But there are those who are making uninformed and uneducated criticisms about crop insurance – and America’s farmers – in the midst of this national tragedy. According to the Washington-based Environmental Working Group, farmers have been ‘praying for drought, not rain.’ Really? I’ve seen a lot of looks on the faces of my fellow farmers this past summer, as their crops and have withered despite their best efforts and their hopes for a great harvest have been dashed.”
In 2012, the drought in Kansas was in its second year, and wheat, corn and soybean farmer Paul Penner was just trying to survive to the next season.
Crop insurance has been Penner’s lifeline for the last two years and the years before that. It has given him and his wife, Deborah, the means and security to plan ahead and prepare for another year should the drought persist. “Without it, many farmers, including us, would face financial uncertainty as revenue would be insufficient to cover production expenses,” said Penner, 60, of Hillsboro, which is about 45 miles north of Wichita.
In 2012, the Penners had a 75 percent insurance coverage plan for wheat crops and 70 percent coverage for fall crops, such as corn, soybeans and sorghum. Just like car insurance, his goal is to “never have to use it.”
Penner has been covered by crop insurance policy for more than 25 years now. If not for this federal safety net, he said, “I wouldn’t be in farming today.”
The insurance helps him recover part of his losses. “It pays for a little bit of your crops or production if we had a bad year like the last two to three years’ drought. The insurance pays me a certain percentage of the revenue I have lost. They don’t pay all of it,” he explained. “They will never pay you 100 percent.”
But he said he’s OK with not recovering 100 percent because even in a bad year, he said a farmer does not really lose a 100 percent of his production. “At least you’re given enough so you can pay your bills,” he said.
Insurance estimates are based on actuarial history of crop yield and the price of the commodity, among other parameters. Premiums could be higher for one crop per acre than the other. In Penner’s case, corn has a higher premium cost than wheat and soybeans.
Filing is straightforward process. A farmer reports his losses to the crop insurance agent, and the insurance company will then send an adjuster to verify the claims based on established guidelines. The farmer and the adjuster will work through production data sheets. Once approved, help is on the way.
His agent is a local, family-owned company with businesses around the Midwest. It’s the third insurance company Penner has contracted over the years, as many have folded up and sold their business.
The premium varies year to year. Penner said he has paid anywhere from $8,000 to $20,000 over the years he has been using crop insurance. The federal government picks up part of the premium – about 60 percent – as the cost to the farmer would be “prohibitive.”
With the current mood in Congress to cut the national debt, there are some who would like to see the entire crop insurance bill “disappear,” he said. He asserted not all so-called “subsidies” should be painted with the same brush, and it’s his view that ad hoc disaster legislation “is a thing of the past.”
Like many in Kansas, Penner was born to farm. Kansas ranks sixth in farm exports. Beef, grain sorghum, and wheat – introduced to the state by the early Russian Mennonite settlers – are the major products. Hillsboro, where Penner Farms is located, has a population of about 3,000.
“Farming is a risky business as weather is the biggest uncontrollable factor,” Penner said. “Without an adequate risk management tool like crop insurance, a farmer cannot make marketing plans with the reasonable certainty he will be successful.”
Penner says that he can’t fathom managing all the risks of farming without crop insurance. “Crop insurance is absolutely necessary, period,” he said. He says that what crop insurance helps this country do is to ensure food security — the country’s ability to provide a reliable and safe food supply for its people, and not be forced with “going to China and Brazil to purchase our food.”
It’s no big secret that Missouri is facing its worst drought in 30 years. This has had a catastrophic impact on the state’s farm and livestock sector, prompting Secretary of Agriculture Tom Vilsack to declare every county in the state a disaster area in July. And while tropical storm Isaac brought us some much-needed rain, every county in the state remains in some level of drought.
As a Missouri farmer, I can tell you that there are few disappointments in life bigger than losing a crop. The loss not only robs you of the income that it should bring – especially with commodity prices at record highs – but also robs you of the joy of the harvest, which is what we farmers are all about.
If I hadn’t purchased a crop insurance policy this year to help me through an event like this, I possibly wouldn’t be able to farm again next year. But that’s the main reason why the federal government teamed up with the private sector years ago to form this public-private partnership that helps farmers manage their risk while shielding taxpayers from expensive farm disaster bailouts.
Droughts like this don’t happen often, but they do happen. And when they happened in the past – before crop insurance was widely available and affordable for most farmers – Congress responded with expensive ad hoc disaster bills. In fact, these disaster bills totaled $45 billion from FY1989 to FY2001.
They don’t call Missouri the “Show Me State” for nothing, and crop insurance has proven its value. Last year, although conditions here were fairly good, there was a string of natural disasters across the rest of the country – from freezes to floods to hurricanes and even wildfires – that left many farms in shambles. And despite these disasters, there wasn’t a single call for a federal farm bailout, because roughly 84 percent of all eligible land was protected by crop insurance.
Crop insurance isn’t cheap for farmers, who have forked over $4 billion out of our own pockets this year to purchase policies, which protect 128 different crops from a wide variety of natural disasters.
This is a great example of the federal government and the private sector working hand in hand for the common good of the country and the food, feed, fuel and fiber supply. In this unique partnership, farmers purchase crop insurance policies – that are partially underwritten by the federal government – and they only receive an indemnity if they incur actual losses. The crop insurance system is efficient, because it is sold, serviced and delivered by the private sector.
In fact, in years past, federal aid for farm disasters like the one we’re in would have taken months or years to get into the hands of the farmers. Compare that to crop insurance, which has been delivering indemnities to farmers as they filed their claims, and thus far this year has put more than $2 billion into the hands of farmers who suffered losses.
Agriculture is certainly a very risky business, which means that banks are often hesitant to lend to farmers, particularly those who are just starting off. But farmers who purchase crop insurance are deemed a much lower risk by the banks, who count the crop insurance indemnity as collateral for the loan.
As disagreeable as things might seem sometimes in Washington, D.C., the fact that crop insurance is a quintessential risk management tool for farmers is one of the few things that both Republicans and Democrats can agree on. And farmers made their feelings on the issue quite clear earlier this year when they delivered a unified message to Congress regarding the upcoming Farm Bill: “Do no harm to crop insurance.”
Of course, there are those who would like to see all farm programs cut, either because of their dislike of government spending or their dislike of family farming. They charge that farmers would rather collect a crop insurance indemnity than harvest a crop. Imagine if a similar charge was leveled against someone who purchased car insurance. Can anyone really believe that people purposely crash their cars to collect the indemnity?
If rains don’t come this winter, we could be looking at the second year of this. Mother Nature strikes in cycles, so that possibility isn’t entirely out of the question. But there are things that we can count on. And at the top of that list is this country’s crop insurance system, which will allow farmers like me who take a beating this year to come back to the table again next year for another try.
Jeremie Nothdurft is fourth generation farmer from Gordonville, Missouri who raises corn, soybeans and wheat on the family’s 1,200 acre farm. This op-ed appeared in the Kansas City Star on Sunday, October 28, 2012.
It would be nice to talk about the great drought of 2012 in the past tense, but unfortunately, the entire state of Missouri remains in drought.
But if Missouri’s farmers hadn’t purchased a crop insurance policy last year — as most do every year — they could have lost more than their crops. They could have lost their farms, or their life savings, which is why crop insurance has become the primary risk management tool for farmers across the country.
Crop insurance is a modern-hybrid risk management tool. It’s a public-private partnership whereby farmers purchase insurance — partially underwritten by the federal government — to cover crop losses. Policies are sold, serviced and delivered by the private sector, and when disaster strikes, the…
Eighty-six percent of all planted U.S. farmland – some 281 million acres – is protected by crop insurance this year, up 2 percent from 2011 and a nearly three-fold increase from the late 1990s when only about 30 percent of farmers purchased policies, according to data from USDA’s Risk Management Agency.
The growth in coverage has been fueled by a number of factors, including fewer federal risk management alternatives for farmers, many farmers’ desire to have increased control of their risk management choices, federally-funded premium subsidies for those who purchase policies, a wide array of policy options and the value banks place on crop insurance when making loans.
But many would argue that private sector crop insurance agents, who operate largely on commission for the policies they sell, should be included in that list as well. Ruth Gerdes, a farmer and crop insurance agent from Auburn, Nebraska, nearly lost the land that she and her husband were farming 28 years ago and decided that other farmers needed to learn more about the benefits of crop insurance to avoid a similar brush with foreclosure.
One of the undeniable factors behind the growth of crop insurance, according to Gerdes, is “a motivated workforce” of agents. “We all strive to provide a quality service,” she said, adding that in an industry where premiums are decided by the government, the only way agents can distinguish themselves is through superior customer service.
“We all work to know the products and markets and are willing to be called upon at all hours when disaster strikes,” she said. Gerdes explained that agents, who are often farmers, or have farmed themselves, take great pride in their work and want their customers – the farmers – to be happy with both the insurance products they purchase as well as the service the agents provide. “And of course, part of it also is because we want the producer’s business again the next year,” she added.
Gerdes argues that “this competitive business model is good for the farmer and good for the system,” which is evident by the ever-increasing number of new crop insurance products developed, which today protect 128 different crops.
In 2012, some 1.2 million crop insurance polices were sold, covering 128 different crops. While 84 percent of the polices sold covered corn (34 percent), soybeans (31 percent) and wheat (19 percent), policies were also written for specialty crops including cherries, almonds, cranberries and avocados.
The 2012 growing season has ended for most of the nation’s farmers, but the drought that dogged many of them appears here to stay. According to the December 11, U.S. Drought Monitor, nearly 62 percent of the continental United States remains in some stage of drought. Forty-three percent of that area is considered to be in severe, extreme or exceptional drought.
Should this weather pattern continue, many farmers would start off the growing season with lower soil moisture contents than they had in 2012. According to the U.S. Seasonal Drought Outlook, which forecasts through the end of February 2013, “persistence of drought is deemed the best bet across central and southern portions of the Intermountain Region, the Rockies and the Plains. Persistence of existing drought, or the development of new drought areas are expected in Texas.”
