Crop Insurance Primer Available Online

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The 2014 Farm Bill was clearly a turning point in federal policy towards agriculture, pivoting away from the traditional support mechanism paradigm of the past and into a risk management model that features crop insurance as farmers’ primary—or only—risk management tool.  But with that new emphasis comes an increased need for basic information about crop insurance, what it is, how it works and why it has become the risk management tool of choice for America’s farmers.

These basics of crop insurance are available in an NCIS video titled “Crop Insurance 101.” The video is very helpful for Americans who have very little to do with agriculture, or for those who now find themselves needing to know more about this important risk management tool.

The video explains the public-private partnership of the crop insurance, the way crop insurance has removed some of the risk burden from taxpayers, and the role adjusters, and the companies they work for, play in the crop insurance program.  It also explains that in order to be protected by crop insurance, farmers must first purchase it with their own money.   Already this year, farmers have spent nearly $4 billion purchasing crop insurance.

USDA Announces Progress In Implementing Crop Insurance Provisions

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The U.S. Department of Agriculture (USDA) announced recently that it continues to make progress in implementing provisions of the 2014 Farm Bill that will strengthen and expand insurance coverage options for farmers and ranchers. The new Supplemental Coverage Option (SCO), available through the federal crop insurance program and set to begin with the 2015 crop year, is designed to help protect producers from yield and market volatility.

USDA Secretary Tom Vilsack pointed out that this nation’s producers work hard to produce a sufficient amount of safe and nutritious food for the country.   “It’s critical that they have crop insurance options to effectively manage risks and ensure that they do not lose everything due to events beyond their control,” he said.   Vilsack added that USDA has made it a priority to ensure the Supplemental Coverage Option was available to help farmers in this upcoming crop year.

The 2014 Farm Bill strengthens and expands crop insurance by providing more risk management options for farmers and ranchers and by making crop insurance more affordable for beginning farmers. SCO, which is administered by the Risk Management Agency (RMA), further strengthens the farm safety net.

SCO will be available for corn, cotton, grain sorghum, rice, soybeans, spring barley, spring wheat, and winter wheat in selected counties for the 2015 crop year. Producers should contact their crop insurance agents to discuss eligibility in time to sign up for winter wheat coverage. RMA plans to make SCO more widely available by adding more counties and crops. Information on SCO for 2015 winter and spring wheat is available on the RMA website.

SCO is a county-level policy endorsement that is in addition to an underlying crop insurance policy, and covers a portion of losses not covered by the same crop’s underlying policy. Producers who elect to participate in Agricultural Risk Coverage (ARC), which is offered by the Farm Service Agency (FSA), are not eligible for SCO for the crop and farm participating in ARC.

Vilsack noted today’s announcement was made possible by the 2014 Farm Bill. The Farm Bill builds on historic economic gains in rural America over the past five years, while achieving meaningful reform and billions of dollars in savings for taxpayers. For more information, visit www.usda.gov/farmbill.

Farm Bill Proves Crop Insurance Popularity At All-Time High, Says Industry Leader

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Weber,Tim FinalPassage of the 2014 Farm Bill, which cemented crop insurance as the cornerstone of farm policy, proved that crop insurance’s popularity among farmers has reached an all-time high, said Tim Weber, co-chairman of the American Association of Crop Insurers and National Crop Insurance Services.

“If I had to sum up the story of the crop insurance industry in one simple statement, I think it would have to be ‘We’ve made a lot progress but our best years remain ahead of us,’” Weber said today during his opening remarks at the annual conference sponsored by National Crop Insurance Services and the American Association of Crop Insurers in February.

Since its inception in 1938, crop insurance has steadily evolved and today protects 90 percent of planted cropland in America. The industry won widespread praise in agricultural circles and on Capitol Hill for helping rural America quickly rebound after the devastating droughts of 2012.

“There can be no question that when it comes to managing the risks posed by Mother Nature or volatile world markets, federal crop insurance has no equal,” he said, adding “it has reached its pinnacle, all while overall federal spending on farm programs has trended down.”

Weber explained that in order to continue to build on past successes, the industry should rely on the same three keys that helped its rise to prominence: Affordability, availability and viability.

In order for crop insurance to remain viable as farmers’ primary risk management tool, the crop insurance infrastructure must remain financially strong, he said. Additionally, customer service, program integrity, and widespread participation will be paramount. And unless crop insurance remains affordable and available to all, Weber believes the entire system could collapse.

Crop insurers faced attempts to reduce program participation during the Farm Bill, but proposals to cap crop insurance benefits and force some farmers to pay higher premiums failed.

