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See the latest reader comments and hear John explain some of agriculture’s complex topics.
Viewers Speak: Crop Insurance, Wealth & Interest Rates
Apr 10, 2013
***Editor’s Note: Below is viewer feedback in response to the April 6-7, 2013 edition of U.S. Farm Report:
#1: First, let me clarify that I fully support and see the need for crop insurance. Farmers need a way to manage the inherent risks of their business. As a taxpayer and part-time farmer, what I don’t support is the taxpayer subsidizing crop insurance. I understood the fact the taxpayer subsidizes 61% of the premium. What I recently read is the administrative costs are also subsidized, bringing the total subsidy to 80% of the total cost of the insurance program. If farmers were struggling to stay in business and the U.S. was concerned fields will go unplanted, I could possibly see it. We need a stable food supply. The reality is, farmers are making good money. The insurance subsidies are simply showing up in the form of skyrocketing land prices. Just last Sunday, it was stated on US Farm Report there have been reported land sales over $16,000/acre in Illinois. Why is the taxpayer picking up 80% of the cost of crop insurance only to see the farmer use the savings to pay ever higher prices for land rent and/or farmland purchases? Farmers should be responsible for the costs associated with running their business, just like everyone else. Dan Lickteig
#2: Which is worse for America strategically? 1. The transfer of wealth creation to non-U.S. areas (outsourcing production, free-market capitalism). 2. The transfer of wealth to non-U.S. areas (Afghanistan, Egypt, world socialism). 3. The transfer of wealth within the U.S. (welfare, unemployment payments, large salaries for government workers milking easy jobs, gambling, food stamps, etc.). 4. Or wealth creation within the U.S. (American workers paying taxes)? Stan Eads - Winton, CA
#3: I agree with your view that the Fed is not the reason for low, long-term interest rates worldwide. I also agree that rants knocking the economy are harmful. The economy is fragile and talking it down can only hurt it. Although the debt overhang is subsiding and jobs are being added, I believe long-term interest rates will continue low for a long, long time due to demand destruction. But here's an upbeat post on the economy: http://www.whitehouse.gov/blog/2013/04/05/employment-situation-march - Secret offshore bank accounts are being kicked open with fines, back taxes and jail time waiting for the owners. Reuben Espinosa - Denver
***Editor’s Note: Below is a transcript of John’s commentary concerning interest rate:
With very little notice compared to the excitement in the stock market, bond prices are indicating a contrasting view of the future. Interest rates are sinking back toward historic lows made last year, despite continued warnings about both inflation and higher rates. Much of the credit or blame has been placed on the Federal Reserve and its policy of quantitative easing. While inaccurately called “printing money”, the Fed has been increasing the money supply aggressively. The problem with this explanation is two-fold. First, interest rates are low all around the world – not just in the U.S. Second, while economists widely agree the Fed can influence short-term rates, they have little effect on long term rates. Right now, 30-year bonds carry a return of a little over 3%. This tells us people – NOT the Fed – think rates could be low for a generation. I favor another influence – the savings glut – or as I call it the wealth problem. New reports leaked to an Australian newspaper illustrate one facet of this phenomenon – immense deposits hiding unreported to government taxing bodies in shady banks in out-of-the-way places. The amount of unaccounted-for wealth is likely in the tens of trillions. The more doomsayers warn of financial panic, the more willing savers are to accept pitiful returns on their money. With apocalyptic rants making headlines daily, I think our six-year-string of historically low interest rates is likely to continue.