The Center for Rural Affairs has long heard complaints from small- and mid-sized farms that the federal crop insurance program unfairly benefits large corporate farms and causes land values to rise. So the Center decided to investigate. Their research determined that subsidized crop insurance indeed has an impact on land values.
How? First, the insurance premium farmers pay is not the actuarial premium. It’s a premium minus a government subsidy. Second, crop insurance reduces the income risk associated with crop production. So, some of the government subsidies get bid into land costs. Thus federal crop insurance drives up production costs by increasing the cost of land. The effect helps already thriving mega-farms.
