Diane McDonald has spent most of her life farming in North Dakota and she’s loved every minute of it. But Diane knows that farming can be a very risky business.

“There are many steps that farmers can take to manage risk, like growing a wide variety of crops, rotating crops and growing cover crops to prevent erosion, and we do all of that,” she said. “But let’s face it, when we get an early August freeze, or a spring flood, or a drought, just about all of the best farming practices in the world will fail to protect us,” she added.

“And that is why I, like most farmers across the state, always purchase crop insurance.”

Diane farms about 1,700 acres with her husband in North Dakota’s Red River Valley. She’s a realist when it comes to business, and knows that the days of the government bailing out farmers after a big natural disaster are over.

“With the passage of the new Farm Bill, farmers must realize that the government is no longer going to come along with an ad hoc disaster bill and bail us out,” she said. “The new Farm Bill is something we should all applaud, since it was hard fought and will provide some degree of certainty to America’s farmers,” she added.

When she’s not farming, Diane is the National Media Chairperson for Women Involved in Farm Economics (WIFE). In that position, she hears from women farmers from across the country that have all praised crop insurance.

“Last spring, we had 18 inches of rain in 21 days, and half of our crops were in the ground already,” she noted. And when the rain finally finished, farmers couldn’t get back in their fields.

“We were facing steep losses, since rent is due and other costs had already been incurred, like fertilizer already on the fields,” she said. “The crop insurance indemnity check for prevented planting helped cover the rent on the land and the lost fertilizer,” she said. “We didn’t make a dime but it covered a lot of the cost.”

McDonald says that they always purchase crop insurance, which is not a small expenditure, costing somewhere north of $40,000 a year. And they seldom collect an indemnity.

“North Dakota has had its share of natural disasters during my tenure, from August frosts that killed entire corn crops to floods and droughts,” she said. “You name it.”

“All it takes is one big hail event and the farm is lost,” she noted. “And that, my friend, is why we always buy crop insurance.”

Many farmers in the United States have been wedded to the soil for several generations. Jon Whatley is no different.

He is a fourth-generation farmer in San Patricio County, outside Odem, Texas, and has been tilling the land since 1993. Whatley plants mainly cotton, corn and sorghum in the coastal bend of Texas on more than 5,000 acres and about 100 head of cows.

Odem is a town founded slightly more than 100 years ago at the junction of two railroads and was named it after the county sheriff, David Odem. The area used to grow vegetables, but the current top crops of cotton, corn and sorghum became dominant by the 1980s.

Whatley believes strongly that a coherent Farm Bill is essential for the American farming sector and that people sometimes do not understand that farmers are in a line of work where a lot of things can go wrong – from withering drought to hurricanes wrecking crops through floods and high wind.

“Farming is a very risky business with many aspects that are out of the control of producers,” he said. “A Farm Bill should help provide some stability for the producer and the consumer. I don’t believe a Farm Bill should create an absence of risk. A bill that helps bring a sense of safety for the producer and the agriculture community is vital for long-term health for ag and ag businesses. Food security and abundance is a result of sound farm policy,” Whatley explained.

One of the vital components of the Farm Bill is a crop insurance program where farmers purchase policies to protect them from catastrophic loss.

“It is necessary and is required by my lender,” said Whatley.

Since becoming a farmer in 1993, Whatley has relied on crop insurance for the bad times, filing in six different years.

That would include 2011 when Texas experienced the worst drought in a century hit Texas and continued into 2013. The prolonged drought caused extensive damage to Texas’ cotton crop, of which Texas is the biggest producer in the U.S.

Whatley feels that some Americans have “distorted the facts” on how farmers are supported and how they operate.

“We as producers have a very complicated business model to explain in short talking points. We need to find ways to easily explain our value to the general public. I believe Americans would support what ag does if they could understand the industry and the impact it has on the economy and their lives,” he said.

Whatley said it is necessary to look at what the farming community brings to the table when it comes to its contribution to American life. “The value of farming on American life can be measured in many ways,” he said. “We cannot all live in metropolitan areas.”

