Plowed Under ‐ Redux

/in , /by

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?

Despite Crop Insurance, Drought Still Stings Farmers

/in , /by

Stop by most any unirrigated farm across the lower Midwest and you’ll see crops in distress. Midwestern corn and soybean farmers are taking a beating during the recent drought, but it’s not likely to drive many out of business.

Most of those farmers carry terrific insurance, and the worse the drought becomes, the more individual farmers will be paid for their lost crops. The federal government picks up most of the cost of the crop insurance program, and this year that bill is going to be a whopper.

 

Despite Crop Insurance, Drought Still Stings Farmers

/in , /by

Stop by most any unirrigated farm across the lower Midwest and you’ll see crops in distress. Midwestern corn and soybean farmers are taking a beating during the recent drought, but it’s not likely to drive many out of business.

Most of those farmers carry terrific insurance, and the worse the drought becomes, the more individual farmers will be paid for their lost crops. The federal government picks up most of the cost of the crop insurance program, and this year that bill is going to be a whopper.

 

Crop Insurers Reassure Farmers as Drought Worsens

/in , , /by

OVERLAND PARK, KANSAS, July 18, 2012 – As the drought spreads and attention turns to worsening crop conditions in farm country, the nation’s crop insurers today reassured farmers that companies will have the money necessary to quickly pay out claims in 2012, even amid record payouts last year.

For every dollar of premium that insurance companies write, they have a regulatory requirement to have the private financial backing to cover catastrophic losses. Each year, the Federal Crop Insurance Corporation reviews and approves every company’s plan of operations to ensure that adequate capital is available, explained Tom Zacharias, president of National Crop Insurance Services (NCIS), the industry’s trade association.

“We’ve always been there for our farmer customers when they’ve faced tough times in the past and we’ll continue to be there,” he said.

Zacharias said 2011, which was marked by widespread weather-related loss and a record $11 billion in indemnity payments, should serve as a good model for what farmers can expect this year.

In 2011, most payments to farmers on the policies they purchased were processed within 30 days of claims being finalized. Such efficiency required a highly trained and skilled force of agents and claims adjusters, Zacharias pointed out.

There are about 5,000 certified crop insurance adjusters in the country who are already visiting farms and assessing damage. More than 2,000 of these adjusters are expected to attend NCIS sponsored training sessions this summer where part of the focus will be on this year’s droughts.

Although indemnity payments on the 2012 crop are already being made, NCIS is unable to predict the extent of likely damages this year because reliable information about the number of policies sold in 2012 and the acres covered by those policies will not be available until mid-August. Final indemnity estimates will take even longer to filter in.

In the meantime, Zacharias offered advice for farmers who are facing weather disaster. If producers think they have a loss on an insured crop, they must:

1. notify their crop insurance agent within 72 hours of the initial discovery of damage;

2. continue to care for the crop and protect it against further damage, if possible; and,

3. obtain consent from the insurance company prior to destroying any of the insured crop.

“Crop insurance is working well, and it will prove to be instrumental to agriculture’s ability to rebound this year,” Zacharias concluded. “As Congress debates a new Farm Bill and as the administration considers future changes, we hope they will see our impressive track record and do no harm to crop insurance.”

# # #

 

Tropical Storm Irene Proved the Value of Crop Insurance

/in , , /by

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

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

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

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

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

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

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

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

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

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

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

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

 

Convo 17

/in , /by

Farmers all across the country have said they like crop insurance. They understand it, they pay premiums — probably not thrilled about that piece of it — but having said that, they’re willing to do it. They understand the protection comes at a price so they have to pay for it. I just think it’s going stay. I really believe that crop insurance and risk management is what this Farm Bill is all about.

Congress Looks to Take Another Bite Out of Farmer’s Crop Insurance

/in , , /by

It’s not uncommon for a bank to ask for proof of insurance prior to lending you money. If the car, boat, or home for which you are seeking financing is destroyed, the bank needs some peace of mind that insurance will be there to cover the loss of its investment.

Agricultural loans are no different—except those loans are much larger than the ones most of us take out. And the risks that farm borrowers – particularly small farm borrowers – face every day are much greater than those facing everyday citizens.

Crop insurance has been the best tool to mitigate this extreme risk, which ranges from Mother Nature, to volatile markets, and heavily subsidized foreign competitors.

Better risk management also made it possible to obtain essential capital during the down economy, and the relationship has paid big dividends for rural economies.

The Federal Reserve of Kansas City noted, “In 2010, rural America was at the forefront of the economic recovery.”

But that success story is under attack right now in Washington, as lawmakers target crop insurance for yet another round of funding cuts and new regulatory burdens. The most serious threat comes from an amendment to subject crop insurance participation to a means test.

In other words, insurance benefits would be stripped away from larger, well-established farms and ranches. It seems innocent enough. After all, no taxpayer likes the idea of government dollars being spent on wealthy people when so many others are struggling.

But this amendment holds serious unintended consequences and could wind up harming not only small farmers, but farmers and ranchers of all sizes and income brackets, right along with the local economies they keep afloat.

Think of it this way. If you removed all the safe drivers from the auto insurance pool, or all the homeowners outside of floodplains, house and car insurance wouldn’t be affordable for anyone. That’s because insurance companies have to spread risk and delivery cost out across a diversified customer base to make products more available for all. For every risky policy, you need one with little risk.

If the amendment passes, the farmers left in the insurance pool will have to fork over more for premiums, and even then, their quality and speed of service will likely diminish as insurers wrestle with shrinking profit margins or losses.

Some will argue that the government shouldn’t be involved in crop insurance at all. That’s not realistic.

That would leave America in the same position it was in before we had a vibrant crop insurance system, when costly ad hoc disaster bills came before Congress nearly every year and taxpayers—not private insurers—bore all the risk.

For this reason, the country’s major financial institutions are urging Senators to vote no on all crop insurance amendments that would harm the crop insurance infrastructure.

Damaging the effectiveness and affordability of what’s left of Iowa farmers’ safety net and their most important risk management tool would only worsen the economy as a whole.

Alan Rosendahl is a Senior Vice President at Iowa State Bank and a farmer who resides in Kesley, Iowa.

This op-ed appeared in Agri-News on June 28, 2012

Congress Looks to Take Another Bite Out of Farmer’s Crop Insurance

/in , , /by

It’s not uncommon for a bank to ask for proof of insurance prior to lending you money. If the car, boat, or home for which you are seeking financing is destroyed, the bank needs some peace of mind that insurance will be there to cover the loss of its investment.

Agricultural loans are no different—except those loans are much larger than the ones most of us take out. And the risks that farm borrowers – particularly small farm borrowers – face every day are much greater than those facing everyday citizens.

Crop insurance has been the best tool to mitigate this extreme risk, which ranges from Mother Nature, to volatile markets, and heavily subsidized foreign competitors.

Better risk management also made it possible to obtain essential capital during the down economy, and the relationship has paid big dividends for rural economies.

The Federal Reserve of Kansas City noted, “In 2010, rural America was at the forefront of the economic recovery.”