The long dry spell is already taking its toll on the winter wheat crop. USDA says that this year’s wheat crop is the poorest at this stage in development since the agency started tracking crop condition ratings 25 years ago, according to Feedstuffs Online.
In its November 26 “Crop Progress” report, USDA pointed out that only 33% of the wheat crop was rated in good to excellent condition, while twenty-six percent of the crop was rated poor to very poor. Fifty-two percent of last year’s crop, by comparison, earned the top two condition ratings, while only thirteen percent scored in the bottom two tiers.
The persistent lack of rain is not only hurting the Heartland’s farmers, but also other agribusinesses and commerce in general. The ongoing drought is pushing water levels in the Mississippi so low that portions of the river south of St. Louis might have to be closed to shipping soon.
Tom Allegretti, president of American Waterways Operators, says that more than 20,000 jobs are at risk, as well as $130 million in wages and benefits if the river is closed for two months. Allegretti estimates that more than $2.3 billion of agricultural products, $1.8 billion in chemicals and $1.3 billion worth of petroleum products normally ship on the river in December and January.
Every county in the state of Iowa is experiencing severe or extreme drought conditions, according to the U.S. Drought Monitor. This time last near, not a single county in the state was experiencing drought. In fact, it would be fair to say that farmers saw quite the opposite conditions last year, especially here in Western Iowa.
We had water, and lots of it. In fact, counties bordering the Missouri River had thousands of acres of farmland – homes and communities – that were under water for four months. The Missouri River, which is typically less than 1,000 feet wide, was roughly six miles wide from bank to bank.
From a farmer’s perspective, the only thing last year and this year have in common is that crop losses will be steep. But this is the nature of agriculture, where we are blessed with some of the most productive land on earth in the good years, and then the threat of losing an entire crop, back to back, in the bad years. Thank goodness most farmers purchase crop insurance to help us get back on our feet after those bad years strike.
Last year, Iowa farmers shelled out more than $444 million from their own pockets to purchase crop insurance. Crop insurance has become the best risk management tool available for most farmers because it is a public-private partnership that limits taxpayer exposure to risk and helps farmers get back on their feet when disaster strikes.
Prior to widespread participation in crop insurance – which in 2011 protected 84 percent of eligible lands – farmers would often rely on federal disaster relief when a flood, or drought, or both, wiped them out. This disaster relief was not cheap for the taxpayers, who funded a string of relief bills totaling $45 billion from FY1989 to FY2001 for this very purpose.
While the disaster bills were greatly appreciated by the farmers who received them, they took a long time to arrive – up to two years – to get into the hands of the farmers who had lost everything and needed those funds badly.
Because crop insurance is sold, managed and delivered by the public sector, the indemnity checks come in a much more timely manner. In fact, more than $1 billion has already been paid out nationally to farmers who suffered losses this year.
For those worried about federal spending, crop insurance is a smart, fiscally responsible farm policy. It requires farmers who want protection to put some “skin in the game,” in the form of purchasing premiums, and it only benefits those who suffer a real, verifiable loss. As crop insurance has grown in use, spending on farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.
Because we are blessed with great soil and a usually amenable climate, many Iowa farmers – and others in the Corn Belt – rarely collect indemnities. The returns that the companies have made over the years, combined with the $3.5 billion the federal government has made in underwriting gains, will help pay for big losses, like the ones we have experienced back to back this year.
But like all farm policies, crop insurance has taken its fair share of criticism from those in Washington who would like to see a much less robust agriculture sector. These critics are actually using this year’s drought to paint farmers as self-serving and living off the government; people who, according to the Environmental Working Group, are “praying for drought, not rain.”
What nonsense! Suffice it to say that only in Washington DC would a group think that a check for an insurance loss could possibly be anywhere close to as satisfying – both financially and emotionally – as a bountiful harvest. The statement is ludicrous, and would lead one to conclude that people purchase car insurance in the hopes of having a bad wreck and cashing in on that misfortune.
Some rains have returned to Iowa but in most cases, it’s too late for the corn crop, of which 53 percent is considered in poor, or very poor condition. The rains will not renew our crops, but they do remind us of the promise of the future. But promises don’t pay creditors, so in addition to the rain, I’ll be thanking my good instincts for purchasing crop insurance yet again this year. Because I can tell you for certain, that if I hadn’t purchased multi-peril crop insurance this year with the drought, or last year with the flood, I’d be out of the farming business altogether.
Richard Archer is a corn and soybean farmer from Onawa, Iowa
This op-ed appeared in the Sioux City Journal on October 3, 2012.
For centuries, blueberries were gathered from the dense forests and bogs by Northeastern U.S. Native Americans, and are one of the only fruits we consume that are native to North America. So when most of us hear about blueberry farms, we conjure up images of cool, damp climates and cold winters.
Except on Jimmy Miller’s blueberry farm, which is located in Interlachen, Florida. Miller has operated the farm, which is the oldest existing blueberry farm in the state, since 1979. Miller, along with his two daughters and son-in-law, operates the 124 acre operation using a variety of blueberry developed by the University of Florida that tolerates the summer heat and mild winters.
One of the main issues for blueberry growers in Florida, Miller explains, is that they must have at least 200 hours every winter where the temperature goes below 45 degrees in order for the bushes to flower, and fruit, later that spring. Lack of enough cool days can mean very low fruit production the following year.
The Millers sell their blueberries, which are among the first in the nation to ripen each year, to both national and international fresh fruit markets. While they are relative newcomers to the blueberry market, they have been dealt quite the lucky hand by Mother Nature. That is, until early spring, 2012.
“We never had a real loss until this year,” said Miller, who explained that their primary risk is a freeze or hail. “And the way we manage freeze is with overhead water protection,” he explains, which protects the bushes by allowing a layer of ice to form on the plants and the berries, keeping the plants warmer than the outside air.
Florida, like much of the rest of the country, had a very early spring in 2012, which resulted in the bushes pushing out new growth and eventually blossoming several weeks earlier than usual. “The plants become vulnerable in late January or early February, and then the berries start to form,” Miller noted.
“It was an early spring, and then all of the sudden, we had a front blow through that dropped our temperature to 24 degrees,” he explained. That usually wouldn’t be a huge problem, given the sprinkler system, but this freeze was accompanied by 15 to18 mile per hour wind gusts, which made the water evaporate as quickly as you spray it.
“When water evaporates, it cools the plants, and we were trying to warm them,” he said. “We had plants that were vulnerable because they were in full growth, and then we had the wind,” he added. “The second night, the temperature actually got down to 18 degrees, but we were fine because we didn’t have the wind.”
The next day, the Miller clan was hopeful that it would be ok, “but we also knew that it could be catastrophic,” he said. Miller explained that one of the risk management strategies they have employed is the use of different varieties of plants that have different cold tolerances and will go into bloom at slightly different times.
The problem was, the bushes that should have fared well with the cold snap didn’t fruit fully that year because the mild winter had not met the requisite number of cool days. “And the plants that did put out a good amount of flowers were severely damaged by the freeze and accompanying winds,” he said.
Thankfully, for Miller, he always purchases crop insurance, and if the blueberries didn’t look better in a few weeks, this could be his first crop insurance claim. After the cold snap ended, Miller called his crop insurance agent who came out for an initial assessment.
“When you feel like it looks pretty bad, you need to give your agent notice,” said Miller. As the agent came out to inspect the bushes, Miller noted that “initially, as the plants came out of the cold snap, we were all hopeful.”
But hope wasn’t enough. As the season progressed, it became apparent that the losses would be staggering. “Without crop insurance, it would have been bad, real bad,” said Miller. In the end, the blueberry farm suffered a seventy percent loss.
“I would have been forced to borrow money just to get through the next year,” said Williams, explaining that without crop insurance, he would have to go to a bank and ask for a loan just for operating capital for the year. “And then two bad years in a row, and you are really out on the ledge,” he said.
“This is a tool, a necessary tool,” he said of crop insurance. “You can’t absorb this kind of loss, so you need to have a tool in place to transfer some of the risk to a private company.”
Luckily, the blueberry bushes appear to be recovering in the warm Florida sunshine and Miller is optimistic about his family’s and his farm’s future. “I feel like we’re going to be fine,” he said.
There are those who say that the grass is always greener on the other side of the fence. But the opposite can be true as well. Sometimes, it’s not until you look on the other side of the fence that you realize just how green your own grass is.
That’s certainly true this year. After good precipitation in the spring, weather in eastern Montana has been on the dry side since July; but the drought is not yet as severe as that in the Midwest weather is top of mind every year, since I’m a farmer who worries every year when I plant 2,300 acres of durum wheat, peas, lentils, flax and canola.
Last year, it was so wet from spring rains that I couldn’t get all of my land seeded. This year, after a promising start, it has become too dry. Mother Nature can be unpredictable, and a few bad years in a row without a good risk management strategy in place could mean the end of your farming career. That’s why I’ve purchased crop insurance every year since I started farming in 2001.
Crop insurance is a public-private partnership that not only reduces taxpayer exposure to risk, but also saves them money. When disaster struck last year with floods in the Midwest, drought in the Southern Plains and hurricanes on the East Coast, farmers who lost everything didn’t send their representatives back to Washington asking for a big farm disaster bill.
How was that avoided, given the extent of last year’s damage? Farmers didn’t need a disaster bill because 84 percent of eligible crops were protected by crop insurance. Prior to the emergence of crop insurance as the top risk management tool for farmers, natural disasters regularly triggered very costly, unbudgeted ad hoc disaster bills from Congress, costing taxpayers $45 billion from FY1989 to FY2001. Those days are over.
Crop insurance is no small expense for those of us who purchase it, but generally is the best – and in some cases the only – risk management tool available to many farmers nowadays. Crop insurance forces farmers to “put some skin in the game” by purchasing the insurance and taking charge of their own risk management strategies. Here in Montana, more than 16,000 farmers paid more than $85 million to purchase policies to cover their potential losses in 2011.
