THE DROUGHT that struck the United States in 2012 affected about 80 percent of agricultural land, making it the most extensive such weather event since the 1950s, according to the Agriculture Department (USDA). Consumers will feel the impact of last year’s smaller harvests in the form of higher grocery prices this year. Yet the increases will be relatively modest — a half-percentage-point increase in food price inflation, according to USDA economic projections.
This is a tribute to the American farm sector’s productivity. As such, it is also a reminder of how far-fetched the rationale for federal agricultural subsidies — the threat of food shortages — really is. The most recent invocation of this phantom came amid the drought, when congressional boosters of the subsidy-marbled 2012 farm bill tried, without success, to exploit the dry spell.
In fact, farmers were well-protected against the drought — at significant cost to taxpayers. The vast majority of U.S. farmland is covered by crop insurance, which is heavily subsidized by the government. Washington pays 62 percent of farmers’ premiums — at a cost of $7 billion for the 2012 crop year. It reimburses administrative costs for the 15 insurance companies that sell the policies, to the tune of $1.4 billion in 2012, and also protects the companies against financial loss.