Farming in rural areas provides the backbone for the economy in those areas and is the foundation for local governments “such as police, roads and the education system to name a few,” Whatley explained.

There is also the big picture responsibility that American farmers have for feeding not only the country but in serving as a global granary of last resort if there are shortages elsewhere. Bottom line, the Farm Bill and provisions like crop insurance is a guarantor of the stability of food supplies and the rural economy in the United States.

“Without a policy that stabilizes farms and commodity markets, the volatility would be devastating to the consumer,” Whatley said, adding the absence of the bill would lend itself “to unsafe and unreliable food delivery.”

Late in the 19th century, the Great Western Cattle Trail used to run from Texas to Dodge City, Kansas. The route passed directly over a creek that eventually became the center of Elk City, Oklahoma. This is a region of dry land farms and ranches. Two years ago, it was the epicenter of the worst drought in a century to strike the region.

Danny Davis farms around 1,700 acres of cotton near Elk City and about 200 to 400 acres of rye for grain. He also runs a small commercial cowherd. He has been farming for more than 41 years.

For him, crop insurance has become an essential tool in surviving the wild swings in weather on the farm. “Crop insurance, in my opinion, is the only meaningful risk management tool available to us now,” said Davis.

Davis has purchased crop insurance every year since the early 1990s.

The first time he used it was during an August hailstorm in 1996, when “we lost all but about 200 acres of our cotton,” he said. “There is no doubt in my mind that hail storm would have been the end of our farming operation had it not been for crop insurance.”

“This was a very pivotal time in the history of our farm, we were still trying to recover from the three-year drought of 1980 to 1982, a devastating early freeze in ’87, and the ever tighter operating margins that surfaced in the mid-to late 80s, and has become the norm since,” Davis explained.

Texas-Oklahoma farmers, like farmers elsewhere, face many weather-related challenges. Planting time in the spring can be delayed by a lack of moisture, hail and windstorms can uproot the plants, and drought is an all too regular hazard.

Davis explained that in 2011, the dry spell reached into the record books. The worst in nearly a century hit the area, and it did not let up too much in 2012. “The current long-term drought we are in has hit us very hard the last two years, and crop insurance has come through not only for our farm, but our lenders, suppliers and our service providers.”

He said there is sometimes a giant misconception by some urbanites that farmers are on “easy street” because they can just plant and collect crop insurance.

“[There is] a near total disconnect with society in general from the land and this nostalgic idea of Granddad’s 40-acre farm, gathering eggs every morning, and green grass all year, and he doesn’t have a care in the world because he’s getting farm subsidies, has crop insurance and life is good,” Davis said.

For Davis, the idea of making sure crop insurance stays in the Farm Bill and is a vital part of farm policy is basic common sense. He strongly feels the idea of being “near self-sufficient” as possible is a key component in the country’s future.

One time, he was getting a haircut and a stranger “was going on and on about how good the farmers had it last year during the drought due to crop insurance settlements. He was one of those guys that knew it all and wouldn’t shut up.”

“Finally, I turned to him and asked what his house was worth and if it blew away or burned to the ground what he would expect from his insurance company. Bragging, he said around $250,000 and he had a full replacement policy so it didn’t really matter what it was insured for, because the insurance company would rebuild his house and rent him a place to live while his was being rebuilt.

“I then asked him what his premium was, and he said around $1,800 a year. Doing a little math in my head I said (that’s) less than 1 percent a year, and he agreed. Davis then asked him if he would be happy with insurance that made him eat the first 15 to 35 percent and cost him 6 to 14 percent of the total value of his house, and if the back bedroom was all that was lost and he didn’t receive a settlement if he’d be happy? ‘Why hell no’, he said.”

Davis showed the gentleman his insurance schedule and explained the math he was facing on his farm should disaster strike. He also explained that, in general, he pays the insurance company an entire crop’s worth of income every 7 to 8 years in premiums.

“The first words out of his mouth were ‘you’re crazy’,” Davis declared.

