On RFD-TV: Cory Walters

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02/02/2022 Added

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Cory Walters, associate professor of agricultural economics, discusses his research which reveals the unintended consequence of crop insurance subsidies--fewer farms. He appeared live on RFD-TV, Feb. 1, 2022.

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[00:00:00.330]Well since the 1980s, the U.S. government has encouraged
[00:00:03.450]farmers to buy crop insurance by offering subsidies to
[00:00:06.690]offset cost of premiums.
[00:00:08.970]However, these subsidies may have an unintended consequence,
[00:00:13.260]leading to fewer farms.
[00:00:14.880]Professor of ag economics at the University of
[00:00:17.100]Nebraska-Lincoln Cory Walters has studied the trend.
[00:00:20.640]And he joins us now for an update on that research.
[00:00:23.580]And Cory, thank you very much for your time here this
[00:00:25.440]morning. Could you begin by telling us just a little bit
[00:00:28.740]about the crop insurance subsidies and their impact that
[00:00:30.960]you've seen?
[00:00:33.810]Yeah, the current taxpayer subsidized program began in the
[00:00:37.680]1980s with the federal Crop Insurance Act.
[00:00:40.380]And then it was followed up with another one in 1994.
[00:00:43.890]And then the big one in 2000, the ARPA act, the Agricultural
[00:00:47.490]Risk Protection Act.
[00:00:49.620]These these acts are essentially aimed at increasing
[00:00:52.200]producer participation, through of course, the subsidy and
[00:00:56.070]enhanced coverage options.
[00:00:57.660]And they they very much worked.
[00:01:00.060]Right now, corn and soybeans, we have over 90% of all acres
[00:01:04.500]insured.
[00:01:06.030]So what does that how does that lead to fewer and larger
[00:01:10.410]U.S. farms?
[00:01:13.850]Yeah, so the the mechanism is a bit bit intriguing.
[00:01:18.050]What happens is crop insurance, you you take off, when you
[00:01:21.110]purchase a policy, you take off the tail of a distribution
[00:01:24.230]of you know, bad outcomes.
[00:01:26.030]That changes the expected income, then for a farmer, and
[00:01:29.180]then and then that can incentivize them to produce more.
[00:01:32.960]For the uninsured farm, then they, they don't get this
[00:01:37.070]benefit, and it can help drive them out of the market.
[00:01:41.090]And on top of that, then the insured farms, they can use
[00:01:44.930]these returns, especially after a bad event, let's say, you
[00:01:48.800]know, drought or something than to to purchase these these
[00:01:53.840]farms that aren't as good of a financial position.
[00:01:58.480]You know, in the analysis, we saw roughly, you know, 20 to
[00:02:01.750]40% reduction in farms due to due to subsidies.
[00:02:06.130]And Cory, how can farm consolidation as a result of these
[00:02:09.160]crop insurance subsidies be avoided in the future, then?
[00:02:14.200]Yeah, so we need to look more closely at these these
[00:02:16.990]unintended effects.
[00:02:19.030]But clearly, you know, being being aware is the first thing
[00:02:22.360]we want to do.
[00:02:24.010]Because we we want to create, you know, a policy that will
[00:02:28.390]be much more robust in the future when rethinking the
[00:02:31.870]current policy design.
[00:02:33.360]And there's some ways to do that that doesn't, you know,
[00:02:36.630]take away the premium subsidies.
[00:02:39.600]We can maintain those, I think, and make some subtle changes
[00:02:44.340]to take away these sort of effects.
[00:02:46.960]Cory here in our last half hour, we reported that the
[00:02:50.740]Congress is getting ready to start work on the new farm
[00:02:53.350]bill.
[00:02:53.800]Do you expect your research or will you share your research
[00:02:57.010]with legislators as they go through the process?
[00:03:00.860]I would love to.
[00:03:02.570]Well good deal.
[00:03:02.850]Thank you very much, Cory, for taking the time to join us.
[00:03:03.000]We appreciate your insight today.
[00:03:06.870]University of Nebraska-Lincoln, associate professor of ag
[00:03:09.540]economics, Cory Walters, connecting with us today.
[00:03:12.810]Of course, you can go online to agecon.unl.edu for more
[00:03:17.520]information

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On RFD-TV: Cory Walters

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