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Crop Insurance Harms Ranchers, Rangeland; Follow New Zealand–No Subsidies!

Last updated on 2013.06.03

Some dairy producers want federal insurance comparable to the subsidized insurance farmers get for crops. Congresswoman Kristi Noem, whose husband sells that crop insurance for a living, wants livestock producers to get a more reliable slurp at the federal teat as well.

White River rancher Eric Iversen explains how federal livestock insurance might ease the market disadvantage current ag policy causes him and fellow ranchers:

"It appears that revenue-based crop insurance is artificially inflating land values and rental rates," said Eric Iversen. "And in order for livestock producers to compete with neighboring crop farmers, maybe it’s time to introduce a revenue-based livestock insurance program. I’ve got a ‘proven yield’ on my pastures and can calculate how many pounds of live cattle have been produced off each acre for the past several years; why can’t I get the same coverage as the crop farmer who keeps production records?" [Carrie Stadheim, "Federally funded crop insurance affects entire ag industry," Tri-State Livestock News, 2013.05.23]

South Dakota School and Public Lands Commissioner Jarrod Johnson sees federal crop insurance driving producers to tear up good grazing land for short-term benefits at the expense of long-term land sustainability:

Johnson, whose agency oversees over 768,000 acres, with roughly two-thirds of their holdings west of the Missouri River, said he is approached more and more by leasees who request permission to break up native sod. He is concerned that producers are jumping in for a “short term gain potential” when nobody knows how long the subsidy will be available.

“We have ag leases and grazing leases,” he said, explaining that only the ag leases can be farmed. While the state agency has the ability to transition a grazing lease into an ag lease, there’s limited capabilities to change it back. The leasee wouldn’t be required to seed it back to grass if he decided that crop farming wasn’t lucrative, and even if Johnson’s office went to the legislature and found the funding to do it themselves, “You can’t just seed it to alfalfa and say ‘it’s ok now;’ you’ll never get the intricacies and synergies provided by native rangelands, back,” he said [Stadheim, 2013.05.23].

But before we go hog-wild creating more corporate-ag handouts, let's hear from former state ag secretary and legislator Larry Gabriel, who's back at the ranch making a living the old-fashioned way, without government handouts. He'll probably catch heck from fellow Republicans for traveling around the world to learn stuff, but he points to New Zealand as a better model for ag policy than Noem's plan for increased government dependence:

“Some say they’ve got to do the same thing for livestock, but I say, two wrongs don’t make a right. I’m a rancher, I don’t buy crop insurance. I don’t believe the retired school teacher should subsidize my operation. When I was the secretary of agriculture, I argued that we [the government] should continue crop insurance for beginning farmers and ranchers, pay the current rate of 62 percent for first 10 years, then 40 percent for next 10 years, then farmers should be able to go on their own after that,” Gabriel still be believes this strategy for insurance would be adequate. “We were in New Zealand a year ago, and the farmers were proud that they have no government programs; they farm for the market. They try to be studious of what the market signals are telling them. They’ve learned that they need to react to what the market is telling them and if they don’t they will go out of business,” Gabriel said.

Gabriel said that when the New Zealand government got into a serious debt problem, not unlike the U.S. financial situation, they cut almost all of their government farm subsidies. “Some of the big farmers had to sell a bunch of their land and young people came in and bought some and they have a thriving, healthy ag economy now,” he said [Stadheim, 2013.05.23].

New Zealand eliminated farm subsidies in 1984. Their experience supports what Gabriel and my liberal farmer friend Charlie Johnson say: take subsidies away from the big players, and you'll see young farmers and small farmers thrive. If Kristi Noem were a real conservative, she'd embrace that free-market/conservationist/liberty policy and advocate for less federal support of agriculture, not more


  1. mike 2013.05.30

    Great post Cory!