But that success story is under attack right now in Washington, as lawmakers target crop insurance for yet another round of funding cuts and new regulatory burdens. The most serious threat comes from an amendment to subject crop insurance participation to a means test.

In other words, insurance benefits would be stripped away from larger, well-established farms and ranches. It seems innocent enough. After all, no taxpayer likes the idea of government dollars being spent on wealthy people when so many others are struggling.

But this amendment holds serious unintended consequences and could wind up harming not only small farmers, but farmers and ranchers of all sizes and income brackets, right along with the local economies they keep afloat.

Think of it this way. If you removed all the safe drivers from the auto insurance pool, or all the homeowners outside of floodplains, house and car insurance wouldn’t be affordable for anyone. That’s because insurance companies have to spread risk and delivery cost out across a diversified customer base to make products more available for all. For every risky policy, you need one with little risk.

If the amendment passes, the farmers left in the insurance pool will have to fork over more for premiums, and even then, their quality and speed of service will likely diminish as insurers wrestle with shrinking profit margins or losses.

Some will argue that the government shouldn’t be involved in crop insurance at all. That’s not realistic.

That would leave America in the same position it was in before we had a vibrant crop insurance system, when costly ad hoc disaster bills came before Congress nearly every year and taxpayers—not private insurers—bore all the risk.

For this reason, the country’s major financial institutions are urging Senators to vote no on all crop insurance amendments that would harm the crop insurance infrastructure.

Damaging the effectiveness and affordability of what’s left of Iowa farmers’ safety net and their most important risk management tool would only worsen the economy as a whole.

Alan Rosendahl is a Senior Vice President at Iowa State Bank and a farmer who resides in Kesley, Iowa.

This op-ed appeared in Agri-News on June 28, 2012

Crop Insurance Saved Taxpayers $10.4 Billion Since 2002

/in , , /by

Federal crop insurance has come in under budget every year since 2002 – the last year of major revisions to the program – saving taxpayers more than $10.4 billion in projected spending, according to a new analysis of Congressional Budget Office (CBO) data.

The savings, taken as the difference between the projected cost of the crop insurance program by the CBO and the actual cost of the program, shows that in some years, the CBO overestimated the cost of crop insurance by more than 45 percent.

Year CBO   Estimate($ bil.) CBO Actual($bil.) Difference($ bil.)
2002 2.876 2.818 0.058
2003 3.179 2.906 0.273
2004 3.682 3.366 0.313
2005 3.626 2.242 1.384
2006 3.864 3.291 0.573
2007 4.670 4.374 0.296
2008 7.746 4.146 3.600
2009 7.496 6.767 0.729
2010 7.784 4.547 3.237
Total   Savings $10.4   billion

For example, the difference between projected and actual cost ranges from being 6.3 percent too high in 2007 to 46.5 percent too high in 2008.  In 2010, the most recent year for which final data are available, the CBO estimated the cost for crop insurance would be $7.784 billion, but the actual cost of the program was $4.547 billion, or 41.4 percent lower than projected.

The constant discrepancy is due to the fact that the CBO always assumes that the gross premiums—which include what the farmers pay and the government premium subsidies—will be equal to the indemnities paid out, which in the real world, is almost never the case.

Whenever the gross premiums exceed the indemnities paid, this excess is called the “gross underwriting gain.”  This excess is divided between the Federal Crop Insurance Corporation (FCIC) and the private insurance companies.  When the government’s share of the underwriting gains are positive, they help offset the cost of the premium subsidies provided to farmers.  Such positive gains reduce the actual cost of the program to the taxpayers below what CBO had expected.

And these government underwriting gains and overestimates in the cost of the program have been consistent in recent years, and may continue into the future,    while overestimates are the long running pattern and may continue in the future, although 2011 may prove to be one of the exceptional years given the record indemnities due to drought, floods, hurricanes and freezes.

Despite the size of the nation’s food and agriculture sector and the fact that agriculture has been a major economic factor in lifting this nation out of the long recession, federal investment in crop insurance is less than one-tenth of one percent of overall federal spending.

Crop Insurance A Key to Credit Access, Bankers Tell House Subcommittee

/in , , /by

Several witnesses representing key agriculture lending institutions and credit agencies told members of the House Agriculture Committee’s Subcommittee on Department Operations, Oversight, and Credit that access to credit is essential for farmers and crop insurance plays an important role in that access. The hearing, held May 10, went largely unnoticed but is pertinent given the need for most farmers to secure credit.

“Crop insurance is important to the adequate supply of credit to farmers and ranchers as it provides assurance that farmers will be able to repay their operating loans in the event of weather or price related calamities,” said Jeff Gerhart, a banker and chairman of the Independent Community Bankers of America.  Gerhart noted that crop insurance was a good risk management tool that their farm customers have learned to use to better manage risk. “The dramatic evolution of crop insurance in meeting the needs of most of our nation’s farmers has been truly impressive,” he said.

Bob Frazee, president and CEO of MidAtlantic Farm Credit, one of 87 Farm Credit cooperatives that is owned by more than 10,500 farmers from the region told the committee that crop insurance gives lenders the peace of mind to loan to farmers in a very risky environment.  “It is extremely important as a lender to agriculture that we know our customers have insured their production,” he said.  “This protects the farmer and it protects lenders as we provide credit to farmers to cover their operating expenses.”

Matthew Williams, testifying on behalf of the American Bankers Association, told the committee that crop insurance provides his customers with “the certainty they need to make responsible planting decisions and provides my bank with the confidence we need to extend credit to our customers.”  Williams reminded the committee that input costs to plant crops today are “staggering,” and explained that his customers use credit to get their crops planted and harvested.  “If federal crop insurance was in some way diminished, our ability to lend – in some cases – would be curtailed,” he added.

Subcommittee Chairman Jeff Fortenberry underscored the importance of access to credit and the essential role it plays in maintaining the United State’s abundant and affordable food supply.  “Ensuring a stable food supply is directly connected to farmers and ranchers having access to steady sources of credit,” he said.

Convo 16

/in , /by

Sorghum producers across the Sorghum Belt faced significant challenges last growing season as a result of the drought. NSP supports Federal Crop Insurance, which is providing meaningful risk management tools to our producers.

Convo 16

/in , /by

Sorghum producers across the Sorghum Belt faced significant challenges last growing season as a result of the drought. NSP supports Federal Crop Insurance, which is providing meaningful risk management tools to our producers.

Crop Insurance Helped Mississippi Farmers See Yet Another Spring

/in , /by

The state of Mississippi and farming are so intertwined that it is hard to imagine one without the other.  Agriculture is not only our state’s number one industry; it employs roughly one-third of our population, contributing $5.8 billion to the state’s economy.  There are approximately 42,000 farms in the state covering 11 million acres, producing rice, cotton, soybeans and other commodities, and there is not a county in our state where farming doesn’t play a major role.

