An approach to risk management that focuses solely on the crop insurance program s subsidy structure is too narrow to address the many risks faced by farmers. In crafting my own risk management bill, I was guided by four principles. First, the greatest possible amount of the six billion dollars should go directly to farmers. In the crop insurance program, private insurers receive substantial compensation for selling and servicing multi-peril policies on the government s behalf. Overall, the insurance companies receive about one-third of the federal financial support of the program.
Farmers get the remaining two-thirds.
In my view, farmers should receive more of the new federal spending. Second, the six billion dollars should be provided in such a manner so that it does not distort planting decisions. I believe that Dr. Gardner will address this point in his testimony. Federal risk management spending should not inadvertently subsidize overproduction when world-wide agricultural stocks are already large. Subsidizing overproduction postpones the day when agricultural prices will rebound.