Crop Insurance and Statutory Reference Prices

Carl Zulauf, Jonathan Coppess, Nick Paulson and Gary Schnitkey

farmdoc daily, 2025, vol. 14, issue 132

Abstract: Federal crop insurance is a farm payment program since farmers pay on average only about 38% of the total actuarially-fair premium. Not considering the resulting net insurance indemnity payments to farmers when setting statutory reference prices means reference prices could exceed the total economic cost of production. Among other problems, this could potentially put upward pressure on farm input prices and stimulate production. For seed cotton and rice, their 2024 statutory reference price exceeds their 2024 total economic cost of production per unit of trendline yield when average net crop insurance payments for the 2014-2023 crops are taken into account. In an earlier article, we pointed out that reference prices proposed by the House Agriculture Committee would exceed 2024 cost of production even without taking indemnity payments into account for peanuts, long grain rice and seed cotton.

Keywords: Agribusiness; Farm Program Analysis and Outlook; Gardner Policy Series; Premiums and Payouts (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ags:illufd:358474

DOI: 10.22004/ag.econ.358474

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