm programs because they are rich, farmers can afford to pay for insurance on their own, and the true cost of the proposed farm programs may be unaffordable (if corn prices drop below $3.00 per bushel).
Clearly these statements are divorced from the experience of many Southern farmers. An uninsured 25% yield loss in the South could mean a $150,000 loss, while in the Midwest it might mean only a year without profit. Moreover, when was the last time Iowa experienced a 25% yield loss? However, the Midwest tends to drive farm policy, so the conclusions drawn by these agricultural economists may simply reflect an overwhelming bias toward Midwest agriculture based on farm numbers. Perhaps Southern agriculture is so different from the Midwest that Southerners are true outliers? A comparison of crop insurance premiums between Iowa and some Southern states provides some insight to answer that question.
A farm with a 150-bushel insurable corn yield in central Iowa would pay a premium for 75% revenue insurance coverage of $27 per acre before any government subsidy. That is only about half of that paid by a similar farm in northwest Alabama ($52) and a quarter of that paid by a farm in southwest Georgia ($108). Similarly, that farm in Iowa would pay soybean revenue insurance premiums of $21 per acre, only 32-46% of those paid by Southern farms with a similar 35-bushel yield. These premium differences imply that Southern agriculture is two to five times as risky as Iowa agriculture and that is difficult to believe.