  2. Owen Reitzel 2013.05.30

    "If Kristi Noem were a real conservative, she'd embrace that free-market/conservationist/liberty policy and advocate for less federal support of agriculture, not more"

    And that goes for the rest of the ultra-conservative Republicans as well.

  3. Rorschach 2013.05.30

    I'm not an expert on farm policy, but I do know that farmers are going to have to accept some change. The government can't afford to throw money at them even while they make money hand over fist. They have a good year, they buy equipment to take their taxable income down to nothing. Then they depreciate the equipment to take next year's taxable income down to nothing. Or buy new equipment again. Many farmers are millionaires and don't need government handouts. I think Larry Gabriel is onto something. Of course, crop insurance will always be available if farmers want to buy it - even if the subsidies are eliminated.

  4. Michael Black 2013.05.30

    I think you could take all of the crop insurance subsidies away and land prices would still continue to rise. Commodity prices are giving a good return for farmers right now, interest rates are low and investors are looking for a place to put money with high returns.

    If we got rid of the ethanol mandates, then things might change.

  5. oldguy 2013.05.30

    Interesting post Cory. It makes prefect sense....

  6. Nick Nemec 2013.05.30

    I served with Larry Gabriel in the SD Legislature and I would classify him as a common sense conservative. I always felt he studied things and wouldn't support an issue just because it was the conservative cause de jour. There is a lot of truth to the argument that crop insurance makes it safer for the big to get bigger, run up land prices and rents, and thus harder for the beginner to even begin.

    In order for his time limited insurance idea to work there would have to be some way to prevent outfits like my operation, Nemec Ranch, from changing its name to Holabird Farm when time ran out and continuing operation as before except with a name change.

  7. Bree S. 2013.05.30

    Yes, getting rid of what amounted to their Farm Program in New Zealand went pretty well - only a very small percentage of farms failed. Even though its funny to see Cory put up an argument you might see on Mises I agree.

  8. PNR 2013.05.30

    If Noem did endorse such a policy, would you support her re-election and criticize any Democrat candidate who tried to nail her for it? Would a potential Democrat contender for that job ever endorse such a policy? If so, could he/she be elected in SD while advocating it?

    I agree that it would be the preferred policy, but before one gets politicians to support it, one needs to persuade voters. And the voters in this state will not at present support a candidate for congress from either party who takes such a public stance.

  9. Bree S. 2013.05.30

    True, people are used to the Farm Program and it's been around for a long time. It will definitely take some time to work on whittling it down to size at least. I notice that Cory didn't bring up getting rid of food stamps, lol. I don't knock Noem for supporting the Farm Program, even though idealistically I'd like to see it go eventually, along with other bloat in the government.

  10. rollin potter 2013.05.30

    smarten up BREE S !!!!!!! These food stamps buy food these farms produce!!!!! Indirectly the farmers receive there income from the food stamps!!!!!

  11. Bree S. 2013.05.30

    The day I see people munching on field corn will be an interesting day.

  12. caheidelberger Post author | 2013.05.30

    No one is in a better position to persuade voters of what PNR and I both appear to agree on, the rightness of Gabriel's position, than Rep. Kristi Noem. Instead of hiding her crass self-interest behind a vague majority, Rep. Noem could use her position to lead a conversation.

    Besides, she's the conservative in this conversation. She should be all about getting government out of the free market. She doesn't have to do it to get my vote; she should have to do it to get the vote of conservatives who are paying attention to their slogans/principles.

  13. Jana 2013.05.30

    20% of every dollar of SNAP goes directly back to farmers.

  14. Bree S. 2013.05.30

    What is Rick Weiland's position on the Farm Program, Cory?

  15. Shamrock 2013.05.30

    Bree that field corn is turned into high fructose corn syrup that goes into almost all processed foods that people by with SNAP benefits. Or into meat that people buy with SNAP benefits. Who do you think lobbies against changing the product eligibility for SNAP purchases (related to products) It's the big food companies of course that want people to buy their processed foods.

