Reasons Offered Why Crop Insurance Participation Isn't Universal

July 22,1999

In the wake of agriculture Secretary Dan Glickman's report on increased crop insurance participation this year, USDA economist Randy Schnepf reports that even with significant risk reduction and low cost, participation still isn't universal. One reason offered is that farmers still lack enough information on how the program works.

Schnepf explains his reasoning in the August issue of USDA's Agricultural Outlook magazine. The article notes that federal crop and revenue insurance subsidies "alter the tradeoff between expected income and risk exposure" so that farmers may obtain significant risk reduction at relatively low cost. They also increase expected, long-run returns.

Yet the rate of participation has remained "significantly less than universal for a variety of reasons," says Schnepf, among them a general lack of information about how insurance programs work, their advantages and "the true extent of farm-level risk," says Schnepf.

The full text of the magazine is available at http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/.