5 ms·

> But the vast majority of the subsidy goes not to small individual farmers, who might need such insurance You are quite right that there is no preferential tr

> But the vast majority of the subsidy goes not to small individual farmers, who might need such insurance You are quite right that there is no preferential treatment for smaller farmers. It is simply for each dollar in premiums required, 60¢ is paid for by the farmer, 40¢ is paid by the government. It is true that those who pay the most in premiums (i.e. the largest farms) will receive the most in subsidies. It is designed to be a fair system without preference for any particular farm. > large agribusinesses who have more than enough resources and diversity to self-insure. On the flip side, small farmers have off-farm jobs so a loss on the farm is not likely to sink them. They still have their day job to pay the bills. > private sector insurance companies and speculators could provide it more efficiently than the government does I'm a tad bit skeptical. Private insurance has done well to serve individual events like a house fire or automobile accident, but when things happen on a grand scale like a major flood or widespread fire, it seems they fall back to government bailouts. The trouble with insurance on the farm is that it isn't usually just one farmer with failure. It is all the farmers at the same time. Private insurance hasn't proven a model to handle such cases, and if you're going to rely on the government to step in anyway as we've seen many times in the private insurance space when disaster strikes a large area, why not codify that action? > It's hard to compete with large businesses that get government subsidies they don't actually need. I am quite interested in your elaboration on this as I am not seeing how large businesses are advantaged by the subsidy in a way that small business are not. Proportionately, the subsidy given to each farmer is equal.

pdonis 7y ago
> for each dollar in premiums required, 60¢ is paid for by the farmer, 40¢ is paid by the government I have no idea where you are getting this from. There are no actual "premiums". There is no actual insurance involved. The "insurance" is, as you originally said, "effective"--for certain crops, if their market price is below a certain price set by the government, the government pays farmers the difference as a subsidy. But only for certain crops, and those crops (the biggest one is corn) are mostly grown by large agribusinesses, not small farms. (The corn subsidy is even worse because much of the corn produced doesn't get eaten, it gets turned into ethanol to put in gasoline, for no good reason.) > small farmers have off-farm jobs I don't know which small farmers you are talking about. Most small farms are family owned businesses and provide the entire income for the family members who participate. Family members who have off-farm jobs are the ones who have left the farm and switched to other careers. > Private insurance has done well to serve individual events like a house fire or automobile accident, but when things happen on a grand scale like a major flood or widespread fire, it seems they fall back to government bailouts. First, while that may be true, it doesn't mean the government provides the insurance more efficiently. Second, private insurance companies are often restricted by the government in the premiums they can charge. For example, while flood insurance in regions which flood frequently is not cheap, it is cheaper than it would be in a free market, because in a free market the premiums would be based solely on actuarial data on the frequency of flooding and the expected losses from flooding, which would go up as more things of value were built in such areas. But the government, due to political pressure, doesn't allow the premiums to get that high, which means that people who choose to live in such areas, or companies that choose to build infrastructure there, don't see the full costs involved and so have less incentive to find somewhere else to go. > I am not seeing how large businesses are advantaged by the subsidy in a way that small business are not They are advantaged by being able to lobby to have the subsidies go to crops that they can more easily grow. But they are further advantaged by the mere existence of the subsidies, since they don't need them while smaller farms might.
- randomdata 7y ago
  > I have no idea where you are getting this from. Experience. I am a farmer. > if their market price is below a certain price set by the government, the government pays farmers the difference as a subsidy. Yes. This is insurance. A claim is made if the price fails to meet the insured value. There is also insurance against production output, which covers things like weather events. This is where the vast majority of the subsidy dollars go. Farmers pay 60% of the cost, the government pays 40% of the cost. As such, like I mentioned, for every dollar required in insurance premiums, you pay 60¢, the government pays 40¢. > I don't know which small farmers you are talking about The data indicates most farmers have off-farm jobs, myself included. I can certainly talk about my small farm, if you wish. Let's face it, unless you have a large farm, there simply isn't much work to do. You need an off-farm job to remain viable. The customer isn't going to pay you to sit on HN all day long. They will pay enough to justify the time you do spend farming, but the rest of your time is up to you to figure out how to make it pay. > because in a free market the premiums would be based solely on actuarial data on the frequency of flooding and the expected losses from flooding It is interesting you mention data, as that is the primary reason why the government operates this insurance system. It gives reason for farmers to report what they are going to produce ahead of time, allowing the government (and private sector) to make informed decisions. > They are advantaged by being able to lobby to have the subsidies go to crops that they can more easily grow. I'm not sure what you mean? The subsidies give no preference to what you want to grow. It is simply a matter of you paying 60¢ on every dollar or premium required to insure you. The reason corn producers receive the most subsidies, which is likely what you are thinking of, is simply because corn is the most frequently grown crop – by a large margin. More acres means greater overall risk, and therefore more overall insurance premiums. Which means that the 40¢ on each premium dollar equals a greater amount than a crop with lesser premium demands. If you want to grow tomatoes, you'll still get 40¢ on every premium dollar you need to spend to enrol in the insurance system. The reason you'll probably choose corn over tomatoes is simply because the market for corn is tremendously larger. It is mostly eaten by animals and cars, which dwarf the number of humans eating tomatoes by orders of magnitude, not to mention much more easily shipped across the entire world. The market for tomatoes is highly localized due to shipping issues (before reaching the processor) and a fairly tough sell in comparison due to the much smaller market.