  16. Douglas Wiken 2013.05.30

    Good thing that only farmers and ranchers get subsidies. The jealousy of non-farmers is awesome. South Dakota lives on agriculture.

    Crop insurance is an income shift mechanism. Pay premiums in good years to get some of production costs back in bad years.

    I have suggested to congress critters that allowing farmers and ranchers to put income in good years into their own insurance fund tax free and then pull it out as income in bad years might serve the same purpose of income averaging without making insurance agents rich at the expense of taxpayers.

    Any farm program payments should be limited to the minimum wage of two people and not go to any incorporated operations of whatever size.

  17. Jana 2013.05.30

    The soda pop and junk food crowd also would be hurt by eliminating SNAP. Forget about the hungry kids and moms...think of the shareholders of Cheetos and Pepsi! Oh the humanity!

  18. PNR 2013.05.30

    I'm not jealous of farmers, Douglas. The fact remains that the subsidies provided farmers (as well as other businesses, including wind energy, solar energy, ethanol, and all the rest) are counter productive. They tend to mitigate against new developments while protecting established interests against the vagaries of progress. This has always been the case - established interests have votes while new interests, by definition, don't.

    Subsidies for things like college and health insurance are also counter productive for similar reasons.

    And above all, we can't afford to maintain them. We're $17 trillion in debt and everyone thinks we can balance that on somebody else's dime - increase THEIR taxes, take away THEIR subsidy, but don't touch MY gimmies. That's what's landed us in this situation and until it changes, and people start saying, "This is serious enough that I guess I'm going to have to give up MY subsidy" we will continue on our merry way to perdition.

    I don't see it changing, and I see perdition being far closer than most folks think.

    Cory- Noem is in a good position to start making the case. But I don't know why it should matter that she's conservative. If it's true, shouldn't we all push for it simply because it's true? As for the politics of it, I can see a Democrat having far greater leeway to do so - the press grants Democrats a pass when they do this kind of thing while excoriating Republicans for pretty much anything. Herseth-Sandlin could have and Johnson could with far fewer political repercussions than Noem or Thune.

  19. Bill Dithmer 2013.05.30

    We have discussed the inequities between farm and ranch subsidies before. Yup there are many, and no they aren't the same risk.

    Why are we even talking about doing away with subsidies completely when you know that doing so will cause the price of food to go up even faster then it is now? Why not fix the problems that exist in the program in the first place? I'm talking about the scammers in farming, not the real farmers.

    Of course that would mean that most of you would have to force the very people that are feeding you right now to in effect police themselves by putting pressure on the politicians to fix what they so obviously don't want to fix in the first place.

    I'm curious where Larry came up with his 62,40 twenty year plan. And to only let young first time people in ag get that kind of break. Why?The risk don't change after twenty years do they? We are just now getting out of an eight year drought, that would have taken a lot of that twenty years right there. If the plan is to put more young people into farming and ranching it wont work anyway. The only way you can buy land is with money. And the only way you can get access to money is by coming up with collateral. Good intentions stopped working when land was twenty bucks an acre.

    Why do we give first time homeowners a break? It seems like a slap in the face to those that have owned and paid for their homes already.

    Why do we give deductions for every child you have on your income taxes? Isn't someone else picking up your tab. Now I would call that a true subsidy. The same goes for property taxes, where's the equity and fairness when you don't have kids in school?

    Larry said "I don’t believe the retired school teacher should subsidize my operation." And I don't think my operations property taxes should subsidize the schools to the tune of eighty percent when I don't have any kids in school.

    No matter how you cut it we all get subsidies in one way or another. It all depends on whose ox is being gored and which wheel squeaks the loudest.

    We don't get either farm or ranch subsidies here. We have always figured that the more you deal with the government the more they want to control you. We sure don't need anymore of that.

    Really New Zealand is the best you could come up with? There is a reason that so few people failed when the rules were changed.

    In the agriculture region the average low temperature of the year is 14 degrees.