Agriculture in this state, and throughout the U.S., has been one of the bright spots that is helping the U.S. turn the economic corner.  But the productivity of the American farm and the consumer benefits of the American food supply did not just happen in a vacuum.  It all happened because of hard-working farmers, abundant natural resources and public policies that provided risk management tools for farmers when disasters struck.  And hands down, farmers across the country will tell you that their most important risk management tool is crop insurance.

As a crop insurance agent who was on more than a few farms the day after Hurricane Katrina struck, I can tell you first hand that crop insurance was a financial lifeline for many farmers.  Katrina hit so many farmers who had never before gone through a large-scale natural disaster that wiped out their entire crop at harvest time.  For farmers whose crops survived the storm, their fields were so waterlogged that they couldn’t get their crops out.  It was precisely in this kind of situation that crop insurance showed its value to Mississippi producers, and for those who had purchased crop insurance it was a godsend.

Crop insurance is privately written and delivered insurance that is purchased by individual farmers and tailored specifically for to the risks they face on their farms.  Because crop insurance is delivered by the private sector, indemnities are made to farmers who suffer losses quickly and efficiently.

After Katrina, crop insurance companies dispatched crews from other parts of the U.S. to the Gulf coast states to meet with the farmers and perform the appraisals.  And, believe it or not, despite the size of the disaster and the number of claims made, indemnities were paid in a matter of weeks.

For farmers, the speed with which they received their indemnities enabled them to pay off their production loans from the crop they had just lost and bounce-back to plant again the following spring.  Compare that to federally-administered disaster programs, such as SURE, that take as long as two years for a loss payment to finally reach a farmer in need.  Two years is often too late when you have just lost everything.

Gutting of crop insurance in farm bill threatens farmers’ survival

/in , /by

Quentin Bowen of Humboldt, Neb., is a farmer who raises corn and soybeans.

As I spend these hot summer days tending to my drought-stressed and dying corn and soybean crops, I am glad I purchased crop insurance.

Whether it’s a flood instantly washing your livelihood down a newly formed river channel, or the blistering sun overcooking your hopes one day at a time, there’s nothing worse than losing a crop and a whole year’s work.

Then again, there’s nothing better than rejoicing in a bountiful harvest, which wouldn’t even have been an option for most growers had crop insurance not helped them pick up the pieces following a disastrous 2011.

Future bumper crops may not be an option for many if some senators are successful in gutting the pending farm bill. That’s because more than a dozen farm bill amendments have been introduced to render private-sector-run crop insurance — our most effective risk management tool — ineffective.

Some amendments would take more money from a program that has already seen $12 billion in funding reductions since 2008, leaving it stressed to a breaking point. Other amendments would cap the discounts farmers get on insurance premiums to make policies obtainable, effectively leaving many mid-size farms and specialty crops without adequate protection from disaster.

The biggest threat comes from a proposal to limit participation in crop insurance through an arbitrary means test, based on your tax filings with…

 

Crop School Teaches Insurance Adjusters To Assess Hail Damage

/in , /by

COLUMBIA — Gene Painter kneels and observes the sample of wheat before him, explaining the difference between damage done by hail and other perils. A clean cut in the stalk signals a rodent; a bent stalk is wind damage; but a broken stalk or missing berries are signs that hail is to blame.

Once determining that hail is the culprit, Painter, a claims supervisor with American Farm Bureau Insurance, refers to the calculations that are used to determine the stage of growth the plants were in when they were damaged. The earlier the damage occurred, the higher the expected loss. These tools serve as a guide to assessing hail claims.

“The way things were done in the old days, every adjuster had his own method and we had to get away from that,” he said. “We need to base it on real facts.”.

Painter is one of 18 plot leaders instructing 85 crop insurance adjusters at the National Crop Insurance Service Crop-Hail Wheat & Corn School.

The school was held Tuesday and Wednesday at MU’s Bradford Research & Extension Center. Bradford has been home to the annual school for over 20 years.

Crop School Teaches Insurance Adjusters To Assess Hail Damage

/in , /by

COLUMBIA — Gene Painter kneels and observes the sample of wheat before him, explaining the difference between damage done by hail and other perils. A clean cut in the stalk signals a rodent; a bent stalk is wind damage; but a broken stalk or missing berries are signs that hail is to blame.

Once determining that hail is the culprit, Painter, a claims supervisor with American Farm Bureau Insurance, refers to the calculations that are used to determine the stage of growth the plants were in when they were damaged. The earlier the damage occurred, the higher the expected loss. These tools serve as a guide to assessing hail claims.

“The way things were done in the old days, every adjuster had his own method and we had to get away from that,” he said. “We need to base it on real facts.”.

Painter is one of 18 plot leaders instructing 85 crop insurance adjusters at the National Crop Insurance Service Crop-Hail Wheat & Corn School.

The school was held Tuesday and Wednesday at MU’s Bradford Research & Extension Center. Bradford has been home to the annual school for over 20 years.

Don’t Hurt the Farmers That Feed Us

/in , /by

It’s one of the great ironies of our time that the richest nation on earth, with the most productive agriculture sector the world has ever seen, would have so many citizens who live with food insecurity, the fear of not knowing where theirnext meal is coming from. The fact that many of these citizens are children makes it even worse.

Senator Kirsten Gillibrand (D-NY) has been a great advocate for the needy and for healthy eating, and it shouldn’t be a surprise to anyone that she’s doing everything she can to ensure that federal support for food stamp benefits are fully funded. Unfortunately, to pay for her recent amendment, she’s cutting the only viable risk management tool available to the very New York farmers who grow healthy food for the poor: crop insurance.

Crop insurance is a private-public partnership that has worked miracles in serving as a backstop to farmers and ranchers after disaster strikes, as it did last year here at home. Farmers purchase crop insurance, which is partially underwritten by federal government, so that when Mother Nature serves up a nasty surprise, there is something in place to ensure that come next year, farmers will be able to plant yet again and feed America.

2011 was a tough year for many of our areas farmers. Tropical Storm Irene hit right as farmers were harvesting their crops, wiping out an entire year’s work for many as their fields were swallowed under several feet of water. New York farmers growing apples, corn, grapes, peas and peaches, as well as many other crops, suffered enormous losses and thankfully collected nearly $45 million in indemnity payments from their private crop insurance policies.

And 2012 has already presented its challenges to our local farmers, as many in the Hudson Valley and the western part of the state lost some or their entire apple and other fruit crops to a late spring freeze. Thankfully, again, crop insurance was there to keep them from losing their farms. In fact, for those who argue that Americans, especially the disadvantaged, need to have access to fresh fruit and vegetables, crop insurance is the only viable safety net available to farmers who grow that produce.

Mike Southcott is a crop insurance agent based in Albion, New York.

Don’t Hurt the Farmers That Feed Us

/in , /by

It’s one of the great ironies of our time that the richest nation on earth, with the most productive agriculture sector the world has ever seen, would have so many citizens who live with food insecurity, the fear of not knowing where theirnext meal is coming from. The fact that many of these citizens are children makes it even worse.

