In recent years, crop insurance has emerged as a main safety net for U.S. crop producers. Crop insurance programs have existed since the Dust Bowl of the 1930s. Coverage remained limited until the Federal Crop Insurance Reform Act of 1994 required crop insurance coverage for some other disaster assistance programs. Federal crop insurance premiums are subsidized and have increased in recent years. For example, government costs for premium subsidies and operating costs have increased from $2.8 billion in 2003 to $7.8 billion in 2014. A recent study has shown that the removal of crop insurance would hurt U.S. food consumers. Based on 2013 data, eliminating crop insurance subsidies would result in lower participation rates and reduced food production that would underpin higher food prices. It was estimated that U.S. food consumers would lose $2.5 billion in welfare value if crop insurance subsidies would decline, with additional welfare losses to foreign consumers. In addition, U.S. farmers and agricultural producers would lose roughly $8 billion in welfare gains through the loss of subsidies. To be sure, U.S. taxpayers would benefit from the elimination of crop insurance premium subsidies, yet the net general welfare gains would be $932 million. Falling farm incomes have led to broader economic strains in rural economic activity. Based on Bureau of Economic Analysis data since 1970, nonmetropolitan county farm earnings have a strong correlation with earnings in food and kindred product manufacturing and agricultural service industry. For example, U.S. tractor and combine sales surged with farm income after 2006, peaking in 2013. Since then, the sharp decline in farm incomes translated into plummeting tractor and combine sales. In fact, tractor and combine sales in 2016 are on pace to fall below sales posted prior to the farm income boom. Bankers reporting to Federal Reserve agricultural credit surveys indicate that farm capital spending is expected to decline further in 2016. In addition to plummeting farm capital spending, farm household spending has collapsed with farm incomes. According to bankers in the Tenth Federal Reserve District, farm households have cut household spending along with capital spending. Reduced household spending will place pressure on retail businesses on rural Main Streets, rural incomes and support for charitable organizations in rural communities. In total, sharp downturns in agricultural profitability often spill over into lower investment, capital spending and household spending in rural communities. Lower farm incomes and reduced spillovers into rural consumer spending and ag-related activity could further strain rural poverty rates. Since the 1960s, nonmetropolitan poverty rates have been substantially higher than poverty rates in metropolitan areas. . . . U.S. farmers are facing substantial declines in farm profits, driven by lower commodity prices. With crop insurance as the primary safety net for U.S. agriculture, the learning and implementation of various risk management techniques are the key to helping farmers manage margins in these difficult times. In addition to benefiting farmers, crop insurance payments provide economic welfare benefits to food consumers. Jason Henderson is associate dean and director of Extension in the College of Agriculture at Purdue University. These comments are from his testimony last month to the House Agriculture Subcommittee on Nutrition. Source - iowafarmertoday.com