    The average high temperature for the year is below 90 degrees.

    Because of the ocean currents they never have to worry about rain, it has always been there for them.

    Hail is just about unheard of there.

    And they have a growing period that is at least forty-five days longer then we do here in good old South Dakota.

    What farmer wouldn't gladly give up his or her subsidies for that kind of climate guarantee?

    The Blindman

  20. caheidelberger Post author | 2013.05.31

    Interesting point, Bill, about the milder weather in New Zealand. But that rather reinforces the point Jarrod Johnson makes: subsidies encourage farming on marginal land that might be better left unplowed and used for grazing or other purposes. Should we maintain subsidies for farmers who choose to farm in harsher climates?

  21. Charlie Hoffman 2013.05.31

    Blindman you write with much wisdom on this matter. From what I have read the subsidies keep American farmers in balance with foreign subsidies and keep a steady stream of raw agricultural product flowing into the business of making food. Take them away and we will find shortages occasionally in every category. I believe though that today our markets are more controlled by the Chicago Merc then by any subsidy program which may or may not be a bad thing depending on where your office sits in the distribution chain. Insurance subsidies are the big player in the profit/loss ratio many years and of course last year with the huge swings upward in market price for nearly every commodity we did see the huge push upwards on bid prices for all ag land. Then moving forward the population boom worldwide will require American farmers to produce more and at any cost and every available acre worldwide lying in arid conditions will become productive.

    We should have passed sodbuster legislation long ago and though anytime is a good time to preserve tens of thousands of years of plant diversification so much native prairie has been lost already it slowly is becoming a lost cause.

  22. Jenny 2013.05.31

    Ahh, the popular farm subsidy program - let's call it for what it really is - the farm welfare entitlement program: big welfare checks that go to wealthy farmers that don't need them. Revamp the system, rich farmers don't need handouts. The sense of entitlement is astonishing amongst so called conservatives like Kristi Noem. Noem, the one who cries about our national debt when her own family has taken millions in welfare checks. Hypocrisy, hypocrisy.....sigh....

  23. caheidelberger Post author | 2013.05.31

    Charlie, our farm subsidies don't level the playing field. They skew the market, dump U.S. exports on Mexico, put Mexican farmers out of business, and drive them north as illegal immigrants to work on our farm fields. Eliminate farm subsidies, and you reduce illegal immigration as Mexican farm hands could make a living back home. How's that for a double-whammy policy plus?

  24. Charlie Johnson 2013.05.31

    Today's agriculture has turned mainly toward a plantation system-all on the taxpayers dime. The trend line in increased crop insurance welfare and the price of land in the last 15 years follow in step. Want farmers to be more conservative?--have them self insure. Want to build up community and bring more young farmers to agriculture?-quit the subsidies.

  25. pnr 2013.05.31

    Bill - Fine. Let's end the homeowner subsidies, too. And the college subsidies. I'd even be willing to give up mortgage, medical care, and charitable deductions. Let's cut out all the various ways in which the tax code is used to manipulate economic and social behavior and all the give-aways by which politicians buy our votes with our own money. Clear all that deadwood and underbrush away, set a flat tax with no deductions for anything. You make a dollar, you send in a dime. Or even fifteen cents.

    We won't face shortages. Prices will serve to adjust supply to demand as people make choices about how to spend their own money and time apart from these political influences. Maybe more folks will raise their own chickens. Maybe there'll be a resurgence of gardens. I don't know, and anyone who says they do will lie about other things, too.

    But I do know it will reduce our federal spending, and thus our national debt, and that would be a very good thing.

  26. Owen Reitzel 2013.05.31

    ah the flat tax pnr. sounds great except the 15% rate effects the person who makes $25,000 a year more then someone who makes $100,000. Doesn't sound fair to me.

  27. Bill Dithmer 2013.05.31

    "Today's agriculture has turned mainly toward a plantation system-all on the taxpayers dime."

