A report from the Nebraska-based Center for Rural Affairs shows the impact of crop insurance on land values. Economist Mike Duffy says the report finds the subsidized portion of crop insurance does have an impact on the value of farmland.
“It’s not a surprising result,” Duffy says. “When you get subsidies, that tends to be built into the land values, especially as we look at the risk factors.” He says the returns on land aren’t as uncertain because landowners have crop insurance.
Duffy says, “It changed the risk that the people would be facing so that this increase, what the expected value would be from the crop, if you cut off the lower end, the risky portion of it, then you’re going to increase the average expected return.” Duffy says the report also shows the importance of having crop insurance.
He says, “What we’ve moved in a policy perspective is away from directly paying people to saying if you have an insurable risk, then you’ll get a payment. If not, then you don’t.”
Duffy says it’s important that anytime the government gets in and impacts the market and the return, there’s going to be consequences. He says that needs to be taken into account as new policies are considered.
The Center for Rural Affairs is based in Lyons.
By Jerry Oster, WNAX, Yankton