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National Crop Insurance Services President Tom Zacharias on government spending to help increase crop insurance to help farmers impacted by the drough...
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-- this drought tax -- are forking over it was ten billion dollars -- so that we don't often hear about not crop insurance.
Billions are being paid by the government and of course.
The funds are critical lifeline for many farmers but it discourages other hedging options that are out there in the market here to disagree with me.
-- you crop insurance services president thank you so much for joining us some confusion about this is because I think some form.
Other insurance makes sense -- understand why that taxpayers paying for this can you explain that to me.
Sure there are taxpayer and consumer benefits to federal dollar involvement in the crop insurance program.
-- Federal involvement that makes premiums more affordable you can have more farmers' purchasing the insurance.
And in year like this when we're gonna have major catastrophic losses that we haven't seen since 1988.
This means is that there will be a system in place -- And get in the fields is next year to meet demands and become a non.
It led to -- crop insurance though they can go out and buy it from a private source or they can go buy futures.
You know -- in the market the way as so many other types of producers deal.
And it they did that they can just pass the president of the consumer it's like taxes I mean it's it's part of the cost of doing business and the person that would pay for it is the person at the end who buys the Corning eats the court.
So why should the consumer.
Pay for the insurance rather than the taxpayer and it taxpayers got enough on their -- -- you have to understand that farmers do pay a portion of the premium in the program last year.
Farmers paid about four point five billion dollars in farmer -- premium.
Right where -- -- government -- is 60% now.
I mean it still the government -- pays the majority evident by the government I mean the tax Payer.
That's true about 60% of this is subsidized by the federal government.
Makes premiums affordable so that coverage levels can be up there and in a year like this year.
When we're gonna see farmers take enormous losses they can recover and get back in the fields for next year.
But they can do that if they had regular insurance they would just pass the cost aren't you say affordable but that's a price of doing business -- that price is not passed on.
In the price of the good at the end of the line.
Corn would be more expensive if they didn't have federal insurance.
But that makes -- I mean people buying corn.
Would be the ones bearing the cost of this insurance no matter what the farmers not paying it in any scenario.
Either the government a taxpayers pay for the end user is paying it you understand when in -- Well you have to understand there's benefits to all of us from having a stable and secure food supply.
And that's the thought process behind the program in previous years if we hadn't had the crop insurance program we have today.
There would be an enormous call for disaster relief and those funds have historically been off budget.
So what the crop insurance program in place.
You have a system where.
There are payments that will be made to farmers to cover the cost of this Strauss and an election year like we have this year.
You have to believe that without crop insurance in place -- the level that we have it.
That there would be calls for ad hoc disaster bills President Obama and secretary Vilsack were in Iowa this last week.
And there was not a call for ad hoc disaster because of the crop insurance program we have in place.
I don't know -- we know we've heard a lot of it all plays out because as a result of the drop but I think that's sort of beside the point I mean let's talk about this mechanism right here.
Because if an airline is worried about the spiking price of fuel.
They go out -- hedging in the futures market by buying fuel futures needed energy utility providers are worried about spiking cost they hedge in the futures market.
I don't understand why farmers can't get -- And hedge corn futures -- and going to that market to buy insurance rather than having that taxpayer paid for it through the federal government.
Okay rule on the hedging side that's generally more of the price risk in this situation we're talking about enormous production losses to the crop.
Bushel last -- -- down through less than a 123.
Bushels for -- Which is a major reduction from last year.
Soybean yields are off substantially.
So what you're talking about here is production losses that -- can't necessarily be hedge could you -- kind of tradition you're private insurance for that.
There is some private insurance for hill covered but for extensive drought coverage there is not.
Private provision the system that we have now provides for both public and.
Because the federal government -- -- there there isn't a market for.
To get -- there on the on the insurance side because the government is doing it so why would there be a free market out airport -- -- all right Tom -- coming on tonight appreciate your perspective.
