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SHOULD ANY AD HOC DISASTER AID BE TARGETED TO THE "HOLE" IN THE FARM SAFETY NET?

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Microsoft Word - USDA Coversheet.doc U.S Department of Agriculture Agricultural Outlook Forum 2003 February 20 & 21, 2003 2002: PUTTING NEW CROP INSURANCE PROGRAMS TO THE TEST SHOULD ANY AD HOC DISASTER AID BE TARGETED TO THE "HOLE" IN THE FARM SAFETY NET? G. A. (Art) Barnaby, Jr. Professor Department of Agricultural Economics Kansas State University Agricultural Outlook Forum 2003 Presented: Thursday, February 20, 2003 SHOULD ANY AD HOC DISASTER AID BE TARGETED TO THE “HOLE” IN THE FARM SAFETY NET? G.A. (Art) Barnaby, Jr. Professor Kansas State University Summary. The worst outcome for insured growers is to suffer a 35% to 40% yield loss and higher prices. Growers will lose their counter cyclical payment because of higher prices, they have fewer bushels (production) to sell at the higher prices, even with this significant yield loss, they will receive no payments under ad hoc traditional disaster aid (TDA), and their net insurance payments will be small or none. However, these corn growers can expect to lose more than $59 per acre below their expected revenue when the crop was planted and they still must cover most of the harvest expenses. TDA targeted payments to zero yields that could have been insured while providing nothing for insured growers with significant yield losses. Some growers are suggesting any disaster aid should be targeted to the “hole in the safety net” and not to the risk that is covered under crop insurance. Introduction. There are some crops that do not have crop insurance contracts and there are only a few pilot insurance products available for livestock and grazing. However, past TDA was provided on crops that were insurable with subsidized crop insurance contracts and the TDA was targeted to the risk that could have been covered under those crop insurance contracts. Many analysts are expecting disaster aid will be provided again on insurable crops under any new disa

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