The new farm bill has some proposed reductions to the crop insurance subsidies.
Brian Postin of Compeer Financial stated that the timing of these cuts is alarming, as margins have been very tight in the past few years. There is an increase in capital and there is also increased risk, with a two to three year forecast decrease in earning potential for the future, reported Postin. This could force some farmers to stop farming.
“The cuts to the crop insurance subsidy could have potential impact on people either deciding to not take it because it’s too expensive or just the additional outlaying cash they have to come up with that’s gonna hurt their cash flow and it’s gonna trickle on down to their earning potential,” Postin stated.
Postin said that many people have compared the current agricultural climate to the late 1980s. He said that the country is not in that dire of a scenario, as there are some key differences today, such as the lending institutions.
“I think as an agricultural community, farming community, as an ag lender, I think that the ag lenders have learned a lot from that time, that thirty years ago, so hopefully we’re not getting ourselves in the same kind of position that everybody was then,” Postin said.
A reduction in earnings and the potential disruption to people’s ability to farm is a similarity to the past that Postin pointed out. The topic will be discussed further at the ag round table on March 16 at Midwest Bank at noon.
Written by Alex Foltz