In the tight financial times we live in, crop insurance is a smart and efficient farm policy. In fact, as crop insurance has grown, taxpayer spending for farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.
While the government pays a portion of a farmer’s premium – which is a way to encourage as much participation in the program as possible – the government and private insurance companies share in the losses and gains of the program. The government has made more than $3.5 billion in underwriting gains over the last several years and that money goes right back into the U.S. Treasury.
With the large amounts of capital required to plant a crop every year, crop insurance is essential for farmers who have to go to banks for operating loans. That’s because the banks see a crop insurance policy as a form of collateral, making their loans to farmers less risky and thus helping to inject billions of dollars into rural America.
Because crop insurance is sold, managed and delivered by the public sector, the indemnity checks come in a much more timely manner. In fact, more than $1.4 billion has already been paid out nationally to farmers who suffered losses this year, with roughly $25 million of that coming to farmers with losses in Montana.
Of course there are those in Washington who seem to forget that they eat three meals a day and criticize every dollar spent on farm programs. They say that farmers in the drought-stricken areas are actually “praying for drought, not rain,” with the implication being that farmers would rather collect a crop insurance check than sell a bountiful harvest. That’s like saying that people purchase car insurance praying for an auto wreck. Not to mention the fact that in many years I purchase a crop insurance policy and don’t collect a dime. Period.
Yes, farming is a risky business, but for those of us who grow food, feed, fuel and fiber for consumers here and abroad, it’s a way of life. Some people might say that the grass is greener on the other side of fence, but because of crop insurance, the grass can be greener on both sides of the fence.
Chris Westergard is a fourth-generation farmer who lives near Plentywood, Montana.
This op-ed appeared in the Billings Gazette on September 30, 2012.
The choices Illinois farmers faced in the past when drought struck the Midwest were unpleasant all around. They could borrow money from family, drain their hard-earned savings or go under.
In the last decade, crop insurance has made it possible for brothers Robert (Bob) and Michael Buntin, owners of Buntin Bros., Inc. in Thompsonville, to avoid any of that even as this summer’s severe drought hit the state. For those without such a buffer, said Bob, 72, “It’s like losing a job. You get by the best you can.”
Thompsonville, with a population of nearly 600, is bordered on the south by Kentucky and on the east by Indiana.
This past summer, the entire state of Illinois experienced varying degrees of drought — worsened by excessive heat — causing crops to shrivel and die from the blistering temperatures.
The Buntins operate a 5,000-acre family farm, planted to corn, soybeans and wheat. This drought has been the worst since 1988, said Bob, and their yield this year is projected to be a little lower than ever before. From 147 bushels of corn per acre, 60 bushels of wheat and 45 bushels of soybeans, he sees production this year slowing to an average of 15 bushels each for soybeans and corn and “above average” for wheat.
“We’re tired of the dry weather,” he said. “This is the worst this year.”
This year, the brothers wrote a crop insurance premium check for more than a $100,000; “You don’t pay monthly like most insurance companies,” said Bob. “You just write one check.”
And like a regular car insurance policy, they make sure they are covered for one year at a time. “You never know when your car is going to break down. You reapply every year so you can change your options.”
Bob says the process of purchasing crop insurance and filing for a claim is uncomplicated with very little paperwork. “If you keep your records straight, what kind of yield you get and report all these to government offices, it makes it easier,” he said.
“We’re going to be all right this year,” he noted. Such confidence comes from part wisdom, part history: A lower crop production traditionally results in higher prices. The Buntins are buoyed by current market prices at sky-high levels, which, Bob said, “should cover my losses this year.”
The brothers recalled past years when their farm faced weather-related crises. “It was dry here last year, dry here in 1983 and dry here in 1988, and you go back to the 1930s and the ‘50s.”
The U.S. has been experiencing extreme weather over the last few years, with 2012 now judged as the hottest year on record. The number of disasters that have run up costs into the billions of dollars have multiplied sharply since the beginning of the century.
In 2011, the worst drought in a hundred years crippled Texas, the biggest producer of cotton in the U.S. The next year, the drought moved to the Heartland.
But in addition to worrying about the weather, there are some ideas being floated in Congress that are causing some concerns as well. “I don’t think there should be a cap on insurance policy,” Bob mused, arguing how a farmer with 500 acres or 5,000 acres should be allowed to take out a policy based on his own needs.
“You got all the expenses; the big guy’s got more expenses than the little guy, but he’s got expenses, too,” he said. For a farmer who is just getting started, the banks will strongly insist that he get insurance for his own protection “at least to some degree.”
“Even the big, more established farms can’t afford to take a hit three or four years in a row,” said Bob, who has been farming since he was a young man in his teens. And the family tradition of farming will continue as one of Bob’s sons two grandsons have joined him and their uncle in meeting the upcoming challenges to feed a hungry world.
On land where wheat stalks heavy with grain would normally wave on a breeze in the late summer, the searing drought of 2012 zapped nearly every inch of land across the Kansas plains, leaving it burnt and lifeless.
There was no way to hide from the drought in the Grain Belt. Just one year after the worst dry spell in a century devastated farmers in Texas, it spread like a virulent disease into the Midwest — the breadbasket for much of the world’s corn, soybeans and, of course, wheat.
The United States is a major wheat-producing country, with output typically exceeded only by China, the European Union and India, according to the U.S. Department of Agriculture (USDA) Economic Research Service.
The drought struck especially hard in Kansas, one of the biggest wheat producing states in the country. Jerry McReynolds, a well-known wheat producer in the northern part of the state, said the dry spell is “one of the most serious droughts we have ever encountered in my farming career.”
Each year, McReynolds plants 2,300 acres of winter wheat, 400 acres of corn, 250 acres of soybeans, 800 to 1,000 acres of grain sorghum and 150 acres of forage sorghum. He also runs his own cattle operation. His farm is located outside Woodston, Kansas, a place just 136 people call home; where “Main Street” is all of eight corners tucked away near Highway 24.
Like many American farms, it is a joint operation by the McReynolds family. He said his three children have always helped him and his wife, Diane, in running the farm.
“Our son is a part of the operation. Our married daughters return whenever possible for harvest or other times. One daughter owns some of the land we operate. Another daughter and [her] husband would like to return to the farm, if possible,” McReynolds said.
McReynolds has taken an active role in two decades of farming. He has held several leadership positions at the Kansas Association of Wheat Growers (KAWG) and, as its president, he helped start the Kansas Farm Bill Coalition. He was also involved in the process that culminated in Kansas Wheat, the cooperative agreement between KAWG and the Kansas Wheat Commission.
In 1998, he was elected to the Kansas Farm Bureau Board of Directors representing the sixth district in the area.
But for all his years in the business, McReynolds says he has never encountered a litany of problems quite like those in 2012.
“All spring planted crops really suffered. Germination was a problem. The weather was extremely hot for a very long period of time, without moisture. We encountered temps to 115 degrees,” he said.
“We cut half of our corn acres for silage. I chose not to plant soybeans this spring because of the extreme dryness. Our grain sorghum and forage sorghum really suffered. Yields will be less than half of last year,” he said, adding however, that “wheat yields were surprisingly good, considering the hot, dry weather.”
Crop insurance has been vital for the continued operation of the farm, especially in the midst of the worst drought this nation has seen in a quarter century.
“Crop insurance is critical to our operation. I had a 70 percent level of coverage. However, that only provides around 60 to 65 percent coverage,” he explained.
McReynolds said he has already turned in the papers for “losses on the corn that was cut for silage,” a process of fodder being compacted and stored without being dried so it can be used as animal feed in the winter.
Other losses will be determined after the fall harvest by the insurance companies, but there’s no doubt the impact of the drought on his farm has been severe.
The fallout will extend into 2013 as farmers approach the fall planting season for winter wheat.
“Moisture is critical to get wheat up this fall, as well as germination of any volunteer wheat that must be destroyed before wheat planting,” he said. “Recovery after a drought is very slow. It takes years to get things back to normal. Drought causes revenue losses, emotional issues, cowherd reductions and a lot of uncertainty.”
Without crop insurance it would have been tough to stay in business, the long-time Kansas wheat farmer said. The way the system works, crop insurance payments are paid close to the time frame when loss occurs — before harvest time in case of prevented planting and replant payments, or shortly after harvest in case of yield or revenue shortfall. Most crop insurance claims are paid within 30 days after settlement – a vast improvement from the days of big, ad hoc disaster bills.
Crop insurance is not a government handout that depends on the taxpayers to pay when disaster strikes. Farmers must contribute financially in order to receive crop insurance and will invest more than $4 billion in 1.2 million crop insurance policies this year. These contributions help hold down the cost to the taxpayer and encourage people taking part to exercise financial discipline going forward.
Still another outstanding feature of the U.S. crop insurance program is that it allows farmers to customize their plans and coverage to accurately reflect individual losses and unique yields or risk.
“The input costs are so great, and our margins are so close, that without crop insurance many growers would be out of business,” McReynolds said.
Like everyone else, he is hopeful 2013 will bring better conditions. “Hardship causes us to improve our management practices, but it is a lot more fun when we get rain,” he added.
Support for crop insurance is especially strong in rural America after this historic drought. A new NCIS video focuses on the overall training, continuing education and primary role adjusters play in getting crop insurance claims processed efficiently and accurately. More than 146,000 policies have been indemnified so far this year, resulting in more than $2.2 billion worth of indemnity payments reaching farmers in need.
The video highlights the fact that claims adjusters must undergo 60 hours of training before they adjust their first claim, and then must earn 16 hours of continuing education every year thereafter to ensure that their procedures are consistent, accurate and efficient.
After spending time in the classroom reviewing data capturing procedures, students go into the field to examine damaged crops with experts on-hand. During a recent school in Lubbock Texas, Jim Allison, a claims supervisor from Shallowater, Texas, pointed out recent hail damage on grain sorghum and explained what it meant to the overall productivity of the plant in the long-term. “A more mature grain sorghum plant that loses all of its leaves is going to be affected much more severely from the hail and the impact to the yield will be greater,” he explained.