“We applaud our congressional leaders for overwhelmingly passing a Farm Bill that strengthens, not weakens, our commitment to crop insurance even in the face of federal spending pressure,” Weber concluded. “I truly believe that 10 years down the road, when we look back at the 2014 Farm Bill, it will be elevated to one of the major legislative initiatives that established landmark developments for crop insurance and production agriculture.”

Senate Passes Five-Year Farm Bill, Begins New Era for U.S. Farm Policy

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The Senate overwhelmingly passed the 2013 Farm Bill with a very strong of vote of 66 to 27, with 93 senators voting. The passage of the bill represents an historic pivot in U.S. farm policy, away from the era of direct payments to large numbers of commodity farmers to crop insurance, which must be individually purchased by each farmer and offers financial support – in the form of a crop insurance indemnity payment – only when they incur a verifiable loss, including weather damages or commodity price fluctuations.

The issue is now in the House of Representatives where the debate continues. Both bills pare overall Farm Bill spending, with the Senate version projecting $24 billion in savings over ten years and the House version projecting $40 billion in savings over the same period of time. Eighty percent of Farm Bill expenditures will go to food assistance programs and roughly 20 percent goes to farm programs, including conservation, renewable energy, commodity programs and crop insurance.

The dramatic shift in farm policy was best encapsulated by a quote made by Senate Agriculture Committee Chairman Debbie Stabenow (D-MI) during the debate. “Crop insurance is insurance. The farmer gets a bill, not a check,” she said. The Senate bill would cut $24 billion from farm spending over 10 years, and includes a provision tying the ability of a farmer to purchase crop insurance to conservation compliance requirements.

Prior to the bill’s passage, USDA Acting Deputy Secretary Michael Scuse pointed out that the performance of crop insurance during last year’s drought was clear proof of the program’s value. “We provided insurance for about $116 billion worth of crops last year,” he said. Scuse added, “We’ve paid about $17 billion in indemnities. I think that shows this program worked and it worked as it was intended. We got the money out to the producers and it’s going to help an awful lot of people stay in business that, had we not had a really good crop insurance, may not have been farming this year.”

Despite strong opposition from Chairman Stabenow, the bill contains an amendment sponsored by Senators Dick Durbin, (D-Il) and Tom Coburn (R-OK) which would reduce the premium discount for farmers in higher income brackets or those from larger or more successful farms. Chairman Stabenow said the amendment would raise premium costs by 40 percent for the affected farmers and would reduce the amount of acreage that must comply with federal conservation standards.

Neither the conservation compliance measure nor the premium subsidy limit is in the bill passed by the House Agriculture Committee.

AFBF’s Thatcher Discusses Crop Insurance as a Key Part of Farm Safety Net

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There are going to be more challenges to the writing of the 2012 Farm Bill than agriculture has ever seen, said the American Farm Bureau Federation Senior Director of Congressional Relations Mary Kay Thatcher, during a recent interview with the National Association of Farm Broadcasting that ran nationally.

“We don’t have as much money to write the Farm Bill as we did in 2008,” noted Thatcher, who added that another challenge is the large number of urban members of Congress who believe that farmers are getting rich off of strong crop prices this year.

Thatcher explained that good prices come and go and inclement weather can strike at any time, which is why it is important to remember that Farm Bills cover a number of years and that crop insurance is a very important component of the legislation. “It’s just a real good risk management tool. We’re able to have famers pay part of the premium and government pay part of the premium to make it affordable,” she explained.

Thatcher pointed out that crop insurance ensures that if we have tough weather like “wildfires in Texas and flooding in the Midwest, that farmers are able to indeed get enough assistance that they can farm for another year.”

Thatcher urged all areas of agriculture to come together during the upcoming debate, using all of our voices to push for as much political influence as possible. “We don’t just compete with the farmers down the road, we compete with the farmers of the world,” she added.

2012 Farm Bill Should Hold The Thin Green Line

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Minnesota has more at stake than most in 2012 farm bill.

Rural America has been abuzz lately about a term coined by retired Army Gen. Wesley Clark to describe the challenge of feeding more and more Americans with fewer and fewer farmers. His phrase, “hold the thin green line,” sums up what many of us have spent a lifetime trying to convey.

“If we cannot feed, fuel and clothe ourselves, then we cannot defend ourselves. If this one bright spot in our economy is choked off, then recession recovery will certainly stall,” Clark said.

Here in Minnesota, we have more at stake than most when it comes to holding the thin green line.

