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The Room is Underwater: Rebutting Alan Guebert’s ‘Insuring Elephants’


Here’s the original article, to which this blog responds:  (Alan Guebert, “Insuring Elephants,”  Farm and Food File, 12/23/14,  http://farmandfoodfile.com/2014/12/23/insuring-elephants/).

Crop (Revenue) Insurance may be, as Alan Guebert argues, “the elephant in the Farm Bill pantry,” but if so, he then seems not to notice the WHALE in the room, and the fact that the whole room is underwater.

He refers to “Big Ag,” and it’s “huge appetite and suffocating presence,” but not Agribusiness commodity buyers (the WHALE,) and not the WATER (“lack of price responsiveness” “on both the supply and the demand sides for aggregate agriculture,”) that is causing the drowning.

Certainly thinking that a Farm Bureau lobbyist can make sense of things raises a huge red flag.  Should we be taken in by the fact that she prominently cites the work of the Land Stewardship Project, an important progressive farm issue group.  As it turns out, no.

Guebert starts with two reasons (the two GAO studies cited by the Farm Bureau lobbyist, on costs and climate change,) as to why crop insurance should be revisited by Congress.  He didn’t mention the bigger reasons.

For example, there is no economic reason for a crop revenue insurance program to exist, as it insures against cheap prices, caused economically by the chronic failure of ‘free’ markets, and caused politically by Congress, which has hardly mentioned anything close to these, the biggest underlying factors.  So it’s a total losers game, which then requires government to prop it up, (the various farmer/insurance-company subsidies,) in order to pretend that it works.

There is only a political reason for such a program:  it works as spin, at least for some audiences, (and no audience sector seems much to understand the core issues, [except for farm justice advocates]).  The spin problem is that de-coupling via “Direct Payments” was a massive failure as spin, and almost everyone forgot what the original (false) idea even was.  The new spin, (revenue insurance,) is that it’s a “risk management” tool.  Hey, it’s insurance.  Any business needs insurance to manage risk, right?

Wrong.  It’s not insurance.  It’s a program that sometimes pays subsidies when farmers need them, and even more when they don’t need them, and doesn’t pay them at all when they’re most needed.  Why, because it has no fixed standard of need, of production costs, for example, by which to measure the benefits.  Instead it follows ‘free’ markets, using “olympic year” standards.  Except ‘free’ markets have usually failed, for 150 years, and are projected to fail through 2023!  So following the standard of failure, plus paying out hugely when it’s not needed, and variations in between, is not, in any rational definition, “risk management.”

And, in fact, it’s failed as spin right from the start, even though almost none of the critics know what’s really happening.

Farmers, however, know something about it.  They massively rejected the revenue insurance approach of the 2008 farm bill, especially in Iowa.  Still, Congress, with support from Farm Bureau, NCGA, ASA and others, chose it as the way to go.

Guebert quotes a GAO report on the point that premium subsidies could be reduced “‘with minimal impact’ to farmers’ cost and their participation in it.”  Well, farmers don’t have a real choice, so yes, they must participate.  Meanwhile I see no rational analysis of farmers costs (vs prices) in any of the sources (Guebert, Farm Bureau, GAO, Land Stewardship Project).

One of the GAO reports even misuses statistics of farm household income to justify it’s conclusions.  Over the decades, as farm income has gone down, down, down, we eventually found that farm household income went up!  Gee, how could that be?  GAO treats it as if the farm economy must be doing OK.  Well, let’s see.  We had the lowest farm prices in history, (i.e. lowest 8 of 9 for corn and soybeans, and similar for other crops,) 1997-2005.  Then we had 7 years when corn, soybean and rice prices were above full costs.  Whoopy!  What we’ve really had is that, increasingly, only the rich, writing off other income, could survive in farming.  Then we had some years when the biggest crops made money.  Much of that has ended with corn prices falling well below costs.  But none of these realities seems to be considered in any of the sources.

Finally, Guebert praises the LSP reports, as follows:

-crop (revenue) insurance is very expensive.

Yes.

-the “data … is shocking.”  “26 operations received over $1 million each…”

Well, not nearly as shocking as the missing data, of how much Cargill makes from the overall program.  No, Cargill doesn’t get subsidies.  It gets ‘free’ market entitlements, from the absence of Price Floor programs, where the US lost money massively on farm exports for 26-32 years in a row.  That makes for US AND global benefits, and those number in the billions globally, but there’s no transparency on those benefits.  They’re not even mentioned.