“We have a lot of losses due to hail every year,” explained Gary Smith, a claims supervisor from Idalou, Texas. “When we get any hail of any size with significant winds, it can be like a lawnmower or a shredder,” he explained.
Many claims adjusters currently farm, or have farmed in their recent past. And because of that experience, they understand the important role crop insurance plays in helping farmers manage risk. “Crop insurance has become an integral part of farming, period,” noted Ben Hanawa, a claims adjuster from San Benito, Texas. “Everything has gotten expensive, and without that form of backup from a disaster, it would be hard for anybody to survive.”
The National Climatic Data Center reported that as the 2012 drought deepened and expanded this summer, it became one of the six largest droughts in modern record keeping. Here in Ohio, you really didn’t need a weather expert to tell you just how bad it was. And before the rains finally came – which were too late for many of crop – the fields were so dry they had cracked, there was only stubble left for cattle to feed on, and creeks and wells were drying up. This has been one of those years that can be full of disappointment for a farmer like me.
Planting this spring the soil looked great, crop prices were high, and there was every indication that a bountiful harvest was a strong possibility. But the rains left and did not return for months, leaving 53 percent of the corn crop in poor or very poor condition, roughly one-third of the soybean crop in poor or very poor condition and almost 70 percent of our pastures the same.
Thankfully, I purchase crop insurance for situations just like this. Crop insurance is a public-private partnership that limits taxpayer exposure to risk – and saving them billions of dollars – and helps farmers get back on our feet when disaster strikes. A crop insurance check does not make a farmer “whole” anymore than an insurance check replaces the home you lost in a fire, but it at least puts us on first base.
Crop insurance has become the key risk management tool for farmers, and the only risk management for some, that last year protected 84 percent of eligible farmland, or roughly 266 million acres. In years past, natural disasters like the drought we are enduring right now, regularly triggered very costly, un-budgeted ad hoc disaster bill from Congress, costing taxpayers $45 billion from FY1989 to FY2001. By comparison, the fact that most farmers purchase crop insurance has negated the need for large disaster bills for crops. Because of the way crop insurance works, when disaster does strike, the cost is partially shouldered by private sector insurance companies. This is a good, fiscally responsible move for farm policy. That’s because the move from ad hoc disaster bills to private crop insurance policies has saved billions of taxpayer dollars. In fact, taxpayer spending for farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.
Many Ohio farmers who are collecting crop insurance checks this year have never filed a claim. Those profits, in addition to the $3.5 billion the federal government has made in underwriting gains, will help pay for these and similar big losses. Last year, there was a string of natural disasters, including drought, wildfires, floods, freezes, hurricanes and tropical storms, which allowed crop insurance to show its steel.
Despite farm disasters from coast to coast, there wasn’t a single call for a disaster bill from Washington. Why? Because farmers had spent $4.5 billion of their own money to purchase crop insurance. Insurance dollars are already flowing into the state to help farmers meet their cash flow demands. In fact, more than $16 million in indemnities have already landed in the hands of Ohio farmers, which will help them make it through an otherwise lean year. It took months, or years, for cash from government programs of the past to find their way to farmers.
But there are those who are making uninformed and uneducated criticisms about crop insurance – and America’s farmers – in the midst of this national tragedy. According to the Washington-based Environmental Working Group, farmers have been “praying for drought, not rain.” Really? I’ve seen a lot of looks on the faces of my fellow farmers this past summer, as their crops and have withered despite their best efforts and their hopes for a great harvest have been dashed. And for the record, none of those looks have been smiles of greed about a check for an insurance policy they bought. Nor have I heard much laughter. Tears of frustration, maybe. Laughter, not so much.
The rains have returned to the Buckeye state but for the most part, it’s too little, too late for the corn crop. Thankfully most of us have purchased crop insurance policies, and will bounce back and be planting again next year.
This op-ed, written by Custar, Ohio farmer, Mark Drewes, appeared in the Bowling Green Sentinel-Tribune on September 18, 2012.
Todd and Ty Williams grew up on their family’s farm near Gruver, Texas, a town of about 1,100 people in the panhandle region. Todd Williams says he’s been driving a tractor since he was about seven years old, so it was just the natural course of events that he and his brother Ty would end up on the farm together as adults.
The brothers have been farming together since 1984. Williams notes that the main driver behind his desire to farm is his love for the work and the land, “because the money certainly isn’t in there,” he says. But above all else, he adds “there’s no better place on earth to raise your kids.”
The Williams brothers farm about 1,800 acres of wheat, corn, cotton and milo. Todd says that when he looks back at 2011, he remembers a year of unbelievable extremes. “Some people were flooded out in other parts of the country while we couldn’t buy a drop of water to save our lives.”
But farming and risk go hand in hand, and that’s why Williams purchases a crop insurance policy every year. “Wheat farming is so risky that using forward contracting as your only risk management tool is nearly impossible,” he says. That’s because if Mother Nature strikes and a crop is forward contracted without crop insurance, a farmer can end up owing a huge sum of money to fulfill the contract, on top of not having anything to harvest to provide income for the rest of the year.
Williams says he learned that lesson the hard way. He explained that a few years ago, he had a bumper wheat crop that was ready to harvest, so he worked through the day and on into the night, harvesting as much wheat as he could. He finally quit around 10 pm, with lots of wheat left standing in the field but exhausted from the long day’s work. Later that night, a large hailstorm blew through, crushing the remaining wheat. “One day it was ready to harvest, the next morning there was nothing taller that two inches in the whole field,” he said.
“Playing futures is risky, but contracting your wheat is an even bigger risk,” he notes.
Texas is a state that is not unfamiliar with droughts, heat waves, tornadoes and other weather anomalies. And because of that kind of weather, many Texas farmers are prepared to lose some of their crop on most years; but never all of it.
The drought of 2011 was so widespread and so extreme that even irrigated crops could hardly be saved. “It was so hot and dry, our irrigation pumps just wouldn’t cut it and our crops dried up,” Williams said.
Williams explained that he and other farmers were pulling so much water out of the local aquifer that they had to continually lower their pumps to keep the water coming.
The Williams brothers were running five irrigation wells and still couldn’t keep up with the heat and the lack of rain. “The crops just withered despite the irrigation,” Williams noted. “It was 110-112 degrees, the wind was blowing and the rain was nowhere to be found.”
Average rainfall for that part of the Texas panhandle is usually about 18-20 inches annually. In 2011, they received less than six inches for the whole year. Williams explained that when all was said and done, they were able to save a tiny portion of their crop by focusing irrigation on certain areas, but for the most part, “almost the entire crop was lost.”
Luckily his crop insurance agent, who Williams describes as “a super guy,” had touched base with the brothers throughout the year and knew that some degree of loss was inevitable. After months of fighting the drought and watching their crops wither despite their efforts, the Williams brothers came to the difficult decision that their fields were simply lost.
“The loss of a crop is crushing, even when you have crop insurance, because the insurance doesn’t really make you whole, it only helps you to recover to a small degree,” said Williams. He explained that like other farmers, he always looks forward to harvest, because it not only means the infusion of money, it’s the accomplishment of a year’s work. “I’d much rather have a harvest than an indemnity check,” he said.
But when disaster strikes and you lose some – or all – of your crop, farmers hope that the indemnity payment from their crop insurance policy is quick to arrive. Williams said that for him, that has always been the case. “Usually, the indemnity arrives in a week to 10 days,” he noted.
“If we didn’t have federal crop insurance last year, I’d be working at Wal-Mart or somewhere else today,” Williams said. “There is not a chance in the world I’d be farming today.” Williams said that because of his crop insurance policy, he and his brother are back farming today, and although it’s a bit dry, it’s a huge improvement over last year.
“Without federal crop insurance we’d be toast.”
There are those who say that the grass is always greener on the other side of the fence. But the opposite can be true as well. Sometimes, it’s not until you look on the other side of the fence that you realize just how green your own grass is.
That’s certainly true this year. After good precipitation in the spring, weather in Eastern Montana has been on the dry side since July; but the drought is not yet as severe as that in the Midwest. Weather is top of mind every year, since I’m a farmer who worries every year when I plant 2,300 acres of durum wheat, peas, lentils, flax and canola.
Last year, it was so wet from spring rains that I couldn’t get all of my land seeded. This year, after a promising start, it has become too dry. Mother Nature can be unpredictable, and a few bad years in a row without a good risk management strategy in place could mean the end of your farming career. That’s why I’ve purchased crop insurance every year since I started farming in 2001.
Crop insurance is a public-private partnership that not only reduces taxpayer exposure to risk, but also saves them money. When disaster struck last year with floods in the Midwest, drought in the Southern Plains and hurricanes on the East Coast, farmers who lost everything didn’t send their representatives back to Washington asking for a big farm disaster bill…
Every county in the state of Iowa is experiencing severe or extreme drought conditions, according to the U.S. Drought Monitor. This time last near, not a single county in the state was experiencing drought. In fact, it would be fair to say that farmers saw quite the opposite conditions last year, especially here in western Iowa.
We had water, and lots of it. In fact, counties bordering the Missouri River had thousands of acres of farmland – homes and communities – that were under water for four months. The Missouri River, which is typically less than 1,000 feet wide, was roughly six miles wide from bank to bank.
From a farmer’s perspective, the only thing last year and this year have in common is that crop losses will be steep. But this is the nature of agriculture, where we are blessed with some of the most productive land on earth in the good years, and then the threat of losing an entire crop, back to back, in the bad years. Thank goodness most farmers purchase crop insurance to help us get back on our feet after those bad years strike.
Last year, Iowa farmers shelled out more than $444 million from their own pockets to purchase crop insurance. Crop insurance has become the best risk management tool available for most farmers because it is a public-private partnership…
Every county in the state of Iowa is experiencing severe or extreme drought conditions, according to the U.S. Drought Monitor. This time last near, not a single county in the state was experiencing drought. In fact, it would be fair to say that farmers saw quite the opposite conditions last year, especially here in western Iowa.