“If you’re not a risk taker with an incredibly optimistic view of life and a deep belief in your own potential as a businessman, then you better not think about wanting to become a farmer,” says Russ Mauch, past president of the American Sugarbeet Growers Association and a sugarbeet farmer .

Mauch is a second-generation farmer who grew up on a farm in Mooreton, North Dakota, with his five sisters and two brothers. He has fond memories of his early life on the farm, where, with his dad and two brothers they ran a fed cattle operation.

“Growing up on a family farm was a great experience that instilled a great deal of self confidence in me as well as a positive view of my potential,” he says.

1973, was a watershed year in his life as they switched their farm over to sugarbeets and joined the newly formed farmer cooperative. “That kicked us out of the livestock business and put us into the full time sugarbeet business,” he says with a smile. Mauch says that when you become a sugarbeet farmer, there just isn’t enough time in the day for a cattle operation on the side.

“Sugarbeets require a heck of a lot of extra time and effort and we just didn’t have enough time to devote to both,” he said. He explained that a sugarbeet operation is a year-round venture, which entails planting in the early spring, tending to the fields during the growing season, and harvesting just prior to the first hard freeze. After the beets are harvested, most of them are placed in huge piles and allowed to freeze solid for the duration of the winter.

If luck is on your side, the winter will remain cold and the beets will stay frozen. They are removed from the piles during the winter and shipped to the processing plants, where they are refined into sugar. By the time this process is over, it’s nearly spring and time to start plating again.

Asked about his view as a long time farmer now, and the lack of knowledge that most folks have about farming, Mauch answered that it’s no great mystery why the urban public has a complete lack of understanding of the life and challenges of a farmer. “It can be summed up in two words,” he said.

“Magnitude and risk.”

Mauch notes that when the urban public hears about soaring grain prices, or the amount of money an acre of farmland might be worth, or news reports about the gross revenue that a given farmer expects after a successful harvest, “they automatically think that, given the numbers they’re hearing, we’re all filthy rich,” he says. “But that’s very often far from the truth.”

That’s the issue of “magnitude.” “Most people are not accustomed to hearing about expenses and bills in the size that farmers see on a daily basis,” he said.

For example, Mauch explains that his fertilizer bill for this year was $800,000; his crop insurance coverage was close to $200,000 and his diesel fuel will be over $400,000 for the year. “Those are numbers that, frankly, are incomprehensible to many people,” he says.

“My wife calls it ‘funny money,’ since it just doesn’t seem real,” he says, noting that it seems more like “Monopoly money” than the real thing. “Who ever has to deal with utility bills like that?” he asked.

The other issue is risk.

“What the public does not understand is all of the risks we take that are out of our hands,” he said. These include wind, torrential rains and heavy flooding, tornadoes, insects, wildlife, interest rates, crop prices that are very volatile, corn getting moldy and sugarbeet piles that rot in the fields from a sudden warm-up. All of these, he explains, are out of a farmer’s control, but at least they’re local. Then there are the risks that are out of control and global, like trade, prices and interest rates.

“Most people face maybe one or two of these risks at their current jobs,” he says. “Farmers face all of them, year in and year out.” And that, says Mauch, is why “crop insurance up here for the farmers is essential to survive.”

Mauch explains that for his farm, for example, they had the worst years on record in in 2005, 2007, 2009, and 2011. “They were the worst farming years in my whole life in the business,” he explained. “But 2004, 2006, 2008 and 2010 were our best years,” he says. “It’s this spiking up and down, which we have no control over, which is why crop insurance is so important,” he says. “Try planning for something like that!”

He says that crop insurance shields the farmer from adversity; it protects the viability of the business to recover thus ensuring the nation’s food supply. “Crop insurance does protect the farmer, but what it really does is give the farmer the ability to repay loans and it also backs up the bankers loans for collateral,” he says. “And frankly, most of them require it now. “

Crop insurance has also been an important tool for farmers who are looking to take advantage of all of the various marketing possibilities out there, since it allows them to forward contract for their crops and ensures that if those crops fail, they have capital to pay off their contracts.

