Bah Humbug: WSJ Letters Go Unpublished

January 12, 2015

In true Ebenezer Scrooge-like fashion, opponents of farm policy used Christmas Eve as a workday to criticize the men and women who helped put holiday meals on tables from coast to coast.   

The attack came in the form of a Dec. 24 Wall Street Journal op-ed penned by Bruce Babcock and Vincent Smith, and the authors were highly critical of crop insurance and the harvest price option – a risk management tool that helps protect producers from extreme price fluctuations.

But unlike the classic Dickens tale, the critics’ cold hearts weren’t thawed by morning and the rest of the story went untold.  That’s because the newspaper refused to print at least three rebuttals that were submitted for publication.

Dr. Thomas Zacharias of the National Crop Insurance Services sent in the first letter, which explained the importance of the specific provision under attack and questioned the authors’ motives.  It read, in part:

The professors who penned the op-ed on crop insurance believe protecting American farmers against the costs of rising prices in disaster years is a program flaw.  But that protection costs farmers higher out-of-pocket premiums; enables farmers to replace lost grain needed to feed animals and meet contracts with merchants, food processors and renewable fuel plants; and ensures widespread program participation, thus reducing the need for ad hoc disaster assistance.

Mr. Babcock’s “analysis” of crop insurance seems ironic since he was compensated by the U.S. Department of Agriculture to help develop the very policies he is now, no doubt, being paid by opponents of crop insurance to criticize.

Next came a letter from a group of commodity organizations – representing America’s corn, cotton, rice, peanut, sorghum, soybean, and wheat farmers – that both defended crop insurance and pointed out a serious data error in the op-ed.

The first line of the article…misleads the reader by implying the program costs taxpayers $80 billion per year.  Instead, government outlays are roughly $8 billion per year, but when coupled with farmer-paid premiums, the public-private partnership provides risk management protection for more than $100 billion annually in crop and livestock production….

In recent years, farmers across the country have suffered from historic droughts as well as floods and other ‘acts of God’ – yet at no time has there been any ad hoc disaster assistance because the federal crop insurance program has been there to assist farmers in times of need.  The volatility of weather and commodity markets necessitates government assistance with premiums so that U.S. agriculture has access to affordable and dependable crop insurance products.

Finally came a response from Tom Sell, a former USDA official who represents multiple agricultural groups including insurance agents. 

He referenced a recent Politico article that took the authors and other economists to task for conflicts of interest and providing analysis that is “more colorful than informative.”  In addition, Sell explained that there were other errors in the op-ed.

Paragraph 2 states that “from 2003 to 2012, crop-insurance subsidies cost U.S. taxpayers $55.4 billion—66% of the cost of the program.”  Wrong.  $55 billion over 10 years is a whole lot closer to the mark than $80 billion per year [as referenced earlier in the op-ed] but they still exaggerate overall costs, presumably by excluding the underwriting gains the government makes on profitable policies sold.  These gains offset and reduce costs.  

In paragraph 3 they dismiss the need for crop insurance premium support because, they say, larger farmers disproportionately benefit.  Wrong.  Smith previously wrote that without premium support the number of multi-peril policies sold would fall to zero as the risks of farming put premiums out of reach, leaving large and small farmers uninsured….

Babcock and Smith play fast and loose with facts and sensationalize issues for special interests.  But the Journal has an obligation to separate wheat from chaff in the analysis presented on its pages.

Given the Journal’s past treatment of agricultural policy, its present choice to omit important information and attack farmers is not surprising. 

Perhaps the Ghost of Christmas Future can bring about a little more balance in reporting in the New Year.