We had water, and lots of it. In fact, counties bordering the Missouri River had thousands of acres of farmland – homes and communities – that were under water for four months. The Missouri River, which is typically less than 1,000 feet wide, was roughly six miles wide from bank to bank.
From a farmer’s perspective, the only thing last year and this year have in common is that crop losses will be steep. But this is the nature of agriculture, where we are blessed with some of the most productive land on earth in the good years, and then the threat of losing an entire crop, back to back, in the bad years. Thank goodness most farmers purchase crop insurance to help us get back on our feet after those bad years strike.
Last year, Iowa farmers shelled out more than $444 million from their own pockets to purchase crop insurance. Crop insurance has become the best risk management tool available for most farmers because it is a public-private partnership…
The portion of the lower 48 states experiencing moderate to exceptional drought increased yet again, to 65%, according to the September 18 U.S. Drought Monitor. In 41%of those states, the drought conditions are considered “severe, extreme or exceptional.” In addition, 54%of the country was in moderate drought or worse.
The majority of the country’s corn and soybean acres are affected, and while it’s too early to predict the full extent of agricultural damage, based on weather data, the losses will likely be greater than 2011 and could rival the flood losses of 1993. Some think losses could be as great as the 1988 drought, but it is still too soon to make that determination.
Whitney Blodgett has been farming in the family’s Vermont apple orchard, commercially known as “Sentinel Pine Orchard,” his whole life. Blodgett says that the family purchased the orchard in 1964, and have since grown, adding the abandoned dairy farm next door.
Sentinel Pine Orchard, is comprised of 220 acres of apple trees, mostly planted in the Macintosh variety. When harvest time comes, Blodgett along with his wife and farm hands, store, pack and ship fresh fruit to market. “That is our niche market because we can grow those apples very well in this climate,” he says.
Blodgett explains that because of the nature of the business – there aren’t a lot of ways to protect an orchard from the whims of Mother Nature – his chief risk management tool is crop insurance. “We had crop insurance claims in 2004, 2007 and 2011,” he explains. “And all of them were because of hail.”
Hail has always been dreaded in the orchard industry because it hits later in the summer, with the coming of the severe summer thunderstorms, and can damage the apples to the point that they’re no longer marketable as fresh fruit. But 2011 was a very different story.
The hail hit in the early spring, just as the blossoms had fallen from the fruit and the small apples were beginning to form. “There’s nothing we can do against hail because we can’t build a roof over the whole orchard,” he said.
“It was very odd in 2011, the hail hit early in the development of the apples and deformed them,” said Blodgett. “We had to wait and see how they developed and then decided if they would be able to be sold as fresh fruit,” he explains. The other option, if the fruit formed but wasn’t marketable as fresh, was to sell the apples for cider.
Blodgett says they held their breath and said their prayers for months as the apples slowly developed, keeping their fingers crossed that the hailstorm didn’t alter the apples beyond the point of marketability. But in the end, with the apples looking dented and battered, they were forced into the cider market.
“So we reluctantly decided to put the apples into cider,” he explained, which in financial terms, is a six-fold reduction in the value of the year’s harvest.
Luckily for Blodgett, he had purchased a “fresh apple” crop insurance policy that had a 50 percent coverage level. Blodgett explains that immediately after the hail incident, he had contacted his crop insurance agent who sent an adjuster out to the orchard within days. “The adjuster did a preliminary determination, but there would not be a final determination until final harvest,” he explained. “It’s a nail biter right to the very end, since you don’t know how bad things are going to be right away.”
But this wasn’t the first time he had looked to his crop insurance policy for a lifeline.
Blodgett explained that he took over the business from his father shortly after they had a large fire in their storage facility, which was full of apples. “The facility burned down, and that was the start of some very lean years,” he said. And although his father had always shied away from crop insurance, Blodgett decided that he needed the risk protection it afforded.
“I purchased a crop insurance policy in 2004, when things were pretty lean and we couldn’t withstand a lot of loss,” he said. “We were stretched very thin at that time.”
Coincidentally, that also happened to be the first year they experienced a large hailstorm, which stole their harvest and would have left them in very desperate times. “Without a doubt, when that first hail storm hit in 2004, we would have been knocked out of business for good,” he said.
“My father had never purchased crop insurance but thankfully I had decided to,” he said.
“Without crop insurance, I wouldn’t own an apple orchard right now,” he says. Blodgett explains that while crop insurance has kept his family in business, it has also had a positive “trickle down” effect on many of the areas businesses, where he buys his crop protectants, fertilizers and equipment. “If we went out of business, it would impact a lot of people,” he said.
Blodgett notes that crop insurance is essential for his business because even if you get a damaging storm at the beginning of a season – and your lose your entire crop – you still have to spend the money to take care of the trees and manage the orchard in preparation of next spring’s crop. “Even when we lose the crop early in the year, as we have done in the past, we still have to maintain the orchard for the rest of the year,” he said. “Otherwise, your orchard will be a mess the following year.”
And despite the disappointment of sending his whole 2011 crop into the cider market, Blodgett is still farming this year, hoping that what started off as an “iffy” year with a late freeze will still produce a respectable, and marketable, crop.
“Things are looking up, although we have some damage and loss, “ he says. “But this year, we will have a fresh crop of apples to sell.”
“It could be better, it could be worse.”
The National Climatic Data Center reported that as the 2012 drought deepened and expanded this summer, it became one of the six largest droughts in modern record keeping. Here in Ohio, you really didn’t need a weather expert to tell you just how bad it was. And before the rains finally came – which were too late for many of crop – the fields were so dry they had cracked, there was only stubble left for cattle to feed on, and creeks and wells were drying up.
This has been one of those years that can be full of disappointment for a farmer like me. Planting this spring the soil looked great, crop prices were high, and there was every indication that a bountiful harvest was a strong possibility. But the rains left and did not return for months, leaving 53 percent of the corn crop in poor or very poor condition, roughly one-third of the soybean crop in poor or very poor condition and almost 70 percent of our pastures the same.
Author – Mark Drewes is a farmer in Wood County, Ohio.
This op-ed was published in the Bowling Green Sentinal-Tribune.
The National Climatic Data Center reported that as the 2012 drought deepened and expanded this summer, it became one of the six largest droughts in modern record keeping. Here in Ohio, you really didn’t need a weather expert to tell you just how bad it was. And before the rains finally came – which were too late for many of crop – the fields were so dry they had cracked, there was only stubble left for cattle to feed on, and creeks and wells were drying up.
This has been one of those years that can be full of disappointment for a farmer like me. Planting this spring the soil looked great, crop prices were high, and there was every indication that a bountiful harvest was a strong possibility. But the rains left and did not return for months, leaving 53 percent of the corn crop in poor or very poor condition, roughly one-third of the soybean crop in poor or very poor condition and almost 70 percent of our pastures the same.
Author – Mark Drewes is a farmer in Wood County, Ohio.
This op-ed was published in the Bowling Green Sentinal-Tribune.
The arrival of heavy rains from Hurricane Isaac made some farmers happy and others worried to death, depending on where they were located and what they were growing.
In Louisiana and Mississippi, most of the cotton crop was two to four weeks from harvest when Isaac made landfall. That was the same situation as 2008 when Hurricane Gustav ruined that crop. Louisiana corn harvest had been delayed as well, leaving much of that crop in the field and farmers scrambling when the winds and torrential rains came.
Kyle McCann with the Louisiana Farm Bureau said that some of the state’s soybeans were damaged by the heavy wind and rain but were still salvageable. “We hope to see the damage in some of the later soybean varieties dissipate overtime as they recover.” The cotton crop suffered some losses as well, particularly the varieties that had opened early and were ready to pick. “Unfortunately, the heavy winds did some of the picking for us and it’s scattered across the ground,” he said. “But luckily, I haven’t heard of any dramatic losses to far.”
As Tropical Storm Isaac reached the parched earth of the Midwest and the cracked soils finally dampened, farmers growing soybeans breathed a sigh of relief while corn farmers lamented the fact that it had arrived too late to help many of them. Despite helpful rains over the eastern portion of the Corn Belt – which saw exceptional improvements for three hard-hit states:
– In Missouri, the area experiencing “severe” or “exceptional” drought was reduced from 97 percent to 32 percent.
– In Illinois, the reduction in these two categories dropped from roughly 70 percent to just under 7 percent.
– In Indiana, “severe” drought or worse is completely gone from the state for the first time since June 12.
Unfortunately, despite those localized gains, the overall drought numbers remained virtually unchanged from the previous week with 63 percent of the lower 48 states experiencing moderate to exceptional drought.
The September 4 crop progress reports bears that out. The portion of corn that is in poor or very poor condition remained at 52 percent, unchanged from the previous week. Soybean conditions remained roughly the same as well, with 58 percent of the crop in fair or good shape. Also, unfortunately for the livestock industry, nearly 60 percent of the country’s pastures remained in poor or very poor condition as well.
Without crop insurance in place, this unfolding natural calamity would surely have spurred a new ad hoc disaster bill in Congress. Thankfully, most farmers have crop insurance. They’ve invested more than $4 billion to purchase 1.2 million policies, thus far this year. For those who have suffered losses already, more than $1.3 billion in indemnity payments have been made.
The Risk Management Agency has provided a 2012 Drought “Frequently Asked Questions” factsheet for farmers or anyone else who has questions about crop insurance policies or how they should proceed if crops are damaged. Additionally, a statement was sent to the national media by National Crop Insurance Services detailing the steps farmers should take if crop damage is detected.
Northeast Indiana looks more like West Texas this summer than America’s heartland. According to the U.S. Drought Monitor, nearly 70 percent of the state, including a wide swath from around the Kentucky border in the south, north through Fort Wayne and all the way to the Michigan border is in an “extreme or exceptional” drought. Sadly, there is not a county in the state where some degree of drought does not exist.
73 percent of the state’s corn crop, the nation’s most valuable commodity, is in poor or very poor condition. 53 percent of our soybean crop, the second biggest revenue-generating commodity in the state, is in poor or very poor condition as well. Ranchers in the state are quickly running out of options to feed their livestock, as 89 percent of the state’s pastures are in poor or very poor condition as well.