Senator Kirsten Gillibrand (D-NY) has been a great advocate for the needy and for healthy eating, and it shouldn’t be a surprise to anyone that she’s doing everything she can to ensure that federal support for food stamp benefits are fully funded. Unfortunately, to pay for her recent amendment, she’s cutting the only viable risk management tool available to the very New York farmers who grow healthy food for the poor: crop insurance.

Crop insurance is a private-public partnership that has worked miracles in serving as a backstop to farmers and ranchers after disaster strikes, as it did last year here at home. Farmers purchase crop insurance, which is partially underwritten by federal government, so that when Mother Nature serves up a nasty surprise, there is something in place to ensure that come next year, farmers will be able to plant yet again and feed America.

2011 was a tough year for many of our areas farmers. Tropical Storm Irene hit right as farmers were harvesting their crops, wiping out an entire year’s work for many as their fields were swallowed under several feet of water. New York farmers growing apples, corn, grapes, peas and peaches, as well as many other crops, suffered enormous losses and thankfully collected nearly $45 million in indemnity payments from their private crop insurance policies.

And 2012 has already presented its challenges to our local farmers, as many in the Hudson Valley and the western part of the state lost some or their entire apple and other fruit crops to a late spring freeze. Thankfully, again, crop insurance was there to keep them from losing their farms. In fact, for those who argue that Americans, especially the disadvantaged, need to have access to fresh fruit and vegetables, crop insurance is the only viable safety net available to farmers who grow that produce.

Mike Southcott is a crop insurance agent based in Albion, New York.

Convo 15

/in , /by

Even though crop insurance is our fourth largest annual expense, we continue to purchase it—that’s just how important it is to us. We have been fortunate not to have filed a claim in the past ten years. It’s comforting to know however that if we had needed it, we would have had the resources available to pay our bills, keep our employees on staff, and continue with this business.

Convo 14

/in , /by

What we would like to see is continued support of our crop insurance.  The reason crop insurance is there is to prevent you from setting up an appointment with the auctioneer.

Convo 14

/in , /by

What we would like to see is continued support of our crop insurance.  The reason crop insurance is there is to prevent you from setting up an appointment with the auctioneer.

EWG Study A Reckless Attack on Farmers’ Best Risk Management Tool

/in , /by

(OVERLAND PARK, Kan.) — “The Environmental Working Group has an unprecedented track record of promoting and funding misleading and flawed analysis, as well as mischaracterizing data to generate news headlines. Its latest attack on farmers’ most important risk management tool is no different. For example:

  • EWG seems to be criticizing government support of crop insurance. Yet, EWG fails to mention that it is promoting a plan on Capitol Hill to provide farmers with 100 percent subsidized crop insurance coverage administered by the government instead of efficient private insurers.
  • The same fruit and vegetable growers EWG supposedly champions are likely some of the largest crop insurance benefit recipients on its list of ‘offenders.’
  • EWG fails to account for the fact that these ‘subsidies’ are premium discounts that are accounting transactions that take place within the USDA. There are no government subsidy checks to farmers. Unless indemnities are paid to a farmer, there is no outlay on that famer’s policy. Even when there is a loss, taxpayer cost is minimized by government underwriting gains on other policies, which is why CBO estimates for crop insurance have historically been so much higher than actual costs.

“Only telling part of the story is nothing new for EWG when it comes to agriculture. Its controversial database of direct and counter cyclical payments quietly combines multiple years, and in many cases multiple farmers, to distort the facts. Ironically, many of the ‘rich and famous’ subsidy recipients EWG has used in the past to make news headlines about farm program payments receive only conservation subsidy payments that EWG supports.

“Crop insurance is extremely popular with lawmakers from both sides of the aisle, as well as with farmers, their lenders, and nearly everyone with a stake in rural America. That is because crop insurance gives producers a fighting chance after disaster strikes or markets collapse. After recent reductions in farm policies, it is the single most important risk management tool remaining for U.S. farmers and ranchers.

“One must question the motive of EWG. Is it to leave America’s farmers and ranchers without the ability to survive and successfully manage agricultural disasters?”

 ###

 

EWG Study A Reckless Attack on Farmers’ Best Risk Management Tool

/in , /by

(OVERLAND PARK, Kan.) — “The Environmental Working Group has an unprecedented track record of promoting and funding misleading and flawed analysis, as well as mischaracterizing data to generate news headlines. Its latest attack on farmers’ most important risk management tool is no different. For example:

  • EWG seems to be criticizing government support of crop insurance. Yet, EWG fails to mention that it is promoting a plan on Capitol Hill to provide farmers with 100 percent subsidized crop insurance coverage administered by the government instead of efficient private insurers.
  • The same fruit and vegetable growers EWG supposedly champions are likely some of the largest crop insurance benefit recipients on its list of ‘offenders.’
  • EWG fails to account for the fact that these ‘subsidies’ are premium discounts that are accounting transactions that take place within the USDA. There are no government subsidy checks to farmers. Unless indemnities are paid to a farmer, there is no outlay on that famer’s policy. Even when there is a loss, taxpayer cost is minimized by government underwriting gains on other policies, which is why CBO estimates for crop insurance have historically been so much higher than actual costs.

“Only telling part of the story is nothing new for EWG when it comes to agriculture. Its controversial database of direct and counter cyclical payments quietly combines multiple years, and in many cases multiple farmers, to distort the facts. Ironically, many of the ‘rich and famous’ subsidy recipients EWG has used in the past to make news headlines about farm program payments receive only conservation subsidy payments that EWG supports.

“Crop insurance is extremely popular with lawmakers from both sides of the aisle, as well as with farmers, their lenders, and nearly everyone with a stake in rural America. That is because crop insurance gives producers a fighting chance after disaster strikes or markets collapse. After recent reductions in farm policies, it is the single most important risk management tool remaining for U.S. farmers and ranchers.

“One must question the motive of EWG. Is it to leave America’s farmers and ranchers without the ability to survive and successfully manage agricultural disasters?”

 ###

 

Crop insurance helps state’s farmers see another spring

/in , /by

Mississippi and farming are so intertwined that it is hard to imagine one without the other. Agriculture is not only our state’s No. 1 industry; it employs roughly one-third of our population, contributing $5.8 billion to the state’s economy. There are approximately 42,000 farms in the state covering 11 million acres, producing rice, cotton, soybeans and other commodities, and there is not a county in our state where farming doesn’t play a major role.

Agriculture in this state, and throughout the U.S., has been one of the bright spots that is helping the U.S. turn the economic corner. But the productivity of the American farm and the consumer benefits of the American food supply did not just happen in a vacuum. And hands down, farmers across the country will tell you that their most important risk management tool is crop insurance.

As a crop insurance agent who was on more than a few farms the day after Hurricane Katrina struck, I can tell you first-hand that crop insurance was a financial lifeline for many farmers…

William Cole is a crop insurance agent from Batesville, Mississippi.

