How The Senate Farm Bill Would Change Subsidies The Senate passed legislation Monday that would do away with direct payments to farmers and instead create an expanded crop insurance program. It's designed to protect farmers from losses, but some say it amounts to a highly subsidized gift to agribusiness.
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How The Senate Farm Bill Would Change Subsidies

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How The Senate Farm Bill Would Change Subsidies

How The Senate Farm Bill Would Change Subsidies

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The Senate passed its version of the farm bill last night - which in the Senate, enjoyed bipartisan support. The five-year spending plan covers everything from food stamps to soil conservation, to crop insurance. And the heavily subsidized crop insurance is generating a lot of debate, as NPR's Tamara Keith reports.

TAMARA KEITH, BYLINE: When the wind whips through Scott Neufeld's farm in Northwest Oklahoma, the wheat sways and looks like a roiling ocean - those famous amber waves of grain.

SCOTT NEUFELD: It's normal. And they're predicting storms today, so that wind you hear is pumping up the moisture for the storms.

KEITH: It's a reminder of just what a precarious business farming can be. Even though his crop looks good now, a violent hailstorm could wipe him out just before harvest. And every year, there's a risk of a drought - or even just a badly timed dry spell.

NEUFELD: You're reliant upon what falls from the sky. You have no spigot to go turn on when it gets hot, or when the rains quit.

KEITH: Neufeld is a third-generation farmer with about 3,500 acres of wheat, canola, alfalfa hay and some cattle. And he's able to manage the risk inherent in his business, in part because of crop insurance - insurance that is highly subsidized by the federal government.

NEUFELD: 2010, we did run into that year where it was very dry, very dry spring.

KEITH: Neufeld harvested far less wheat than expected, and his crop insurance made up part of the difference.

NEUFELD: It, by no means, made up the complete income. But it was maybe 70 percent to be able to afford to keep going, pay the bills, and go again for the next year.

KEITH: Neufeld buys a revenue protection policy. Most farmers do. It insures against not just yield loss from storms or drought, but also from revenue loss if commodity prices drop.

BRUCE BABCOCK: It's what I call the Cadillac of insurance products.

KEITH: Bruce Babcock is a professor of economics at Iowa State, who helped invent revenue coverage back in the mid-1990s. Now, though he supports the idea of crop insurance, he's a critic of how much taxpayer money goes into it. For every dollar of insurance premium, on average farmers pay 38 cents, and taxpayers kick in 62 cents. The Senate farm bill expands the insurance program, and is expected to cost $89 billion over the next decade.

BABCOCK: Crop insurance is not an insurance program. It's a social program. It's a regular farm commodity support, subsidy program.

KEITH: And, he says, because of how American agriculture works, it's a social program that helps the biggest agribusinesses the most. The legislation does away with direct payments - a program that pays farmers whether they plant a crop or not, making insurance subsidies the central way the government will support the nation's farmers in the future.

SEN. DEBBIE STABENOW: Crop insurance is insurance, and the farmer gets a bill, not a check.

KEITH: Michigan Democrat Debbie Stabenow heads the Senate Agriculture Committee and was speaking in favor of the crop insurance program on the Senate floor. That bill she talks about covers about a third of the actual cost, but she says the government subsidy is necessary.

STABENOW: They get a bill - it's got to be a bill that they can afford to be able to provide the coverage. And then there is no payout unless you have a loss.

KEITH: The legislation in the Senate also ties those insurance subsidies to conservation requirements, to protect farmland and streams. Still, many, including Oklahoma Sen. Tom Coburn, a Republican, say the crop insurance program is too generous. He offered a bipartisan amendment that would reduce subsidies for the wealthiest farmers.

SEN. TOM COBURN: The number one farmer in the country gets $1.9 million worth of subsidies a year. All we're going to do is cut his subsidy to $1.6 million.

KEITH: The amendment passed. For his part, Scott Neufeld would be happy to pay his premiums year after year and never use his crop insurance. But...

NEUFELD: We get into a year where there's a major drought, our commodity prices fall out of bed for nothing under our control, then I think we need to have that safety net.

KEITH: The House version of the farm bill also replaces direct payments with expanded crop insurance. It's scheduled to take up the measure for what is promising to be vigorous debate later this month.

Tamara Keith, NPR News, the Capitol.

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