North Dakota Farmers Know First Hand Why Crop Insurance is Money Well Spent

I’ve spent the last 17 years of my life farming in North Dakota and I’ve loved every minute of it. But it can be a very risky business. There are many steps that farmers can take to manage risk, like growing a wide variety of crops, rotating crops and growing cover crops to prevent erosion. And we do all of that.

But let’s face it, when we get an early August freeze, or a spring flood, or a drought, just about all of the best farming practices in the world will fail to protect us. And that is why I, like most farmers across the state, always purchase crop insurance. In fact, last year North Dakota farmers spent more than $38 million out of their own pockets purchasing crop insurance policies.

It’s just a smart business decision. There has never been a year when we didn’t have crop insurance. Sure, it costs a lot of money, and that money could be spent elsewhere. But that would be a penny wise and pound foolish, since going through a natural disaster can cost you the farm.

This isn’t a hypothetical argument. In fact, last spring during planting, we had 18 inches of rain in 21 days. In between downpours we planted what we could, but by the time the rain was finished, we couldn’t get back into the fields to finish planting. In other words, we started off our growing season with only half a crop. Thankfully, our crop insurance policy covered that kind of loss. We certainly didn’t make a dime from the policy, but the indemnity check helped cover the rent on the land and the lost fertilizer that had been laid on a field that couldn’t be planted.

The passage of the new Farm Bill this year marks a pivotal stage in U.S. farm policy. Gone are the days of direct payments and large disaster bills aimed at helping farmers after natural disasters. In its place is crop insurance, which has been embraced by farmers, farm groups and lenders alike. Farmers who don’t purchase crop insurance need to realize that the federal government is no longer going to come along with an ad hoc disaster bill and bail us out.

The centerpiece of the new risk management strategy on the farm is crop insurance, which is sold and serviced by private insurance companies and partially discounted by the federal government. The government’s role – helping to ensure that crop insurance is affordable to farmers – has remade the face of crop insurance from a policy that for many years was largely unknown and underused to a risk management tool that last year protected 90 percent of planted cropland.

Crop insurance is not only popular with farmers, but with bankers as well. In fact, most farmers need to show proof of a crop insurance policy when they meet with bankers to secure production loans. The banks realize what a risky loan they are making, and are more likely to take that risk if they have the relative protection of crop insurance.

Crop insurance is good public policy for farmers, bankers, and taxpayers alike. In the past, extensive droughts like what much of the nation experienced in 2012 would have triggered an enormous ad hoc disaster bill in Congress. But since the vast majority of the cropland was protected by crop insurance during the worst drought to hit the nation since the Dust Bowl days, farmers sought assistance from their crop insurance policies, not the federal government.

Crop insurance, like all public policies, has its detractors, however. And before the ink is even dry on the new Farm Bill, these groups are plotting their assault on crop insurance. They have their sights set on the premium discount, the very thing that makes crop insurance affordable to farmers. Without the discount, farmers like me couldn’t afford to purchase crop insurance. And if a large-scale natural disaster hits and farms across the country fail, where is our food going to come from? I don’t think most Americans would want to be in a position of relying on other nations for our food in addition to our fuel.

Crop insurance is good public policy because it helps underpin farmers, who are enormous consumers and literally drive the rural economy. Americans spend about10 percent of their incomes on food, among the lowest of any country. With the proper risk management tools in hand for farmers, the promise of a safe and affordable food supply will not only be a legacy for our children, but for the world’s growing population as well.

Diane McDonald, from Inkster, North Dakota, is the national media chairperson for Women Involved in Farm Economics (WIFE).

This op-ed appeared in Agri-Pulse on April 8, 2014.