Survey on striga and crop husbandry practices in relation to
Crop Insurance in Relation to Other Components of the Producer Safety Net
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Crop Insurance in Relation Crop Insurance in Relation to Other Components of the to Other Components of the Producer Safety Net Producer Safety Net Joe L. Outlaw Professor & Extension Economist Co-Director, AFPC July 26, 2011
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Crop Insurance in Relation to Other Components of the Producer Safety Net. Joe L. Outlaw Professor & Extension Economist Co-Director, AFPC July 26, 2011. Net Outlays ($B), 2012-21. Source: CBO March 2011 Baseline. Total Payments ($M), 2012-21. Source: CBO March 2011 Baseline. - PowerPoint PPT Presentation
Transcript of Crop Insurance in Relation to Other Components of the Producer Safety Net
Crop Insurance in Relation to Crop Insurance in Relation to Other Components of the Other Components of the
Producer Safety NetProducer Safety Net
Joe L. OutlawProfessor & Extension Economist
Co-Director, AFPC
July 26, 2011
Net Outlays ($B), 2012-Net Outlays ($B), 2012-2121
Source: CBO March 2011 Baseline
Total Payments ($M), Total Payments ($M), 2012-212012-21
Source: CBO March 2011 Baseline
What I Look For in a Safety What I Look For in a Safety Net?Net?
1. Does it help when it’s needed and doesn’t when it’s not?
2. Can you explain what your trying to accomplish to a normal person and they understand?
3. Does it help keep people actually farming the land?A. Support goes to those “at risk”B. Bankability - Will a lender consider it in making
operating loans?
4. Is there minimal overlap?A. Not getting paid on the same loss twice…
Evaluating Safety Net Evaluating Safety Net Options Relative to my Options Relative to my
CriteriaCriteria• Crop Insurance
– Yield insurance passes all my tests– Revenue insurance passes almost all tests
• If you have any other price/revenue support tool in place there will be overlap
• Futures market based price – good and less good (perceived or real market manipulation can create politically unacceptable or indefensible outcomes)
• SURE– Passes all except for #1– it has paid so late
that if you really needed this part of the safety net to kick in – was probably too late (Money from the heavens) and
– 3b – not bankable– Difficult but can be explained as just whole
farm gap insurance– No Baseline
Evaluating Safety Net Evaluating Safety Net Options Relative to my Options Relative to my
CriteriaCriteria
• ACRE– Is counter-cyclical but better hope highly correlated with
state yields – otherwise might not trigger– Can’t explain it to anybody – much less a normal person– Does support people “at risk” but based off of
benchmark prices that for some crops are too low to provide much protection
– Has not been seen as bankable – too complicated with multiple triggers
– Tremendous overlap with crop insurance• Cannot defend paying on the same loss twice…
Evaluating Safety Net Evaluating Safety Net Options Relative to my Options Relative to my
CriteriaCriteria
• Direct Payments– Passes #2 (explainable) and 3a (bankable)– Fails on:
• not counter-cyclical support• Not only helping those at risk• Overlap???
– I probably should have had WTO acceptability as one of my criteria but… I didn’t
Evaluating Safety Net Evaluating Safety Net Options Relative to my Options Relative to my
CriteriaCriteria
• Counter-Cyclical Payments (CCPs)– Passes #1 sort of and #2 explainable– Fails 3a and 3b (“at risk” and bankable)– Does overlap with revenue insurance– If we go this route payment limits would
need to be raised – otherwise no bankable protection
Evaluating Safety Net Evaluating Safety Net Options Relative to my Options Relative to my
CriteriaCriteria
• Marketing Loan/LDPs– Almost perfect (passes all my tests)– If it had a built in automatic input cost
inflation and yield improvement mechanism – we wouldn’t be having this discussion, maybe a WTO discussion, but not this one
– Overlaps with revenue insurance
Evaluating Safety Net Evaluating Safety Net Options Relative to my Options Relative to my
CriteriaCriteria
• Each of the various components of the producer safety net have their strengths and weaknesses– Each were designed to accomplish a certain goal– Whether I think the tool is any good probably is
influenced by what I think it’s goal was/is• In a limited budget environment – Choices will
have to be made• If it were me making the choice I would say all we
need is crop insurance and some time of price protection
SummarySummary