Almost half of the state’s land is devoted to food production, one-quarter of our residents are employed by agriculture, and we are national leaders in producing staple crops such as corn, wheat and sugar. So how does Minnesota build on this success story? It all starts in the halls of Congress with debate of the 2012 farm bill, and that debate is about to get under way.

Some lawmakers are already taking aim at agriculture. Some are pointing to federal budget deficits as an excuse to cut gaping holes in the farm safety net and leave Minnesota’s economy vulnerable to the whims of Mother Nature and the roller-coaster rides of current commodity markets.

Such attempts are as foolish as they are disingenuous, especially when you consider the current state of farm budgets. The sugar policy that underpins the state’s Red River Valley, for example, costs taxpayers $0. Some policy replacements that have been proposed in the past would cost $1.3 billion a year or more.

Meanwhile, the policies in place to help the state’s corn, soybean and wheat growers hedge risk continue to operate under budget and represent less than one-quarter of 1 percent of federal spending.

Then there’s arguably the most important tool to Minnesota farmers: crop insurance. Crop insurance was specifically designed to shield taxpayers from mega-payouts that could result from catastrophic situations such as commodity price collapses and weather disasters.

By helping farmers afford insurance policies that would otherwise be cost-prohibitive, the government is able to stretch tax dollars much further. The 2010 crop is a prime example – every dollar spent by the government yielded $20 worth of protection for farmers. And this divide is expected to grow in 2011.

If you doubt the need for crop insurance, just look at recent data from the National Weather Service, which shows that excessive snow in the Great Plains and Midwest may leave more of the state’s valuable crops under water than the 2009 record-setting floods.

Now is not the time to weaken crop insurance and put taxpayers – instead of private insurance companies – on the hook for picking up the pieces. If anything, discussions should be centered on ways to strengthen crop insurance and the rest of the safety net. After all, there’s far more at stake than farmers in the next farm bill.

Widner is chairman of the American Crystal Sugar Co. and grows sugar beets, wheat and soybeans in Stephen, Minn.
This article appeared in the Fargo Forum on April 24, 2011.

Farm Bill Principles and Crop Insurance

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America’s abundance of affordable and nutritious food is the envy of the world. This is not an accident, as our long history of investment in agricultural infrastructure has made this possible. Underpinning this system is crop insurance’s modern public/private partnership that provides a safety net for farmers, helping them manage price and weather risks.

USDA’s Agricultural Outlook conference speech by Sen. Debbie Stabenow of Michigan, chair of the Senate Agriculture Committee, outlined her principles for the upcoming Farm Bill. She urged us not to look at the 2012 Farm Bill under the lens defined by budget cuts or specific programs but instead from principles like “creating the best safety net and the best tools possible for managing risk.”

Ask any Michigan farmer — or any American farmer — what fits this bill, and crop insurance will be among the first responses. Crop insurance provides protection to producers of the Great Lakes state’s lucrative specialty crops — like the well-known tart cherry crop — should prices crash or Mother Nature deal an unwelcome blow. In fact, it is the only safety net tool available for most fruit and vegetable growers.

It is easy to see why crop insurance has gained so much popularity with farmers. In fact, more than 1.1 million policies covering 256 million acres across the U.S. were written in 2010 to deal with risks. Nationally, this public/private partnership enabled the government to turn a modest investment into nearly $80 billion in protection in 2010.

Stabenow wants the Farm Bill to be based on the notion that farmers know better than anyone else what works for them. A major strength of today’s crop insurance program is that it allows farmers to create individualized risk management solutions tailored to their specific risks.

When catastrophe hits, the only thing protecting many producers from bankruptcy is crop insurance, which is streamlined by the efficiency of private sector delivery. And banks are increasingly relying on crop insurance, knowing fully that the money they loan farmers for food production is partially secured by this program.

Unfortunately, this risk management tool has been put under the budget-cutting microscope in recent years. Lawmakers in search of budget offsets for other, often non-farm priorities, have already substantially reduced funding.

Bill Murphy with USDA’s Risk Management Agency recently cited an agency report that indicated current investments in crop insurance are delivering a significant bang for the buck. The persuasive attributes of crop insurance, despite the funding reductions already taken, underscore a program that is cost effective and sustainable.
The U.S. agricultural sector is a source of deep economic strength and stability. As weather-driven crop failures globally cause price fluctuations and food shortages we should be heartened by our fiscally sound crop insurance policies. As Stabenow also noted, “We need an effective safety net so that we aren’t watching family businesses go under because of a few days of bad weather or market factors outside of their control.” Indeed, crop insurance is attempting to meet this need not only in Michigan, but nationwide as well.