    Charlie or course your right about the plantation system. From the beginning of time all farmers have tried to get the most out of the land they have while at the same time trying not to work as hard as those that came before them. It has only gotten worse, "or better" depending on what you expect for your food dollar, since the great dust bowl.

    Lets face it fewer people wanted to work on farms, that's hard work for the money they make, but still the population continues to grow. Those farmers and ranchers had to do something that would insure their continued success or fold up their tents and do the same.

    The name of the game became efficiency. Bigger more expensive machinery, that did the work of many people, and in return creating a bigger return on their investment. Add to this the dreaded chemical use and it became possible to increase the total amount of product per acre. Like Eric Iversen said it is well documented how many lbs. of flesh can be made per acre just like it is bushels per acre. If you compare those figures to what it was in the thirties or forties the numbers are staggering. Did it come at a price? You bet it did, in more ways then one, but it also made it possible to feed an ever increasing population not only here but around the world.

    The other part of the equation is the decreasing value of our dollar. In the sixties it was worth seven times what it is today. Just think about that. You could buy seven times as much with the dollar then you can now. At the same time the prices that are paid for those products that the farmer and rancher raises are about the same as they were then. That in itself drove the smaller operations out and increased the size of the farms. Without spending the money for the machinery that helped increase the yields those small farmers just couldn't survive. If they didn't have the property to justify their investment it became a no win situation. Their only answer was to get bigger or get out of farming.

    Rorscharh said "They have a good year, they buy equipment to take their taxable income down to nothing. Then they depreciate the equipment to take next year's taxable income down to nothing. Or buy new equipment again." Well of course they do, what business doesn't take advantage of these tax laws? If you don't continue to update your equipment pretty soon that equipment isn't worth very much. Remember that efficiency thing? The name of the game is more value from that gallon of fuel, less time in those huge fields because of the use of chemicals, and "no till."

    The problem with this strategy is that we are quickly coming to a saturation point. We can farm bigger pieces of ground but the equipment cant get much bigger. This was tried once before with the Big Bud tractors and was a miserable failure. The return on that investment broke a few people.

    And still bankers loan more money to buy more land and PCA writes down loans so that their friends can make it. Say, that would be a good place to start to look at ways to fix the farming problems. Millions of dollars for write downs on the tax payers dime. But then maybe I'm digging a little to deep for my own good.

    "Want farmers to be more conservative?--have them self insure. Want to build up community and bring more young farmers to agriculture?-quit the subsidies." Charlie, that wouldn't help young people get into agriculture, it would make it harder. The price of self insuring alone would be to expensive for the new farmers to buy. After all insurance companies are in the business of making money not breaking even.

    If you want cheap food fix the system. Take the scammers out of the equations, and stop the huge farmers that get the write downs on their loans from their lenders, "the federal government" that you as a citizen own in the first place.

    The Blindman

  28. Bill Dithmer 2013.05.31

    PNR to do that you would also have to overhaul the commodities trade to make it work and I dont see that happening anytime soon.

    the Blindman

  29. Douglas Wiken 2013.05.31

    A whole lot of assertions in this and little actual fact:
    "Charlie, our farm subsidies don't level the playing field. They skew the market, dump U.S. exports on Mexico, put Mexican farmers out of business, and drive them north as illegal immigrants to work on our farm fields. Eliminate farm subsidies, and you reduce illegal immigration as Mexican farm hands could make a living back home. How's that for a double-whammy policy plus?"

    That bit of propaganda on US corn driving poor Mexicans north was full of holes and distortions.

  30. pnr 2013.05.31

    Owen - we do it already with social security/medicare taxes.

    But the notion that a flat percentage of a smaller number is somehow unfair when compared to that same flat percentage of a larger number has always struck me as too clever by half. Why is $3,750 out of $25K so much worse than $15,000 out of $100K? Because some bureaucrat or politician or whatever somewhere decided that's "regressive"?

