November 23, 2017

Two U.S. Senators Propose Elimination of Harvest Price Option Subsidy

U.S. Sens. Jeff Flake (R-Ariz.) and Jeanne Shaheen (D-N.H.) last week reintroduced the Harvest Price Subsidy Prohibition Act; a bill they say would eliminate a costly but little-publicized crop insurance subsidy known as the Harvest Price Option (HPO). The bill would save taxpayers $21.1 billion according to the nonpartisan Congressional Budget Office. A companion bill was also introduced in the House today by Congressman John J. Duncan, Jr. (R-Tenn.).

Under a traditional crop insurance plan, farmers will only receive a payout if they earn less money at harvest time than they were projected to make when they planted their crop. By softening the blow of unanticipated losses, traditional crop insurance serves as a safety net. However, under an HPO policy, if that crop’s price at harvest time ends up higher than the insured planting price the insurance payout is recalculated based on the higher price. The Senators suggest that by paying out more money than “the farmer ever anticipated earning”, HPO policies go far beyond the safety-net concept – they are simply a taxpayer-subsidized profit guarantee.  Advocates for the policy say the option is necessary as it allows farmers to more effectively manage their risk and more aggressively forward contract production without the fear of additional losses should they have to buy out of the contracts due to short production.

This is the the first time Senator Flake has attempted to eliminate the Harvest Price Option.  He offered a similar Harvest Price Subsidy Prohibition Act in 2013 as an amendment to the farm bill. In a statement Flake explained his reasoning this way:

“HPO is like insuring your car for $5,000, and getting a check for $10,000 after it’s totaled. It’s the kind of program that only makes sense in Washington,” saidFlake. “Making a living in agriculture isn’t easy or predictable, and there’s a case to be made for safety net programs such as traditional crop insurance. But HPO isn’t a safety net, it’s a taxpayer-funded windfall. With a $20 trillion national debt, taxpayers shouldn’t be expected to pay Big Ag billions of dollars for profits that they never expected to earn in the first place.”

Joining Flake in sponsoring the bill is Senator Jeanne Shaheen, a democrat from New Hampshire.  She said the legislation is a “smart,pragmatic bill that will provide our current crop insurance program with a much needed fix.  We ought to act on it immediately to save taxpayer dollars.” Lobbying groups offering support to the measure include Americans for Prosperity, National Taxpayers Union, Taxpayers for Common Sense, Coalition to Reduce Spending, The Council for Citizens Against Government Waste and the Environmental Working Group, among others.