Tropical Storm Irene Proved the Value of Crop Insurance

One side benefit of the popular “eating local” movement is a growing recognition by urbanites and suburbanites of the importance of agriculture and the need to ensure that farmers are able to withstand the many challenges presented by Mother Nature. While farmers manage their many risks using a wide variety of tactics, there is one tool in most farmers’ risk management portfolio, which they consider indispensible: crop insurance.

The value of crop insurance to New England’s farmers was made crystal clear last year by Tropical Storm Irene, which brought heavy winds and even heavier rains just as crops were nearing harvest. While 2011 saw record losses across the U.S. with freezes in Florida, drought in the Southwest and floods in the Midwest, it was farmers in Vermont who sustained the highest loss ratios in the country. As a crop insurance agent, I can attest that many of our farmers saw their entire crops devoured in one day as floodwaters, sometimes six feet high, swallowed their fields.

After the waters finally receded and the extent of the damage to their farms was assessed, it quickly became clear that Irene’s wallop had the potential of being a “game changer” for many New England farmers. And crop insurance was the only thing that saved many of them from losing their farms to bankruptcy and instead allowed them to return to their fields this spring and plant.

Crop insurance is a public private-partnership whereby a farmer buys a policy that protects his crops from adversity. Just like homeowner’s insurance or car insurance, crop insurance is personalized to match each farmer’s degree of exposure to losses and comfort level with risk. It’s sold, monitored and delivered by the private sector, so farmers receive their indemnities quickly after catastrophe strikes.

But it wasn’t always like this. When I first became an agent in New England in 1984, probably only about 10 percent of our farmers purchased crop insurance. Lack of familiarity was one reason for that low percentage: It was a relatively new risk management tool for farmers in New England. But the biggest reason was cost. So every time a disaster hit, farmers would have to rely on receiving help through federal disaster bills because they didn’t have crop insurance. Such disaster relief is expensive for taxpayers and painfully slow to deliver help – taking up to one or two years at times – for the farmers who lost everything.

In the mid 90s, the federal government, weary of disaster payments and looking for a better risk management tool, put forward funds to help partially underwrite crop insurance premiums. Today, most farmers in New England and elsewhere have purchased crop insurance policies, which last year covered 80 percent of eligible crops covering 263 million acres.

Crop insurance is also great for consumers because it makes purchasing locally produced food possible. Consumers nowadays are concerned about the origin of their food, the cultural practices used to produce it and its overall safety. Many of us believe that the best food in the world is local, because we know that the farmer down the road has produced a product that is not only delicious but also secure. Without some kind of policy protection in place for those farmers, “buying local” could be a thing of the past.

And in the tight credit markets we live in, crop insurance has proven to be an indispensible tool for farmers seeking lines of credit from banks. When I first started in the business, it was rare to see a lender who would ask about crop insurance. Nowadays it’s almost ubiquitous, particularly for farmers who raise expensive specialty crops, like potatoes and apples.

Crop insurance has already shouldered $12 billion in federal funding cuts in the name of balancing the budget — about 10 percent of the total federal expenditure in 2008 and another cut of 7 percent in 2010. The federal government now spends about $90 billion on crop insurance subsidies. But if the government continues to bleed crop insurance, it will become either unaffordable for farmers to participate or incapable of meeting the challenges when a disaster strikes, or both.

When the next farm bill is written, Congress needs to remember that it should “do no harm” to crop insurance. Those who weathered Irene and lived to plant another day can attest to the fact that a robust crop insurance policy is in the best interest of not only farmers, but consumers as well. The farmers down the road that grow the food for your family and mine need some common-sense protection against Mother Nature. Crop insurance fits the bill.

Art Carroll owns the Arthur Carroll Crop Insurance Agency in Limerick, Maine, which insures farmers in all New England states and New York. This commentary was prepared with assistance from National Crop Insurance Services.

This op-ed ran in the Valley News on May 25, 2012.