“One of the main reason crop insurance became important was that it would enable you to pay back your operating lines of credit since we all borrow so much money,” he said, and added that the difference between crop insurance then and now was like “night and day.”

“Most farmers now are taking it out because it’s not only working very well, the coverage is sufficient to save the farm if you have a bad year,” he added. Mauch also noted that today’s successful farmers have become much more adept businessmen and understand the importance of marketing their crops to hedge their risks. “The ability of farmers to buy to up 75 percent or more helps them forward contract,” he said.

“And with the revenue products, a farmer who has forward contracted a crop will know that his bases are covered even if his crops are wiped out and the prices of commodities he holds contracts for shoot through the roof,” he said. “The fact that the buy up increases with the crop prices allows you to keep your bases covered,” an option that allows many farmers to sleep at night.

Mauch says that while farming is a business, it is a unique undertaking, because of the scale and risk involved, as well as what is at stake in the long run, which is the security, availability and affordability of a healthy, wholesome food supply. These factors necessitate some degree of continued federal involvement in agriculture.

“The government’s main role is to provide a floor for farmers should a disaster occur, which it does each and every year, someplace in the U.S.,” he said.

For Trent Patterson, 2012 was a very dry year.

Drought parched much of Tennessee, where he farms about 4,500 acres planted to cotton, corn, soybeans and wheat. The drought forced farmers like Patterson to switch crops from the flagship cotton to soybeans, which requires less agricultural inputs. With crop insurance as part of most farmers’ backup plans, many of them were able to get by.

“The drought of 2012 caused hardship from planting to harvest,” said Patterson of Lake County in northwest Tennessee. “We planted, replanted, spot planted and in some fields abandoned the cotton crop and planted beans only to plant and replant those and get half a stand.”

Corn yields took the biggest hit during the year-long drought. “We were unable to fill our contracts,” he said.

Tennessee is a major producer of cattle and is a key grower of crops like cotton and soybeans. The farm sector alone is responsible for nearly $3 billion in farm gate receipts, according to the Tennessee Department of Agriculture. About half of the state’s land area, or some 11 million acres, is comprised of farms. The western portion where Patterson farms is prime land fed by the flood plains of the Mississippi River. This area is largely devoted to soybeans, wheat, corn, cotton and sorghum.

Crop insurance has been a much-needed lifeline for Patterson and other farmers like him. Crop insurance has allowed them to survive drought, floods and other disasters that form part of the natural landscape farmers must contend with on a yearly basis in much of the U.S.

For farmers in Texas, 2011 was the worst drought in a century. For farmers in Louisiana, the program was critical in 2005 when they endured the double-barreled disaster brought on by hurricanes Katrina and Rita. For farmers in Tennessee and in much of the Midwest, the drought of 2012 was the worst in 25 years. And while crop insurance only covers a percentage of the loss in most cases, the money provides the much-needed infusion to help farmers survive until the next season.

Said Patterson, “Without crop insurance as a risk management tool, a disaster as we have had in 2012 is not survivable to many farming operations.”

Each year is a “make or break situation” for most farms, he explained. For his part, he has filed the paperwork to receive insurance claims for cotton crops that had to be switched to beans. The insurance adjuster has visited his farmlands and reviewed his paperwork, which includes a history of his yield production.

Patterson says that crop insurance is a key component of the farm safety net and a major feature in ongoing Farm Bill discussions. If the country’s goal is to keep U.S. food and fiber industries viable, then the farm bill must include crop insurance to help American farmers manage their risks. These comments reflect the sentiment of many farmers and lawmakers from across the country who have strenuously argued that a viable crop insurance program is essential for the future of U.S. farming.

Patterson says that crop insurance is either a subsidy or an investment, but either way, it’s especially critical to a chancy, “risky business” like farming. He underscored the “wisdom” of protecting the American farmer and the industry.

“I don’t want to have to go hungry and naked because I didn’t help my neighbor with his garden if I was eating out of it,” he said. “(So) is it a subsidy or an investment?”

 

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.