-”The top 10% … 2.3 percent of America’s farmers”  “took in more than half … of all premium subsidies.”

Yes, but the full-time crop farms are all in the top ten percent.   The bottom 80% average less than 10% of a full-time size.  That’s never mentioned.  And the subsidies are for commodity crops, which make less money than other, nonsubsidized crops, even WITH the subsidies.  That too is never mentioned.

-“study after study has shown that federal farm program benefits mostly are capitalized in land prices” “crop insurance” fosters concentration.

In fact, however, over the decades, farmers have received less and less and less money, even with subsidies, and most farmers have gone broke.  So where is the explanation as to why land prices are so high relative to being able to make money from the land?  Why are commodity crops blamed, when they make less than fruits and vegetables, even with subsidies?  Why are these factors omitted from these reports?  And why is tax loss farming, where the rich can out compete those trying to actually make money from farming itself, not part of the analysis?

In the end, Guebert describes LSP’s conclusions.  How about “whole farm crop insurance” focusing on “resource conserving, integrated diversified farms” for “beginning farmers.”  Well, that’s all great as far as it goes, in dealing with the elephant.  But what about the WHALE!?  What about the FLOOD?  LSP does nothing to address the fact that CAFOs are massively subsidized by cheap prices, even in their own proposal.  That’s why, while it’s good on the small issues, it fails in the larger sense, doing not much of anything on the cheap feed problem that has caused most farmers to lose value-added livestock, and with it, the economic basis for Resource Conserving Crop Rotations, (i.e. a use for alfalfa, clover and small grains).  The proposal then ignores the problem of the massive destruction of the infrastructure for sustainability, such as sale barns, elevators that will buy oats and grind feed, etc.

Guebert concludes:  “The groundwork is done and the question remains:  why are taxpayers insuring elephants?”  Unfortunately, he and the others all fail to answer that question.

It’s the whale in the room!  It’s the fact the room is flooded!  It’s The Whale In The Room!!  It’s The Fact That The Room Is Flooded!!  IT’S THE WHALE IN THE ROOM!!!  IT’S THE FACT THAT THE ROOM IS FLOODED!!!

 

FOR FURTHER READING

Daryll E. Ray, “It’s Price Responsiveness! It’s Price Responsiveness!! IT’S PRICE RESPONSIVENESS!!!,” APAC, University of Tennessee, 5/6/05, http://agpolicy.org/weekcol/248.html .

Daryll E. Ray & Harwood D. Schaffer, “Revenue insurance: The upside down safety net,” APAC, University of Tennessee, 2/20/15, http://agpolicy.org/weekcol/760.html .

Brad Wilson, “PRIMER: Revenue Insurance in the 2012 Farm Bill,” ZSpace, 5/11/12, http://zcomm.org/zblogs/primer-revenue-insurance-in-the-2012-farm-bill-by-brad-wilson/, (links to key articles by Daryll E. Ray, IATP, Brad Wilson, etc).

Brad Wilson, Talking Points for the 2012 Farm Bill,” ZSpace, 5/13/12, http://www.zcomm.org/talking-points-for-the-2012-farm-bill-by-brad-wilson .

Brad Wilson, “De Mystifying Crop Insurance in the Farm Bill,” ZSpace, 6/17/13, https://zcomm.org/zblogs/de-mystifying-crop-insurance-in-the-farm-bill-by-brad-wilson/ .

Brad Wilson, “Politics and Crop Insurance,” ZSpace, 9/13/13, https://zcomm.org/zblogs/politics-and-crop-insurance-by-brad-wilson/ .

Brad Wilson, Corporations and Crop Insurance: Rebutting LSP’s White Paper 1,” ZSpace, 1/3/15, https://zcomm.org/zblogs/corporations-and-crop-insurance-rebutting-lsps-white-paper-1/ .

Brad Wilson, “Biggest Secretly Bigger in ‘Reform’: Rebutting LSP’s White Paper 2,” ZSpace, 1/3/15, https://zcomm.org/zblogs/biggest-secretly-bigger-in-reform-rebutting-lsps-white-paper-2/

Brad Wilson, “Farm bill net impacts: Which State is the Biggest Loser?” SlideShare, 8/12/14, http://www.slideshare.net/bradwilson581525/farm-bill-net-impacts-which-state-is-the-biggest-loser .

 

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