Crop insurance helps state’s farmers see another spring

/in , /by

Mississippi and farming are so intertwined that it is hard to imagine one without the other. Agriculture is not only our state’s No. 1 industry; it employs roughly one-third of our population, contributing $5.8 billion to the state’s economy. There are approximately 42,000 farms in the state covering 11 million acres, producing rice, cotton, soybeans and other commodities, and there is not a county in our state where farming doesn’t play a major role.

Agriculture in this state, and throughout the U.S., has been one of the bright spots that is helping the U.S. turn the economic corner. But the productivity of the American farm and the consumer benefits of the American food supply did not just happen in a vacuum. And hands down, farmers across the country will tell you that their most important risk management tool is crop insurance.

As a crop insurance agent who was on more than a few farms the day after Hurricane Katrina struck, I can tell you first-hand that crop insurance was a financial lifeline for many farmers…

William Cole is a crop insurance agent from Batesville, Mississippi.

NCIS Unveils Third in Video Series, Spotlight On Historic Midwest Flooding

/in , /by

(OVERLAND PARK, Kan.) — As the House Agriculture Committee wraps up its hearings and the Senate Farm Bill moves closer to the floor for debate, National Crop Insurance Services (NCIS) today released the third in an ongoing series of educational videos on crop insurance. This new video spotlights the Missouri river flooding of 2011 – a months-long flooding event – that brought historic damage and destruction to farms in several states.

The video, titled “2011 Midwest Case Study,” contains an overview of the record flooding by NCIS President Tom Zacharias, highlighting the extended duration of the flood and the destruction it inflicted to America’s breadbasket. Additionally, Ruth Gerdes, a farmer and crop insurance agent from Auburn, Nebraska, who had several clients whose farms were totally destroyed, gives some insight into the human side of the event and explains how farmers were able to bounce back and resume crop production the next year.

Ruth Gerdes described 2011 as a “year that I will never forget,” describing how she felt watching grain bins being crushed “like aluminum cans” as the waters overwhelmed the levees and crushed everything in their path. Gerdes explained that she had 39 clients who not only lost their crops, but their homes, their farmsteads and their grain bins. “One of the most exciting things for me was having those farmers on the coverage that allowed them to survive,” she said, noting that farmers who lost their crops in the flooding often had their indemnity payments in hand within two weeks.

Gerdes explained that what really amazed her was that after observing firsthand the record damage of 2011, to see farmers she knew return to the same fields today and see the tremendous effort those farmers had made to restore that land to the best shape possible. “Strong crop insurance is what has allowed those farmers to do all of the conservation needed in order for us to plant a crop in 2012,” she said.

2011 crop insurance indemnities have surpassed $10.7 billion and continue to rise. Zacharias noted that “testimonials like the ones in this video series provide undeniable evidence that crop insurance is a public-private partnership that not only helps farmers get back on their feet but also shoulders taxpayers from the burdens of natural disasters.”

 

###

 

House Subcommittee on General Farm Commodities and Risk Management Told ‘Outstanding Success Story’ of Crop Insurance

/in , /by

(WASHINGTON) — Crop insurance has become the powerful risk management tool that Congress designed it to be, garnering widespread support from all segments of agriculture, banking and most importantly, farmers, said Ruth Gerdes during her testimony today to the House Subcommittee on General Farm Commodities and Risk Management.

“The growth of Federal Crop Insurance is an outstanding success story,” said Gerdes, president of The Auburn Agency Crop Insurance Inc., farmer and crop insurance agent from Auburn, Nebraska. Gerdes explained that from the time the modern public/private partnership was forged in 1980, the program has grown “from an insignificant nuisance among farm programs covering less than 12 percent of the nation’s cropland to a robust program covering 83 percent of all cropland acres and providing bankable protection to America’s best, most dynamic and most productive farm families.”

Former USDA Chief Economist Keith Collins told the subcommittee that “the expanding role of crop insurance in the farm safety net signals several key features that farmers and policymakers find attractive.” Collins explained that these include the requirement that a producer has to consciously elect to manage risks, the availability of insurance plans that can be designed to fit individual farm risks, the idea that producers share in the program costs, and accountability that comes with cost sharing.

“In addition, the private sector delivers the program as part of a public/private partnership that involves risk sharing between the government and the private companies,” he said.

It was a good thing for taxpayers and famers that crop insurance was so effective, given the level of loss experienced by farmers last year. Tim Weber, president of Great American Insurance Company’s crop division, told the subcommittee that the fact that farmers are in their fields today is proof certain that crop insurance is the risk management tool that Congress envisioned.

“The 2011 crop year, one of the most destructive weather years in recent history, taught us that crop insurance is absolutely critical,” said Weber. “With large farm losses and record-high indemnity payments, farmers who might otherwise be out of business are back in the fields for the 2012 crop year,” he said.

 -###-

 

2011 Southwest Case Study

/in , , /by

Crop Insurance 101

/in , , , /by

Tom Zacharias, President of NCIS, explains the basics of crop insurance.

Strong Financial Underpinning A Key Requisite to Strong Crop Insurance Policy

/in , /by

Because of the magnitude of risk inherent in U.S. agriculture, combined with the large volume of commodities produced, companies that participate in the Federal crop insurance program are mandated by law to have ready access to large pools of liquid capital so they can meet their obligations if disaster strikes the farming sector. These rigorous financial requisites all but demand the involvement of reinsurers – large, financially fortified companies that provide insurance to insurance companies – to ensure that payments arrive to farmers for the policies they purchase in a timely fashion.

Never before in the history of the Federal Crop Insurance Program was the extent of the risk and financial exposure so evident as in 2011, which saw record indemnities in excess of $10.4 billion paid by private companies to farmers for their losses. This makes 2011 the most expensive year ever, topping the old record set in 2008 of $8.67 billion in indemnities by 20 percent. And with commodity prices rising due to tight markets and increased domestic and global demand, there will likely be an increased need for crop insurance, which protected over $113 billion worth of crops in 2011.

Although crop insurance has already been subjected to $12 billion in federal funding reductions, further reductions could raise questions of the federal commitment to the existence of a robust and effective crop insurance policy. “An unrecognized danger is that additional budget cuts will prove counterproductive in the long run, driving away the reinsurance companies that have long played a crucial role in the program’s growth by putting a substantial amount of their capital at risk,” says Jim Christianson, Managing Director, Guy Carpenter & Company, LLC.

Christianson notes that any pullback by reinsurers would have serious repercussions in the market and would, in the end, leave the federal government and the U.S. taxpayer to shoulder a greater portion of the cost of future catastrophes that hit the country’s agriculture sector.

As recently as the early 1990s, farmers purchasing crop insurance hovered around 30 percent. But the program has expanded dramatically since and in 2011, more than 1.1 million policies were written, covering 83 percent of eligible farmland and 128 crops in all 50 states. And the continued climb in commodity prices means an increase in the amount of risk that will be protected annually.

“Today, reinsurers from around the world find the U.S. crop insurance market to be a welcome addition to their portfolios,” said Christianson.

Reinsurers are keeping a watchful eye on Congress and lawmakers as they write the 2012 Farm Bill. ”Congress should be very cautious about considering the adoption of any other policies that would weaken the already over-extended crop insurance infrastructure or divert the much needed reinsurance investments elsewhere,” he added.

