Crop Insurance Implications of Permanently Authorizing the Emergency Relief Program

Abstract

The United States has a long history of providing ad hoc disaster assistance to agricultural producers. The latest version – the Emergency Relief Program (ERP) – follows five consecutive years of appropriations for disaster assistance. In response to ongoing appropriations, there is growing interest in establishing a permanent disaster program. However, with that comes concerns over the impact it could have on the existing farm safety net, particularly crop insurance. In this paper, we characterize the likely effects on crop insurance coverage levels of a permanent authorization of ERP. We assume that corn and soybean producers choose a coverage level based on the effects of that choice on the distribution of future ending wealth reflecting crop revenue, insurance indemnities, and ERP payments. We find very modest effects on crop insurance coverage level choices and crop insurance premiums collected.