Alan Skari works as a wheat farmer on 11,000 acres in Liberty County. Five years ago, he had 3,000 acres of grassland in the Conservation Reserve Program, or CRP, a federal initiative that pays farmers to keep their land out of production. In the intervening years, as wheat prices climbed, he began to put his CRP land back into production, driven by the promise of increased profits and limited financial risk thanks to federal crop insurance subsidies. The government pays more than half of his annual $18,000 crop insurance premium, which protects him from crop failure and revenue loss.
This year, he will plant wheat on the last of his uncultivated acres. "The higher crop prices definitely played a role in my decision to return the land to production," Skari says. "But without the crop subsidies, I probably would not have planted the least productive land. It might have been left alone."
Skari says he farms responsibly, but he knows of farmers who plant on marginal land, aware that their crops will fail, in order to collect payment from their crop insurance providers. "They farm as cheaply as possible just to collect the insurance," he says.
That sort of behavior is fair gamea farmer receiving crop insurance subsidies can farm any way he or she likes. Unlike other farm programs, crop insurance subsidies are not coupled with a "conservation compliance" provision that mandates best practices to help prevent erosion and other environmental ills. Congress removed the conservation provision from the crop insurance program in 1996.
Skari's experiences offer a window into the strange world of federal crop insurance subsidies, the largest, most expensive farm program in the United States. These subsidies are pumped into agricultural economies, state by state, where they help farmers buy crop insurance policies. They cost American taxpayers an average of $9 billion a year by covering up to 60 percent of farmers' insurance premiums. Much of the financing finds its way into insurance company bank accounts. But the subsidies aren't just a vast transfer of wealth.
According to a new report by the Environmental Working Group, crop insurance subsidies also contribute to massive habitat loss nationwide by encouraging farmers to plant on fragile, and often marginal, land.
The report, titled "Going Going Gone: Millions of Acres of Wetlands and Fragile Land Go Under the Plow," uses government data to estimate that 32,289 acres of wetlands and wetlands buffers were converted to agricultural uses in Montana in the last five years alone. Another 323,539 acres of highly erodible landssuch as erosion-prone grasslands and sagebrush steppewere plowed up during the same period.
This "sod busting" took place in countiesfrom Choteau in the west to Roosevelt in the eastwhere federal spending on crop insurance subsidies was highest. According to the EWG's farm subsidy database, more than $1 billion was spent on crop insurance subsidies in Montana between 1995 and 2012.
"Through crop insurance, taxpayers have picked up most of the risk of plowing up fragile and marginal land," says Craig Cox, author of the report and senior vice president of the EWG. "It is encouraging conversion to crop land that would not happen unless taxpayers guaranteed farmers' income." The conversion of untilled land to row crops, he notes, is also driven by record-high grain prices.
Sod-busting hurts prairie species that depend on undisturbed habitat. The greater sage grouse, which is being considered for the Endangered Species List, is of particular concern. It requires large tracts of land to survive, and many of the lands being converted to row crops are prime sage grouse habitat.
"Crop insurance subsidies function as federally subsidized habitat destruction," says Katie Fite, biodiversity director of the Western Watershed Project. "Sage grouse are birds of wild country. To have a healthy population you need blocks of undisturbed habitat, and row crops eat into those blocks and endanger the bird's chances of survival."
With the ever-growing expense of crop insurance subsidies, as well as their impact on the landscape, many are pushing Congress to reform the program. And Congress has responded. The Senate already passed a version of the Farm Bill that would return the conservation compliance provision to the subsidy program. The provision faces serious opposition in the House of Representatives, however.
Legislators have also proposed a $40,000 cap on the amount an individual can receive in crop insurance subsidies. As it stands now, there is no limit. A Freedom of Information Act request by EWG revealed that in 2011, 10,000 farming operations nationwide each received between $100,000 and $1 million from the program.
As Congress considers these reforms, a powerful coalition of bankers, farmers and insurers are pushing back.
These groups sent a letter to Sen. Debbie Stabenow, D-Michigan, chairwoman of the Senate Committee on Agriculture, Nutrition and Forestry, to express their "opposition to any changes to crop insurance that would discourage producer participation or undermine private sector delivery." The letter's signatories, including the American Banking Association, American Farm Bureau Federation and American Insurance Association, together spent more than $52 million during the 2012 election cycle.
"We oppose both those reforms," says John Youngberg of the Montana Farm Bureau Federation. "The conservation provision, for instance, is a regulatory nightmare and increases the cost of doing business."
As debate about the Farm Bill heats up, the fight over crop insurance will test the power of the bank and farm lobby against the resolve of the reformers. Only Congress can settle the dispute.