Convo 7

/in , /by

Farmers like me need to have access to affordable risk management tools to better mitigate the impact of significant crop losses and sharp price declines. This is why the upcoming farm bill is so important. It is not about providing income to the less than 2% of the American population. It is about insuring that the same 2% can continue to provide affordable food for the other 98% of Americans who rely on them.

Farmers Tell House Ag Committee: “Do No Harm” to Crop Insurance

/in , /by

Illinois farmer John Williams told the House Agriculture Committee that he firmly believed the number one goal of the 2012 Farm Bill should be to “do no harm to federal crop insurance,” during his testimony at the second of four field hearings held across the country throughout March and April to gather input in advance of writing the 2012 Farm Bill. The hearing was held on March 23, 2012 at Carl Sandburg College in Galesburg, Illinois.

Williams told the panel that crop insurance was not only an indispensible risk management tool, but an important component of his business marketing plan. “Crop insurance is a safety net in a time of disaster but it also is an integral part of my overall marketing strategy,” he said. “Because of revenue protection insurance, I can market aggressively and still be protected against market shifts.”

Members of the committee listened to testimony from two panels of Midwest producers of corn, rice, soybeans, wheat, sorghum, specialty crops and beef. Several of the witnesses underscored the importance of developing policy that appreciates and recognizes the risks involved with growing food and fiber. They stressed the need for an effective safety net and a choice of risk management tools so farmers can continue to produce a stable food supply and compete in the global marketplace.

Minnesota corn and soybean farmer John Mages told the committee, “first and foremost, please do no harm to federal crop insurance, which should be preserved, protected, and strengthened.” Mages, who is also president of the Minnesota Corn Growers Association, added, “we strongly oppose any further legislative or administrative cuts to federal crop insurance, and we oppose carrying conservation compliance or other rules applicable to the Farm Bill over to this critical risk management tool that we as producers help pay for.”

Fourth-generation southern Ohio farmer Craig Adams, told the committee that he was the only Wilmington College agriculture graduate of 1979 still engaged in full time agriculture “because of the 1980’s farm crises, poor yields,18 percent interest, and no functional crop insurance,” at the time. Adams told the committee that “crop insurance in its current form is the most effective answer to short crop years,” and that “any producer who desires an effective risk management tool can purchase crop insurance.”

House Agriculture Committee Chairman Frank Lucas (R-OK) underscored the importance of the field hearings and the role they will play in writing the 2012 Farm Bill. “The field hearings give Members of this Committee a chance to hear how programs are working for our agricultural producers. There’s no better way to accomplish this than to visit with folks in the countryside. It’s important to understand how we can write policy that works for all of agriculture,” he said.

During the committee’s third field hearing focusing on major farm issues in the southeast, held on Friday, March 30, 2012 at Arkansas State University’s Fowler Center, some of the same messages continued to be heard. Chairman Lucas said, “Now, I know that crop insurance—while a valuable tool for many producers—doesn’t work as well for producers down here. That’s why offering an array of programs is important and why we must work with the Risk Management Agency to improve crop insurance products for rice, peanuts and other crops that do not have higher buy-up levels.”

Georgia farmer Tim Burch, who grows cotton and peanuts, and serves on the Georgia Peanut Commission, urged Congress to pass a five-year farm bill and when doing so, to not undermine crop insurance. He commented that while he hopes Congress makes improvements to crop insurance so that its coverage can include other crops, he also urged Congress to “not harm crop insurance products.”

The last hearing will be held on Friday, April 20, at theMagouirk Conference Center in Dodge City, Kansas.

Thankfully, There Are Ways to Deal With Droughts Like This

/in , /by

As a cotton farmer in West Texas, last year I felt that I had about as much of a chance of seeing a good soaking rain as I did of running into the Tooth Fairy when I stopped by my local dentist.

Unfortunately for the area farmers, much of the cotton in this part of Texas that was planted never even sprouted, leaving farmers hoping for a miracle but expecting the worst.  Luckily, for the vast majority of them, they had purchased a risk management tool that would serve as a backstop when a disaster like this strikes, ensuring that they would survive to farm yet another day.  That tool was crop insurance.

Crop insurance is the risk management tool preferred by most farmers across the country – about 80 percent of eligible U.S. lands are covered by a policy – because it combines the efficiency of the private sector with the universality of the public sector.

One of the most popular efficiencies of this public/private partnership afforded to those who purchase crop insurance policies is its speed of delivery when crops fail or markets crash.   Typically, when a farmer files a claim, the crop insurance company that holds that policy will have the indemnity to the farmer within thirty days of the finalization of the paperwork.  This is real money coming to the farmer in real time, allowing him to plant again or plan to plant the next year.

Government programs, on the other hand, while very well intentioned, just aren’t realistic, at least not from a business point of view.  For example, the SURE program, which many farmers depended on, is just now – in early 2012 –  providing benefits to farmers who suffered losses in 2009.  That’s just too long to wait for assistance if it’s really going to be helpful or effective.

Crop insurance, on the other hand, gets to the growers quickly, allowing them to bounce back from loss and prepare for the next season.  Many of the cotton farmers in Texas who lost nearly everything last summer, for example, had their indemnity payments in hand before Labor Day.  That makes a world of difference for somebody who has suddenly lost their livelihood and won’t be able to farm again if help doesn’t arrive soon.

Another reason why crop insurance has become the most preferred tool in almost every farmer’s risk management tool belt is because the individualized nature of each policy.  Instead of a big government plan allotting a specified amount of help based on an average amount of loss, crop insurance policies are tailored to the farmer, his or her tolerance for risk, and the strengths and weaknesses of their farm.

Each spring, a crop insurance agent meets with the individual farmer and together, they come up with a plan to manage that specific farm’s risk.  It’s not the federal government’s plan; nor is it the state’s plan or the county’s plan.

It’s the farmer’s plan.   And who would know better than the individual farmer about what their piece of land can handle, what kinds of stress it can tolerate, and how much loss they can withstand as an individual.

While farmers are charged with raising the food, feed and fiber to feed and clothe our great nation, the nation realizes that we are merely individuals who can easily be stomped on by an angry and unforgiving Mother Nature.  That’s why it’s in the nation’s best interest – as well as the best interest of farmers – to ensure that moving forward, a robust and effective crop insurance policy is part of any Farm Bill discussion.

I didn’t see the Tooth Fairy the last time I went to the dentist, but thankfully I have seen some rain.  Some, but not enough.  And according to most experts, this drought is supposed to continue.  But regardless, for those of us who farm for a living, with the purchase of a crop insurance policy, we have purchased our chance to farm yet another year to feed, clothe and fuel the nation we love.

Shawn L. Holladay, chairman of the American Cotton Producers Farm Policy Task Force, lives in Lubbock, Texas.

This op-ed appeared in the Amarillo Globe-News on March 23, 2012.

