Saturday, February 18, 2012

A Puzzle: Crop Insurance and Big Farms

An excerpt from the executive summary of analysis of the changing farm structure recently completed by ERS:
A long-term shift in production to larger farms has contributed to a shift in the distribution of commodity-related Government program payments and Federal crop insurance indemnity payments toward larger farms, most of which are family farms. Since operators of larger farms tend to earn higher household incomes, this shift has in turn led to a shift in the distribution of commodity-related Government payments toward higher income farm households. Most commodity-related program payments now go to farms operated by households with annual incomes over $89,000—significantly higher incomes than the typical U.S. household. Federal crop insurance indemnity payments have also shifted toward farms operated by higher income households, although not as much as commodity related program payments.
 The last sentence puzzles me, because I would have expected the exact opposite.  Maybe I'm living in a dream world but I do expect the payment limitation provisions FSA administers to have some effect.  And since crop insurance doesn't have such limitations, I'd expect the indemnities be more correlated to farm size.

Not sure I have an explanation, which is why it's a puzzle.  Perhaps, just perhaps, the larger operations are able to self-insure? Or maybe the definition of "operation" varies across the agencies?  Who knows?

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