While we’ve been blessed with adequate rainfall for the past month, for the corn crop it’s a case of “too little and too late.” We’re also still at a level of sub-soil moisture that, if it doesn’t improve, will potentially make it difficult to produce a crop in 2013…
Rob Schuman is a corn, soybean and cattle farmer from Churubusco and is the vice president of the Whitley County Farm Bureau.
Click here to read more…
Last year’s flooding, coupled with this year’s extreme drought, have made crop insurance more important than ever to Missouri farmers.
“Crop insurance is a completely different industry than it was a few years ago. It has gone from being something producers buy in order to receive their disaster payments to something they consistently rely on,” says Amanda Hurley, a licensed crop insurance agent with C&H Insurance Services LLC in Charleston, Mo. The industry has responded by offering several more insurance options, says Hurley, including additional replant and prevented plant options.
Recent crop disasters, as well as the increased risk from higher input costs, have prompted both growers and lenders to use insurance programs more effectively, says Hurley.
“Wise lenders and producers are much more aware of risk these days and are looking for ways to mitigate that risk,” she says. “Crop Insurance is a government program. Your basic yield and revenue products are the same no matter what agent you buy them from. What producers need to realize is they are shopping around for service, not a better premium price. You have to sign up for crop insurance long before you are even sure what/where you are going to plant. Farmers need to have a strategy that will…
Last year’s flooding, coupled with this year’s extreme drought, have made crop insurance more important than ever to Missouri farmers.
“Crop insurance is a completely different industry than it was a few years ago. It has gone from being something producers buy in order to receive their disaster payments to something they consistently rely on,” says Amanda Hurley, a licensed crop insurance agent with C&H Insurance Services LLC in Charleston, Mo. The industry has responded by offering several more insurance options, says Hurley, including additional replant and prevented plant options.
Recent crop disasters, as well as the increased risk from higher input costs, have prompted both growers and lenders to use insurance programs more effectively, says Hurley.
“Wise lenders and producers are much more aware of risk these days and are looking for ways to mitigate that risk,” she says. “Crop Insurance is a government program. Your basic yield and revenue products are the same no matter what agent you buy them from. What producers need to realize is they are shopping around for service, not a better premium price. You have to sign up for crop insurance long before you are even sure what/where you are going to plant. Farmers need to have a strategy that will…
The crop insurance program is a dramatic risk mitigator for the farmer.
The crop insurance program is a dramatic risk mitigator for the farmer.
Florida accounts for roughly 70 percent of the U.S. annual production of citrus, of which the vast majority goes into processing, mostly for orange juice. Citrus is big business in the Sunshine State, and Mike Garavaglia is one of Florida’s many citrus growers who make their living putting fresh citrus on the tables of America’s families.
Mike and his family own and operate 4,000 acres of citrus groves, which have been in the Rogers family for four generations. The family’s business, known as “The Packers of Indian River,” specializes primarily in fresh citrus for consumption – producing oranges, tangerines and grapefruit.
The family’s groves are geographically diverse, spanning three counties on both the east and west coasts of the state, but geographic diversity doesn’t always protect you from the whims of Mother Nature. “We have manageable and unmanageable risks,” says Garavaglia. “We try to eliminate as many of the preventable issues as possible, which include insect damage, bacterial and fungal diseases that attack the tree and crops.”
But what they can’t manage are large weather events like hard freezes, hurricanes and floods. Garavaglia has seen his share of natural disasters, with three hurricanes hitting the groves in 2004 and 2005 — at a time when the groves are especially vulnerable. “By the time August rolls around, you’ve invested about 90 percent of your care taking in the crop, and you are keeping your fingers crossed and hoping for a good harvest,” he said.
But nothing can really protect a grove, or the fruit on the trees, from a hurricane. “The fruit is too immature to harvest, and it’s very susceptible to high winds,” he adds. That’s where crop insurance comes into play. Garavaglia purchases the maximum buy-up of multi-peril insurance, “because over the years, that’s what has proven to work the best for us,” he says.
When a hurricane blows a good portion of the ripening crop onto the ground, “the fruit is shot,” he says. “And if the winds are high enough, it can take the trees years to recover from the damage.”
Another major threat to Florida’s premier citrus industry, and one that made its presence known in 2011, is a “hard freeze” – periods when temperatures go below 28 degrees for four or more hours. This can not only rob a grower of their harvest – which is their income for the year – but can kill the grove as well, if the freeze is long and hard enough.
“You can do everything humanly possible to mitigate the damage during a freeze, but you certainly can’t stop it,” he said. Garavaglia says that in the winter of 2010 and 2011, his groves endured three nights of temperatures that were as low as 22 degrees.
“When a freeze is on the way, growers spend a significant amount of money to prevent damage by flooding their groves and installing micro-jet irrigation to mist the trees,” he says. “But when it gets so cold for so long, as it did in 2011, you just know that there is going to be some major damage to the crop, or the trees, or both,” he said.
Unlike other weather events, it’s really impossible to assess the extent of the damage of a hard freeze for weeks, or even months. That’s because when those long, cold nights are finally over, it can take several weeks before the fruit starts to drop. “Initially, we lost about 20 percent of the crop on the ground,” he said. “Done.”
And then over the rest of the season, every box that is brought in has to be specially inspected with samples removed to ensure that parts of the fruit were not dried out from the freeze. ”Even if it stays on the tree, half of what’s remaining can be completely dried out and not marketable,” he notes.
Garavaglia explained that crop insurance is different with citrus than with row crops in the Midwest because it can take months to fully assess the damage.
“Within several weeks of a deep freeze, an adjuster will visit the grove, and he can spend weeks there going through the damage,” said Garavaglia.
“Fruit can continue to drop for two to three months, which means the adjusting can take months before it is complete,” he explains. But even then, the adjuster is often tasked with checking back after harvest to see if any more fruit was lost during inspection. “Because of the length of time it takes to assess the damage, claims can take months to finalize,” he said.
Garavaglia recounted a crop insurance vignette from a decade ago that demonstrated the critical role crop insurance plays in helping growers bounce back from adversity. The family had purchased another grove and had closed on the deal in August. In late December/early January, they were hit with a hard freeze and lost nearly 60 percent of the crop immediately. “You put your whole life savings into a crop every year, and to completely lose a return on an investment, it could wipe you out,” he said.
“If we didn’t have crop insurance, we would have lost the grove.”
Garavaglia says that while crop insurance doesn’t replace a harvest, it’s a critical tool for growers to mitigate some of their biggest risks. “Crop insurance pays for about 65 percent of what it takes to get a crop to market,” he says. “Nobody is making a profit on crop insurance, but it’s a great way to provide some risk mitigation on things we can’t control,” he added.
The continental United States is parched, with 63% of the lower 48 states experiencing moderate to exceptional drought, according to the August 28 U.S. Drought Monitor. Crop insurance is helping farmers pick up the pieces. So far in 2012:
• Farmers have invested more than $4 billion to purchase more than 1.2 million crop insurance policies.
• The policies provide $115 billion in liability protection.
• 15,000 private crop insurance agents and 5,000 loss adjusters are already helping farmers with claims.
• The crop insurance industry has already paid out $1.2 billion in indemnity checks.
It’s perhaps no great coincidence that Ben and Jerry’s Ice Cream was founded in Burlington, Vermont, given that dairy is the Green Mountain State’s largest agriculture industry. Cash Ruane, from North Clarendon, Vermont, is one of those Vermont dairy farmers.
Cash has been farming his whole life, starting his own farming business with his beloved wife and business partner Karen in 1992. Together, the Ruanes milk a herd of 75 dairy cows with an additional 90 calves and breeding stock. In addition, and primarily to keep the cattle fed, the Ruanes raise about 160 acres of corn, used mostly for silage, as well as hay, used for feed.
On a good year, the Ruanes can raise enough corn to make all of the silage they will need for the year, plus sell some to neighbors. Ruane says that 2011 was looking like a great year. “My corn crop was doing super, and I already had two cuttings of hay,” he explains, adding that he usually gets four. The promising corn crop and adequate hay supply would mean that the Ruanes would not only have enough feed for their farm for the year, but some to sell to the neighbors as well.
The Ruanes had never experienced any major natural disasters. The main source of adversity and risk on their farm was milk prices, which “fluctuated too much and too often” for most farmers’ taste.
But 2011 was going to prove to be quite the unusual year for the duo, when the arrival of Tropical Storm Irene, turned Otter Creek, which runs right through their farm, into a destructive and wild torrent.
When Hurricane Irene was downgraded to a tropical storm, many in New England thought they had dodged a bullet and would get by with some wind and a few showers. But Irene was big a storm that moved very slowly, dumping record amounts of rainfall in a very short period of time on a very rugged part of the country.
Hours after the rain began, Ruane looked out the window of his house to check his cornfields. “All I could see were the tassels of the corn,” he said, as a wall of water rushing down the mountains had swallowed the entire field.
Sometimes flashfloods do not spell doom for corn crops, if they are short in duration and not too deep. But in this case, water came, it came deep and then it refused to leave. “The water did not recede for four and ahalf days,” said Ruane. At one point, the rising water was approaching a barn full of cows, which required immediate rescue. “Luckily, we got the cows out in time,” he said.
When the water finally left, the couple realized that in addition to losing their entire corn crop for the year, they probably would not be able to cut hay for quite some time, due to the silt and debris left in their hayfields. “We lost about 35 to 40 percent of both our third and fourth cutting of hay,” said Ruane. “Which we knew was going to leave us short on feed for the dairy cows for the approaching winter.”
And while there was actually corn left standing despite the rapids that cut through the field, it was soaked to the point that it was ruined. “As time went on, some of the corn just molded and rotted right on the stalk,” he said. Adding, “surprisingly, some of the corn was so waterlogged that it actually sprouted, right on the cob, standing there in the field.” The crop was a complete loss.
