9 Forces Driving More
average rate of return on retained premiums (how reinsurance rates are
negotiated) was 1 percent.
The 201 farm bill broadened the scope of insurance coverage to
include more kinds of farms and more types of losses. USDA was
instructed to devise ways to boost insurance coverage on farm reve-
nue and entire operations. Insurance policies were authorized for 1 0
products, including fruits and vegetables, nursery stock, pasture, and
rangeland. In structuring policies, no payout caps were to apply. And
to avoid the embarrassing public outcry from the media disclosing pay-
ments, the bill specifically prohibited the release of information at the
individual level. At the time of this writing, the 201 farm bill, await-
ing reconciliation between the House and Senate versions, promises to
deliver more of the same.
Offering subsidized insurance was good for farmers—but for tax-
payers, not so much. On average, the government pays 2 percent of the
farmer’s premiums. It also picks up the administrative and operating
costs, plus the underwriting expenses. Since implementation of the 201
Farm Bill, many farmers figured out how to be compensated twice for
the same crop loss. The cost of this “double-dipping” is passed on to
taxpayers.
So what has happened to the social norms that once governed farming,
especially given that facing uncertainty is as old as farming itself? Every
farmer knows that nature is capable of serving up bumper harvests or
no harvests at all. They also know that they can better or worsen their
chances by how they choose to farm.
On multiple occasions, I walked with my father through our orchards
the day after a late-spring frost. Randomly plucking and peeling open
blossoms, he looked closely at the color of the ovary. Green brought a
sigh of relief. Black meant most, if not all, of the fruit crop for the year
had been lost.
Some springs our fortunes were even brighter. Favorable tempera-
tures at just the right time delivered a spectacular display of blossoms.
Weeks later, the budding fruit was so thick it had to be thinned to keep
branches from breaking and provide room for the new fruit to grow.
Whether the trees were barren or loaded with fruit, the orchard still