pdonis 7y ago

> for each dollar in premiums required, 60¢ is paid for by the farmer, 40¢ is paid by the government I have no idea where you are getting this from. There are no actual "premiums". There is no actual insurance involved. The "insurance" is, as you originally said, "effective"--for certain crops, if their market price is below a certain price set by the government, the government pays farmers the difference as a subsidy. But only for certain crops, and those crops (the biggest one is corn) are mostly grown by large agribusinesses, not small farms. (The corn subsidy is even worse because much of the corn produced doesn't get eaten, it gets turned into ethanol to put in gasoline, for no good reason.) > small farmers have off-farm jobs I don't know which small farmers you are talking about. Most small farms are family owned businesses and provide the entire income for the family members who participate. Family members who have off-farm jobs are the ones who have left the farm and switched to other careers. > Private insurance has done well to serve individual events like a house fire or automobile accident, but when things happen on a grand scale like a major flood or widespread fire, it seems they fall back to government bailouts. First, while that may be true, it doesn't mean the government provides the insurance more efficiently. Second, private insurance companies are often restricted by the government in the premiums they can charge. For example, while flood insurance in regions which flood frequently is not cheap, it is cheaper than it would be in a free market, because in a free market the premiums would be based solely on actuarial data on the frequency of flooding and the expected losses from flooding, which would go up as more things of value were built in such areas. But the government, due to political pressure, doesn't allow the premiums to get that high, which means that people who choose to live in such areas, or companies that choose to build infrastructure there, don't see the full costs involved and so have less incentive to find somewhere else to go. > I am not seeing how large businesses are advantaged by the subsidy in a way that small business are not They are advantaged by being able to lobby to have the subsidies go to crops that they can more easily grow. But they are further advantaged by the mere existence of the subsidies, since they don't need them while smaller farms might.

randomdata 7y ago
> I have no idea where you are getting this from. Experience. I am a farmer. > if their market price is below a certain price set by the government, the government pays farmers the difference as a subsidy. Yes. This is insurance. A claim is made if the price fails to meet the insured value. There is also insurance against production output, which covers things like weather events. This is where the vast majority of the subsidy dollars go. Farmers pay 60% of the cost, the government pays 40% of the cost. As such, like I mentioned, for every dollar required in insurance premiums, you pay 60¢, the government pays 40¢. > I don't know which small farmers you are talking about The data indicates most farmers have off-farm jobs, myself included. I can certainly talk about my small farm, if you wish. Let's face it, unless you have a large farm, there simply isn't much work to do. You need an off-farm job to remain viable. The customer isn't going to pay you to sit on HN all day long. They will pay enough to justify the time you do spend farming, but the rest of your time is up to you to figure out how to make it pay. > because in a free market the premiums would be based solely on actuarial data on the frequency of flooding and the expected losses from flooding It is interesting you mention data, as that is the primary reason why the government operates this insurance system. It gives reason for farmers to report what they are going to produce ahead of time, allowing the government (and private sector) to make informed decisions. > They are advantaged by being able to lobby to have the subsidies go to crops that they can more easily grow. I'm not sure what you mean? The subsidies give no preference to what you want to grow. It is simply a matter of you paying 60¢ on every dollar or premium required to insure you. The reason corn producers receive the most subsidies, which is likely what you are thinking of, is simply because corn is the most frequently grown crop – by a large margin. More acres means greater overall risk, and therefore more overall insurance premiums. Which means that the 40¢ on each premium dollar equals a greater amount than a crop with lesser premium demands. If you want to grow tomatoes, you'll still get 40¢ on every premium dollar you need to spend to enrol in the insurance system. The reason you'll probably choose corn over tomatoes is simply because the market for corn is tremendously larger. It is mostly eaten by animals and cars, which dwarf the number of humans eating tomatoes by orders of magnitude, not to mention much more easily shipped across the entire world. The market for tomatoes is highly localized due to shipping issues (before reaching the processor) and a fairly tough sell in comparison due to the much smaller market.