Thankfully, Ruane had purchased crop insurance, as he always does, and immediately called his agent when the angry waters left his property. The crop insurance adjuster quickly assessed the damage and the payment soon followed. “I had my indemnity payment within 10 days to two weeks,” he said. “I was impressed, because I was expecting two to three months,” he said.
Unfortunately for the Ruanes, while a crop insurance indemnity can help a farmer get back on his or her feet, it doesn’t replace the income that you would have gained had you sold a bountiful harvest in a good market. “I lost so much feed, I had to borrow money and corn throughout the winter to feed the dairy cows,” he said.
“This was the first time I ever had a claim,” he said. Ruane used his crop insurance indemnity to pay off his 2011 lines of credit, which allowed him to borrow for his next year’s input costsand plant again in 2012. The indemnity, along with help from local charities for farmers and townsfolk who had lost so much in the flooding, helped the Ruanes weather the storm and come back again this year to farm.
“I was really impressed with the generosity of the public, even people I didn’t know and will likely never meet, who extended us a helping hand,” he said. “And my crop insurance indemnity, which allowed us to keep our dairy running for yet another year.”
The continental United States is parched, with 63% of the lower 48 states experiencing moderate to exceptional drought, according to the August 21 U.S. Drought Monitor. Crop insurance is helping farmers pick up the pieces. So far in 2012:
Farmers have invested more than $4 billion to purchase more than 1.1 million crop insurance policies.
The policies provide $114 billion in liability protection.
15,000 private crop insurance agents and 5,000 loss adjusters are already helping farmers with claims.
The crop insurance industry has already paid out $1.1 billion in indemnity checks.
The continental United States is parched, with 63% of the lower 48 states experiencing moderate to exceptional drought, according to the August 21 U.S. Drought Monitor. Crop insurance is helping farmers pick up the pieces. So far in 2012:
Farmers have invested more than $4 billion to purchase more than 1.1 million crop insurance policies.
The policies provide $114 billion in liability protection.
15,000 private crop insurance agents and 5,000 loss adjusters are already helping farmers with claims.
The crop insurance industry has already paid out $1.1 billion in indemnity checks.
Oklahoma is wheat country. Iowa is corn country. What farmers in the two states have in common is weather-related disasters — consecutive years of cropland devastation.
Recent rains and cooler temperatures notwithstanding, farm belt states are suffering. The 2012 winter wheat harvest in Oklahoma came before the summer meltdown; corn farmers in Iowa aren’t so fortunate.
Their plight is well-known. What isn’t as obvious is that farmers had planted the largest corn crop since 1937, according to the National Crop Insurance Services (NCIS). Despite that, corn production is forecast to be the lowest since 2006. Average yields are forecast at 123.4 bushels per acre, the lowest since 1995. Soybeans have also been hit hard.
Oklahoma is wheat country. Iowa is corn country. What farmers in the two states have in common is weather-related disasters — consecutive years of cropland devastation.
Recent rains and cooler temperatures notwithstanding, farm belt states are suffering. The 2012 winter wheat harvest in Oklahoma came before the summer meltdown; corn farmers in Iowa aren’t so fortunate.
Their plight is well-known. What isn’t as obvious is that farmers had planted the largest corn crop since 1937, according to the National Crop Insurance Services (NCIS). Despite that, corn production is forecast to be the lowest since 2006. Average yields are forecast at 123.4 bushels per acre, the lowest since 1995. Soybeans have also been hit hard.
The continental United States is parched,with 62% of the lower 48 states experiencing moderate to exceptional drought, according to the August 14 U.S. Drought Monitor. Crop insurance is helping farmers pick up the pieces. So far in 2012:
Farmers have invested $3.9 billion to purchase more than 1.1 million crop insurance policies.
The policies provide $110 billion in liability protection.
15,000 private crop insurance agents and 5,000 loss adjusters are already helping farmers with claims.
The crop insurance industry has already paid out $948 million in indemnity checks.
The continental United States is parched,with 62% of the lower 48 states experiencing moderate to exceptional drought, according to the August 14 U.S. Drought Monitor. Crop insurance is helping farmers pick up the pieces. So far in 2012:
Farmers have invested $3.9 billion to purchase more than 1.1 million crop insurance policies.
The policies provide $110 billion in liability protection.
15,000 private crop insurance agents and 5,000 loss adjusters are already helping farmers with claims.
The crop insurance industry has already paid out $948 million in indemnity checks.
Crop insurance has become the chief risk management tool for farmers for one simple reason: It works. Farmers purchase policies and can receive claims only for documented losses. As you noted, most of the United States is locked in a severe drought this year. Crop losses may be deep, and no crop insurance indemnity will be enough to make any of these farmers whole again. The indemnity will allow those who purchased policies to get back on their feet and farm yet another day.
Crop insurance has become the chief risk management tool for farmers for one simple reason: It works. Farmers purchase policies and can receive claims only for documented losses. As you noted, most of the United States is locked in a severe drought this year. Crop losses may be deep, and no crop insurance indemnity will be enough to make any of these farmers whole again. The indemnity will allow those who purchased policies to get back on their feet and farm yet another day.
The weekly U.S. Drought Monitor map released August 14 held more bad news for the contiguous United States, with 62 percent remaining in some level of drought. And the expanse that is gripped by extreme or exceptional drought rose nearly two percent last week to 24 percent.
The center of the drought remains directly over the Corn Belt. With some stage of drought covering the entire states of Indiana, Illinois, Iowa, Missouri and Kansas, the drought is certainly taking its toll on the corn and soybean crops. According to the August 10 estimates from USDA – the first “in the field” estimates of the year – production numbers are down substantially from what was projected at the beginning of the planting season.
Despite the fact that this was the largest corn crop planted since 1937, production is projected to be down 13 percent, the lowest output since 2006. Corn yields are expected to average 123.4 bushels per acre, down nearly 24 bushels from last year, which would be the lowest average yield since 1995. Soybeans tell a similar story. Soybean production is forecast to be down by 12 percent from last year, and if realized, would have the lowest average yield since 2003.
“Thankfully, the vast majority of the farms in these drought-ravaged areas are protected by crop insurance,” said Tom Zacharias, president of National Crop Insurance Services, in a statement released to the media. Zacharias noted that farmers purchase crop insurance policies to protect themselves against situations just like this, although many have never collected an indemnity. “This year, their decision to purchase crop insurance confirms their practice of sound risk management,” he said.
While there continues to be speculation about the ultimate cost of the 2012 drought, it is still too early to provide precise estimates of the losses. Zacharias explained that NCIS is analyzing the August 10 report and will compare that with reports from the field along with the crop insurance policy data that is still being processed and reported to the Risk Management Agency.
It will be hard to gain a complete picture of the situation and final outcomes will vary by state, crop and types of policies purchased. “What is certain is that the crop insurance industry is on the ground in the drought-stricken areas, mobilizing loss-adjuster teams,” Zacharias pointed out.
“Farmers can be assured their claims will be paid, and that the companies will move as quickly and as efficiently as possible, given the expected volume of claims, to assess damages and get indemnity checks into the hands of farmers.”
In order to be approved to sell federal crop insurance, companies must have adequate surplus and reinsurance at their disposal so that even if a catastrophe of this magnitude strikes, and then one strikes again the next year, the company is still capable of paying indemnities on the policies they sell.
In addition to company surplus and reinsurance, the federal government serves as the backstop reinsurer for all companies that sell crop insurance. As such, the federal government shares in the gains and the losses of the program. Gains in prior years can and will be used to offset losses in years like this one.
Zacharias explained that the industry has 5,000 claims adjusters and 15,000 agents working tirelessly right now to help growers cope. These adjusters are working hard to get money to farmers who have suffered losses, already paying out more than $1 billion in indemnities to date. Companies are also mobilizing adjusters away from other parts of the country that have not been affected by drought and sending those adjusters to the hard-hit states.
“With their crop insurance policies in hand, farmers will not only survive this drought but plant again next year, ensuring a continuity of the food, feed, fiber and fuel supply for this nation and an increasingly hungry world,” he added.
A drought specialist with the national weather service recently compared the drought and heat wave here in the Midwest with the catastrophic dry period of 1988 that at the time cost agriculture $78 billion. This year’s weather pattern, which settled into the Great Plains and the Southwest last year and has spread into the Corn Belt, resembles those of a quarter century ago, he noted.
USDA Chief Economist Joe Glauber recently said that “49 percent of the corn crop, 50 percent of the soybean crop, and 45 percent of the hay crop are all in areas that are experiencing drought,” adding that a lot of that area is actually in the “severe drought” category. For consumers, this drought could spell higher food prices as food and feed supplies tighten further and global demand continues to rise.
For farmers and ranchers who in 2011 experienced one of the most disastrous weather years in history this could mean yet another year of dismal harvests and dashed hopes. Thankfully, the vast majority of U.S. farmers purchase crop insurance policies, which last year covered 84 percent of eligible lands, protecting 266 million acres of crops.
But the agricultural destruction experienced in 2011 — which ranged from drought in the plains to flooding in the Midwest and Delta regions to freezes in Florida and Hurricane Irene on the East Cost — differed from previous years. In the past, large natural disasters would have triggered nearly immediate and always expensive ad hoc farm disaster bills in Congress. Last year, there were none.
Why? Because crop insurance, the public-private partnership designed to encourage the private sector to sell and service policies, was in place and working to help America¹s farmers pick themselves up when Mother Nature struck. Crop insurance is the most widely used and popular risk management tool available to farmers today.
This past year, as Congress began writing the 2012 Farm Bill, farmers and ranchers from each corner of the country and nearly every major commodity group came to Washington to testify about what that Farm Bill needed to do. There was one main theme that threaded through their testimony: “Do no harm to crop insurance.”
Unfortunately, an amendment in the recently passed Senate Farm Bill could harm the crop insurance system by mandating means testing to farmers who seek to purchase crop insurance. This might sound like a common-sense amendment at first glance, but what is important to remember is that crop insurance is purchased by the farmers themselves, so trying to make crop insurance sound like some government handout is very misleading.