    I'll tell you why the graduated income tax is called "progressive" and politicians tell us it's better - because there are a lot more people making $25K than there are making $100K, and they're far more likely to vote for somebody when he says they can have a bunch of free stuff paid for by the guy making $100K (or a million or a billion or...). Which brings us back to the problem of thinking we can balance our budget and restrain our debt on somebody else's dime. We can't.

  31. Douglas Wiken 2013.05.31

    PNR, Talk to Warren Buffet about why taxes should be progressive. He is rich enough.

  32. PNR 2013.06.01

    Douglas - Mr. Buffet is not rich enough to pay off the national debt. Nor is his wealth sufficient to make him correct on taxes - besides the fact that his actions and his words do not always match up on the question of taxation.

    Or do I detect a trace of jealous resentment in your statement?

    Nor do I see any moral justification for taking from him in the simple fact that he has an abundance.

  33. Kal Lis 2013.06.01


    Just for points of clarification, I have a few questions.

    1. When you advocate for the flat tax, are you advocating 15% on income plus the current payroll taxes or are you advocating eliminating payroll taxes.

    2. What do you plan to do with user fees and excise taxes under your flat tax formulation?

    3. Does your formulation of the flat tax include trust funds that currently grant rich kids a tax free stipend for breathing?

    4. Does your flat tax tax capital gains income the same as income earned from labor or do you believe that a capital gains tax is double taxation?

    I know you've done some flat tax posts at your blog and I could have asked these questions there. If you want to answer them there, just let me know and I'll migrate over there

  34. Douglas Wiken 2013.06.01

    Buffet says our system uniquely benefits his talents and he owes support to that system. He views it as unfair that he pays a lower percentage of his income as taxes than does his secretary. He is rich and he is not a freeloading hypocrite.

  35. G-Man 2013.06.01

    Cory, you need to also follow how GMO wheat could have huge negative implications on our wheat farmers in the United States. Just this week, a batch of illegal GMO wheat (a strain from Monsanto) was found growing in an Eastern Oregon field. The farmer alerted authorities and they sent 9 federal investigators to the field. Monsanto could be liable for any damages to the other wheat (through cross polination) and any sales lost by Oregon wheat farmers. JAPAN HAS HALTED OREGON WHEAT EXPORTS OVER THIS FIASCO...story is developing...stay tuned.

  36. G-Man 2013.06.01

    South Korea joins Japan in halting some wheat imports from U.S. due to rogue Monsanto GMO batch found in Oregon field this week...

  37. G-Man 2013.06.02

    The Billings Gazette now has a story out on the halting of some US wheat exports and how Montanans are closely watching this news unfold. I wonder if South Dakotans are too? Montana exports over 60% of its wheat and I bet North Dakota exports a huge chunk of its wheat too. When Asia starts halting exports, then, you will begin to see farmers question planting GMOs.

  38. Douglas Wiken 2013.06.02

    What evidence is there that GMOs are harmful to man or beast? It may be that the genes which kill certain insect pests on plants kill bees, but not sure that also impacts humans in Japan or anyplace else.

  39. G-Man 2013.06.02

    These other countries have major concerns over GMOs and that is one of many reasons GMOs are banned in these countries.

  40. G-Man 2013.06.02

    I have my concerns as well. I will begin buying meat that has not had added hormones or antibiotics. We have those options in Oregon. Buy milk that rbst free.

  41. Bree S. 2013.06.02

    At the very least GMOs aren't necessary for agricultural production. Good old-fashioned plant breeding has produced many food plant specimens that are superior to similar specimens developed with genetic modification.

  42. G-Man 2013.06.02

    Thune & Johnson are part of the Monsanto 71. Both of your senators supported legislation to give special protection to Monsanto from court litigation, which puts the company above the law.

  43. G-Man 2013.06.02

    John Tester voted against Monsanto, along with both of Oregon's Senators.

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