Crop Insurance Proposal Could Cost U.S. Billions - PowerPoint Presentation Example

[FIN 3360 Management of Risk and Insurance] November 28, Crop Insurance Proposal Could Cost U.S. Billions Crop insurance debate is the main topic under discussion in the Congress these days. Congress is considering launching an insurance programme for farmers covering their losses and the price drop in crops as well as a low yield. It is expected to be an expensive programme, costing $3 billion per annum as crop insurance subsidy according to the farm bill passed by the Agriculture Committee.Supporters of this notion are of the opinion that the farmers would be safe from the whim of weather, pests and market rates.

Moreover, the subsidies are already favorable for farmers and should not be further exploited at any cost. Yet other farmers reflect that they should produce enough crop that is actually capable of supporting subsides since the crop market thrives because of subsidies itself. In order to compete in the international arena, the plains of Dakota and Montana are slowly being converted to crop fields while they once were the abode of birds. There is a gigantic increase in the prices of the land while the grasslands are being transformed to fields.

The real estate business is thriving leaps and bounds, since, everyone is eager to purchase the land for farming. Farmers are guaranteed a profit even though the land is not so fertile and there is a definite risk of loss.It is also true that the government shows neutral approaches regarding taking the risk while the farmers prefer to be risk averse (Dinar 1994).According to a Government Accountability Office, the costs of the crop insurance programme have augmented since the raise in the value of the crops.

Despite the cost issues attached to the insurance programme, it is still widely appreciated by the masses of people. Work CitedDinar, Ariel. Economics of Agricultural Crop Insurance: Theory and Evidence. Ed. United States of America: Kluwer Academic Publishers, 1994. Print