Livestock Producer on Dependability

/in , , /by

Challenges of Life in Farming

/in , /by

Part of Long Term Marketing Plans

/in , /by

Crop Insurance Protects Farm and Family

/in , /by

Full-time Insurance Agent, Farmer and Mom

/in , /by

Farm Manager on Dealing with Disasters

/in , /by

Driving Agricultural Communities Nationwide

/in , /by

Convo 12

/in , /by

As Congress continues work on the next farm bill, our organizations agree that an affordable crop insurance program is our No. 1 priority.

Convo 12

/in , /by

As Congress continues work on the next farm bill, our organizations agree that an affordable crop insurance program is our No. 1 priority.

Credit Providers Urge Senators to Keep Crop Insurance “Strong and Vibrant”

/in , /by

The three major trade associations representing agriculture credit providers expressed their unified view regarding the need to maintain a strong and vibrant Federal crop insurance program as a vital risk management tool for farmers and ranchers, noting that agriculture is an inherently risky business, both in terms of weather and markets, as well as being capital intensive.

“Federal crop insurance provides producers with an effective tool to manage their risk, and it provides lenders with greater certainty that loans made to producers will be repaid,” said American Bankers Association, Independent Community Bankers of America and The Farm Credit Council in a March 14 letter to the Senate Committee on Agriculture, Nutrition and Forestry that was formally submitted for the record at the hearing.

“Federal crop insurance is an important component allowing lenders to take on the additional risk of financing many young and beginning producers who have less collateral and equity,” they note.

The Federal crop insurance program has evolved into a broad-based safety net for producers. It is instrumental in assuring that American agriculture remains solid, solvent and globally competitive. “Without the risk protection provided by Federal crop insurance, agricultural lenders would be forced to increase underwriting standards, increase costs to offset risk, and likely be forced to reduce credit availability to some producers for their production, equipment and land purchase needs,” they add.

The letter explains that financially strong crop insurance companies, reinsurance companies and agents are critical to delivering the benefits derived from a strong program. “The private-sector delivery system currently in place for Federal crop insurance is working efficiently and effectively, and we believe its overall framework should remain intact,” they say.

“Federal crop insurance program is working,” the letter continued. “It continues to provide significant risk management support to producers. Producers enjoy the ability to select revenue and yield protection that enables them to obtain adequate capital from lenders to continue to be successful in their operations.”

Agriculture Risk Happens, Even Where You Didn’t Expect It

/in , /by

As a former Chief Economist for USDA, I can attest to the fact that farming is indeed a very risky business. Recent news reports out of USDA’s Risk Management Agency underscore that point all too clearly: With some 15 percent of all crop insurance claims yet to be processed, crop insurance companies have paid out a record $9.1 billion (1*) so far in indemnity payments to America’s farmers for 2011 crop losses, surpassing the previous record set in 2008 by nearly half-a-billion dollars. (2*) And the 2011 figure will continue to climb.

But the economist in me wanted to dig into the data to better understand the damages reflected by the overall numbers. And there were a number of surprises. Most people might expect that – given the severity of the drought in the southern plains – farms with the greatest damages per dollar of premium for insurance would be there. But while farmers in those states did suffer greatly, it was actually the farmers in Vermont, at the other end of the country, who saw the highest loss ratio last year.

Remember when Hurricane Irene slammed into New England? The farmers up there won’t soon forget it.

The surprise of that finding underscores just how vulnerable farmers are and how the federal government needs to have a hand in production agriculture. Indeed, farmers in 2011 were fortunate that crop insurance was available for more than 125 different crops and was purchased for 80 percent of eligible acreage.

But despite the success of the crop insurance program as illustrated last year, there are many in Congress who will be seeking even deeper cuts to this primary risk management tool, despite the fact that program funding has already been reduced by $12 billion since 2008. Congress and the Administration need to remember that farm income stabilization through risk management programs like crop insurance is critical for ensuring continuous and stable growth in overall supplies of food, feed and, increasingly, fuel.

In the not too distant past, when Mother Nature struck America’s agriculture sector, it often resulted in ad hoc disaster packages being born in the halls of Congress to address the damage and help the farming sector recover. While those packages were greatly appreciated by farmers, Congress decided to push to make crop insurance more universally available and affordable, giving farmers the tools they need to manage their own risks while taking some of the burden of the disaster assistance off of the backs of the public and putting it onto the laps of the private sector.

Today’s crop insurance policy makes more sense and works better because it puts the onus of managing risk on producers and farmers, not the government. The private sector crop insurance agent works directly with the producer to help put together an insurance plan that best meets their specific needs and is tailored to their comfort with risk. The outcome is a plan that protects their physical and financial assets in the face of natural hazards and market risks.

Another reason why crop insurance has become the most popular risk management tool in agriculture is that farmers and insurance agents alike recognize the wisdom in making farmers bear some of the risk and costs of the program. In order for a risk management program to work efficiently, it cannot completely remove risk from the equation—risk bearing ensures program accountability and discipline. Crop insurance helps ensure that while it’s in everyone’s best interest when farmers succeed, it’s also in everyone’s best interest to help farmers regain their footing when Mother Nature throws a tantrum.

There are other surprises that can be found when you drill into the 2011 claims data. For example, wouldn’t you expect that the ongoing drought in the southern plains would have meant that cotton and wheat were the most heavily damaged crops last year? But the hurricane that drowned out New England first passed over the Carolinas and severely damaged the flue cured tobacco crop, which, combined with several other weather issues in that area, resulted in the flue cured tobacco crop having the highest loss ratio last year of any crop.

Of course, drought did heavily damage much of America’s cotton and wheat, as $3.7 billion (3) in indemnities have been paid for those crops so far, but with crop insurance in place, farmers are able to bounce back. In fact, wheat growers in Kansas, Oklahoma and Texas sowed 1.7 million more acres this fall than they did last year. Hopefully, the rains will come and we will all see a bounty. But if they don’t, the farmers have something in place to keep the bottom from falling out.

If you were surprised by Vermont, I can assure you that so were those farmers. That simply underscores how unpredictable Mother Nature can be and how almost anywhere in our country, crop insurance is there to help those who purchase it bounce back from these things.

Keith J. Collins is a former USDA Chief Economist who received his Ph.D. in economics and statistics at North Carolina State University in 1977.

This op-ed appeared in the Raleigh News Observer on February 8, 2012.
Since this op-ed ran, these numbers have been updated. The new numbers are:
(1) Indemnities are currently $10.8 billion
(2) Current indemnities have topped the previous record by more than $2.2 billion
(3) To date, indemnities paid for damages to cotton and wheat are $4.2 billion.

Crop Insurance Leader Urges Congress to Do No Harm

/in , /by


FOR IMMEDIATE RELEASE
March 15, 2012

(WASHINGTON) — “How crop insurance emerges from the 2012 Farm Bill process will hold major ramifications for this risk management program and for America’s farmers and ranchers who have come to rely on it,” Steve Rutledge today told the Senate Committee on Agriculture, Nutrition and Forestry.

