Dear Editor;
Congratulations to The McPherson Sentinel and Jonathan Shorman for attempting to write an article about federal spending that goes beyond the sound bite level. Unfortunately, some facts were misapplied and out of context.
Crop insurance is not “federal spending.” It is sold by private insurance companies to individuals who voluntarily buy coverage. Originally, it just covered bushels of production, although the newer programs can guarantee revenue (bushels time price). The federal government through the Risk Management Association (RMA) does specify how those policies are written, how prices and premiums are established, etc., so that each company sells the same products. The government also underwrites a fraction of the premium, but it also does that for other “high risk” policies, like flood insurance coverage. That subsidy is federal spending, but certainly indemnity payments as listed in the article are not.
A farmer can buy crop insurance for 50-85 percent of their 10-year actual production history. Most buy 65-75 percent since higher levels of coverage cost disproportional higher premiums. (I have seen where $10 additional coverage actually cost $11 additional premium.) As a side note, average cash expenses like fuel, fertilizer, repairs, etc., take 80 percent of McPherson County farm income, so most farmers filing a crop insurance claim are not even covering their bills for the year, let alone their labor or return on investments.
McPherson County typically produces a few hundred million dollars worth of crops. The fact that there was $36 million of indemnities paid in 2007 and $54 million in 2008 does not point to excessive government payments: rather, it illustrates how much area farmers lost in those years.
As another side note, the federal government has already re-written their operating agreement with the insurance companies and removed billions of dollars from their portion of the premiums.
Sincerely,
Jay B. Warner
McPherson