Means testing could potentially disrupt the whole system because crop insurance, like other forms of insurance, relies on large pools of policy holders, who are all interconnected, meaning that less risky producers make policies more affordable for the riskier producers. In laymen¹s terms, that means that the well-financed, established farmers make policies more affordable for the less established, heavily-leveraged farmers or new farmers seeking to enter agriculture for the first time.
For those of you who don¹t farm, think of it this way. If a car insurance plan removed all of the most experienced and safest drivers from the pool of the insured, the cost for the remaining participants would increase because the low cost members were no longer there to balance out the high cost members. The same is true with crop insurance.
Without an adequate pool of insured participants, the whole system could collapse, making it much more difficult to secure insurance policies or to quickly collect indemnities when disaster strikes.
It’s important that this idea gets stopped in its tracks in the House Farm Bill, which will soon be written and then debated later this summer. An effective insurance program requires more acres in the program, not less. Means testing and arbitrary caps on crop insurance will reduce participation and hurt everyone in the system, including consumers.
The crop insurance system has helped American farmers survive the mishaps of Mother Nature last year, and it will do it again if it’s not undermined. Last year, farmers received nearly $11 billion in indemnities for the damages and losses they incurred over the course of the year. And hopefully, we can maintain crop insurance in its current form, because the current system works for both farmers and consumers.
Mike Pfantz is a crop insurance agent from Omaha, Nebraska. This op-ed appeared in the Lincoln Journal-Star on July 13, 2012.
In spite of the depth and far-reaching impact of the drought that has gripped more than half of the nation’s agricultural production area this summer, farmers should have no worries regarding their crop insurance policy’s ability to pay.
“The crop insurance industry is on the ground in the drought-stricken areas, mobilizing loss-adjuster teams,” says Thomas P. Zacharias, president, National Crop Insurance Services in a statement released today.
“Farmers can be assured their claims will be paid, and that the companies will move as quickly and as efficiently as possible, given the expected volume of claims, to assess damages and get indemnity checks into the hands of farmers,” Zacharias says.
Claim volume will be huge. Recent USDA crop report estimates indicated significant losses for corn and soybeans, result of the heat stress and extreme drought that covers much of the Corn Belt.
“Although this was the largest corn crop planted since 1937, production is projected to be down 13 percent, the lowest output since 2006,” Zacharias says. “Corn yields are expected to average 123.4 bushels per acre, down nearly 24 bushels from last year, which would be the lowest average yield since 1995. Soybean production is forecast to be down by 12 percent from last year, and if realized, would have the lowest average yield since 2003.”
Zacharias says most farmers in drought-stressed areas are covered by crop insurance.
“Some farmers in these affected areas have purchased crop insurance policies for years and have never collected an indemnity. This year, their decision to purchase crop insurance confirms their practice of sound risk management.”
In spite of the depth and far-reaching impact of the drought that has gripped more than half of the nation’s agricultural production area this summer, farmers should have no worries regarding their crop insurance policy’s ability to pay.
“The crop insurance industry is on the ground in the drought-stricken areas, mobilizing loss-adjuster teams,” says Thomas P. Zacharias, president, National Crop Insurance Services in a statement released today.
“Farmers can be assured their claims will be paid, and that the companies will move as quickly and as efficiently as possible, given the expected volume of claims, to assess damages and get indemnity checks into the hands of farmers,” Zacharias says.
Claim volume will be huge. Recent USDA crop report estimates indicated significant losses for corn and soybeans, result of the heat stress and extreme drought that covers much of the Corn Belt.
“Although this was the largest corn crop planted since 1937, production is projected to be down 13 percent, the lowest output since 2006,” Zacharias says. “Corn yields are expected to average 123.4 bushels per acre, down nearly 24 bushels from last year, which would be the lowest average yield since 1995. Soybean production is forecast to be down by 12 percent from last year, and if realized, would have the lowest average yield since 2003.”
Zacharias says most farmers in drought-stressed areas are covered by crop insurance.
“Some farmers in these affected areas have purchased crop insurance policies for years and have never collected an indemnity. This year, their decision to purchase crop insurance confirms their practice of sound risk management.”
Tess Vigeland: Congress left for its summer vacation without coming up with a drought relief package for farmers and ranchers.
But that doesn’t mean they’re all left high and dry. A lot of farmers are going to get help from crop insurance. And that could put a crimp in the bottom line of insurance companies — and taxpayers. Marketplace’s Adriene Hill explains.
Adriene Hill: Corn is supposed to be green and tall this time of year.
It’s not.
Doug Yoder: It’s brown.
Doug Yoder is with the Illinois Farm Bureau. He says it’s brown and/or short, depending on where you are.
But scrawny plants don’t always add up to scrawny paychecks. Most corn and soybean farmers — and we’re talking big-scale farmers here — have crop insurance. The feds pick up a big part of the tab, farmers pay the rest.
Yoder: Anybody that drops a seed in the ground and hopes to make a living on that, you’re accustomed to taking risks. But there are also limits to those risks that you can take, and we’ll be testing those limits this year. There’s no doubt about it.
Tess Vigeland: Congress left for its summer vacation without coming up with a drought relief package for farmers and ranchers.
But that doesn’t mean they’re all left high and dry. A lot of farmers are going to get help from crop insurance. And that could put a crimp in the bottom line of insurance companies — and taxpayers. Marketplace’s Adriene Hill explains.
Adriene Hill: Corn is supposed to be green and tall this time of year.
It’s not.
Doug Yoder: It’s brown.
Doug Yoder is with the Illinois Farm Bureau. He says it’s brown and/or short, depending on where you are.
But scrawny plants don’t always add up to scrawny paychecks. Most corn and soybean farmers — and we’re talking big-scale farmers here — have crop insurance. The feds pick up a big part of the tab, farmers pay the rest.
Yoder: Anybody that drops a seed in the ground and hopes to make a living on that, you’re accustomed to taking risks. But there are also limits to those risks that you can take, and we’ll be testing those limits this year. There’s no doubt about it.
WASHINGTON (CNNMoney) — As the drought continues to ravage the nation’s corn, wheat and soybean fields, crop insurance losses are expected to break records.
With nearly half of the continental United States under severe drought conditions, crop insurance losses are mounting daily, according to a report from the National Drought Mitigation Center at the University of Nebraska-Lincoln released on Thursday.
“It will be a major loss situation,” said Thomas Zacharias, president of the National Crop Insurance Services, a lobbying group representing private crop insurers. “The companies are in the field adjusting claims as we speak.”
An economist with the group roughly estimated that losses could top $20 billion.
And taxpayers will ultimately shoulder most of the cost the nation’s scorched fields.
While there are no official estimates available yet, National Crop Insurance Services Economist Keith Collins said crop losses this year look as bad or worse than other terrible drought years.
WASHINGTON (CNNMoney) — As the drought continues to ravage the nation’s corn, wheat and soybean fields, crop insurance losses are expected to break records.
With nearly half of the continental United States under severe drought conditions, crop insurance losses are mounting daily, according to a report from the National Drought Mitigation Center at the University of Nebraska-Lincoln released on Thursday.
“It will be a major loss situation,” said Thomas Zacharias, president of the National Crop Insurance Services, a lobbying group representing private crop insurers. “The companies are in the field adjusting claims as we speak.”
An economist with the group roughly estimated that losses could top $20 billion.
And taxpayers will ultimately shoulder most of the cost the nation’s scorched fields.
While there are no official estimates available yet, National Crop Insurance Services Economist Keith Collins said crop losses this year look as bad or worse than other terrible drought years.
By Thomas P. Zacharias, President, National Crop Insurance Services
The Environmental Working Group’s (EWG) most recent report entitled Plowed Under (August 6, 2012) deserves a few candid observations. By all outward appearances, the document appears to be a standalone “research effort.”
As such, the report has no real analytical or science‐based foundation. The report attributes recent crop land use conversion rates to the existence of crop insurance. How is this substantiated? By way of a series of mapping overlays, EWG associates loss of wildlife habitat solely due to farmers’ use of crop insurance. There is no demonstration of any formal analysis, such as statistical or economic considerations. It is not obvious that the reportunderwent any form of peer‐review, nor is there is any reference in the report to any similar analysis that has been published in peerreviewed journals.
This is quite unfortunate and irresponsible. Fortunately, one does not have to search too far to find a series of peer‐reviewed studies on this very topic. I have provided such a review of the subject here.
So, what do we know…
In a paper presented at the 2011 Annual Meeting of the Agricultural and Applied Economics Association, authors Miao, Feng, and Hennessy (Iowa State University) find crop land use effects attributable to crop insurance to be quite small. Conversely, the authors find product price to be the more dominant factor in farmer’s land use decision. This is consistent with most published literature.
More recently in the August 2012 Journal of Agricultural and Resource Economics, authors Walters, Shumway, Chouinard, and Wandschneider find “…. small, but not universal, tendency for increased crop insurance participation to create “noticeable” environmental effects …evidence shows both positive and negative effects as cropping patterns change. On average, the contribution of crop insurance to adverse environmental effects is slightly less than 1%…” A careful reading of their paper also indicates that product price is the dominant factor in farmers’ acreage decisions, again consistent with the existing literature.
These are peer‐reviewed studies that are based on formal analytical and statistical techniques; not for the faintof heart. This should be the essence of the policy debate. The assertion by EWG that farmers are planting on less‐productive land simply and solely to collect insurance indemnities is unfounded.
Partial and incomplete analysis of important agricultural and environmental policy issues does not serve the public well, particularly in the midst of the Farm Bill debate and the current drought situation in the Midwest. Maybe farmers are praying for rain instead of drought, and maybe policy makers are praying for intellectual honesty instead of glib, one‐line headline seekers.Farmers are probably not laughing at ill‐informed critics,nor are they laughing at burned‐out corn and soybean fields.
Who can know the heart?
National Crop Insurance Services
8900 Indian Creek Parkway, Suite 600
Overland Park, KS 66210-1567
Phone: 913-685-2767