Rutledge, who spoke on behalf of crop insurance companies, underscored the public- private partnership that is unique to crop insurance and how that relationship lowers risk for taxpayers. The chairman of Farmers Mutual Hail Insurance Company of Iowa also asked lawmakers to do no harm to crop insurance with additional funding reductions or regulatory burdens in the ongoing legislative debate.

Today’s testimony comes on the heels of record indemnities being paid out by crop insurers to farmers and ranchers recouping from the worst weather year in history. “The fact that the United States is planting crops just months after such devastation in 2011 should not be taken for granted,” he testified, noting the importance of a vibrant agricultural sector to the larger U.S. economy.

“I can’t tell you how many times I have seen the relief and gratitude on a farmer’s face when they realize that because of crop insurance, they will be back in the fields in the spring and life will go on uninterrupted,” explained Rutledge, who began his career as an insurance adjuster.

But this success could be upended if the crop insurance infrastructure is strained, Rutledge said. He explained that in the midst of the growth of crop insurance and the rising crop prices—both of which increase the cost of the policy and company risk—cropinsurance has lost about $12 billion in funding since 2008, making it one of the only sectors to sacrifice for deficit reduction.

“This reduction is astounding when one considers that crop insurance represented only 8 percent of farm bill spending and a meager one-tenth of one percent of overall government outlays,” he said.

Rutledge’s testimony concluded: “We firmly believe that crop insurance should remain the core risk management tool, and we are committed to the public-private partnership of program delivery, which directly supports more than 20,000 private sector jobs across the country. The private sector should continue to provide and deliver crop insurance options, share in the risk of loss caused by changing markets and natural disasters, and adjust losses for insurable crops. We believe the private sector, not the government, is the best way to provide the individual risk management information and tools that are indispensible for producers today. We understand that is the way farmers and ranchers want the program to operate, and trust in our congressional leaders to stay the course.”

Crop insurance companies wrote more than $11.9 billion in federal multiple peril crop insurance premiums last year, covering nearly 265 million acres of farmland, protecting more than 80 percent of eligible crops, with total potential liability exceeding $113 billion.

###

After Successful 2011, What’s Next for Crop Insurance?

/in , /by


FOR IMMEDIATE RELEASE
February 13, 2012

(SCOTTSDALE, Ariz.) — With a record $9.7 billion in indemnities already paid out on 2011 damages, and farmers preparing to plant another impressive crop just months after one of the worst weather years in U.S. history, the current crop insurance system is earning high praise from agricultural leaders and lawmakers alike.

But in a new peer-reviewed analysis that appeared in January’s Choices magazine, former USDA Chief Economist Keith Collins and Harun Bulut, National Crop Insurance Services (NCIS) senior economist, explained that many proposals to alter crop insurance policy in the 2012 Farm Bill could hold serious ramifications for farmers and taxpayers, and could weaken the very system that proved so crucial last year.

Among the shortfalls they highlighted: Displacing private-sector crop insurance with duplicative government-run programs; saddling farmers and taxpayers with greater risk exposure; increasing program complexity; increasing taxpayer cost; and reducing farmer participation and coverage levels.

“With deficit reduction in prospect for years to come and insurance so fundamental to risk management in all economic areas, the long-term most sustainable safety net program for farmers may be enhanced crop insurance,” the authors wrote.

Collins, who attended an annual convention sponsored by NCIS, urged people to consider the past and present before writing the future.

“Let’s not lose sight of the fact that the current system took three decades to build and is working as designed,” he said at the conference. “The public-private partnership was created to reduce taxpayer risk by encouraging farmers to purchase insurance from professionals skilled in delivering private-sector payments quickly.”

Since modern-day crop insurance was first created in 1980, participation and coverage levels have grown dramatically. Nearly 265 million acres were insured by $114 billion worth of liability coverage in 2011, up from 45 million acres and $6 billion in coverage in 1981.

“My advice moving forward: Consider all consequences before restructuring crop insurance. The unintended consequences could harm three decades of success and upend some of the essential strengths that make the current system so great for farmers and taxpayers,” Collins concluded at the meeting.

###

Vital Role of Crop Insurance Highlighted at CIRB National Meeting

/in , /by

Speakers including the Senate Agriculture Committee Chairwoman and Ranking Member, the Risk Management Agency Administrator, and several industry leaders underscored the vital role of crop insurance as the cornerstone of federal farm policy during the 48th annual meeting of the Crop Insurance and Reinsurance Bureau (CIRB). The two-day meeting was held in Scottsdale, Arizona, and featured the following comments:

  • “We have heard loud and clear that crop insurance is one of the most critical risk management tools, embraced by farmers and producers in all parts of the country. We will continue working to strengthen crop insurance to make it available to more producers and to make sure farmers have the tools they need to effectively manage their risk.” –Senate Committee on Agriculture, Nutrition and Forestry Chairwoman Debbie Stabenow.
  • “This program has traveled leaps and bounds from where it first started, and it has now become the most important risk management tool in most producers’ toolboxes. Like CIRB, my goal is to maintain a robust risk management program that is delivered by the private sector, which is critical for providing jobs in rural America and excellent service to producers.” — Senate Committee on Agriculture, Nutrition and Forestry Ranking Member Pat Roberts.
  • “Crop insurance is a vital part of the farm safety net and has become an integral part of business life for a large majority of American farmers and ranchers. In years like this one, the value of this critical safety net is made clear.” –USDA’s Risk Management Agency Administrator William Murphy.
  • “Crop insurance literally saved my operation this year – I seldom have claims of any size, but the Mississippi River flood wiped out a lot of my crop. It’s a critical program that I have faith in, and the private sector delivery system is second to none.” — John McKee, Owner and General Manager, Westside Farms, McKee Planting Co.
  • “Support for crop insurance is at an all-time high – among policymakers and farmers. Without a doubt, crop insurance has a very bright future.” — Jim Wiesemeyer, Senior Vice President, Informa Economics.
  • “While policy development and positions among commodity groups are fluid, there is one point of agreement: crop insurance is a risk management tool that farmers cannot live without.” — Mary Kay Thatcher, Senior Director, Congressional Relations, American Farm Bureau Federation.
  • “In the crop insurance community, weather is at the forefront of everything that you do. Looking ahead at 2012 and what we might expect, it’s possible that volatility is the new standard, and natural disasters are just going to become one of the many expected costs of doing business.” — Drew Lerner, Senior Agricultural Meteorologist, Founder and President, World Weather, Inc.
  • “As a reinsurance intermediary, I can testify that commercial reinsurance is a critical component of the crop insurance program. While the Federal Crop Insurance Corporation provides some level of reinsurance support, the role of the commercial reinsurance community is essential.” — John Reinman, Guy Carpenter & Co., CIRB Board Member.
  • “Government clearly has a role to play in crop insurance by making valuable private sector-backed insurance policies available and affordable for all growers in the United States. Without this public-private partnership, farmers would be unable to meet the challenge should Mother Nature indeed give us another weather year like we just experienced.” — Sam Scheef, chairman, CIRB.