Former RMA Administrator Opines on Crop Insurance Critics

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Kenneth Ackerman, a former Administrator of the USDA’s Risk Management Agency, recently published an article entitled Top Priority for the 2018 Farm Bill: Protect Federal Crop Insurance.

We thought the piece summed up the current political debate surrounding crop insurance well, and wanted to share it more broadly.  Ackerman, who currently works at OFW Law, embodied the term “public-private partnership” when he worked for the government, and, as you can tell, is still a champion of a strong crop insurance system.

Crop insurance critics have a blind spot, seen in the recent CBO report…issued December 2017. At several points, CBO asks whether the cost to taxpayers for the current FCIC program is justified compared with the alternative, that is, simply protecting farmers against unusual disasters by providing what it calls “supplemental assistance,” or what used to be less-delicately labelled “ad hoc disaster bailouts.” CBO ultimately ducks the question. “It is not possible to know,” the report says, “nor are data available,” it argues, and “it is not possible to compare” the two. Here, they are wrong. Data does exist to compare the two approaches. All that’s required to access it is a memory.

Young farmers today probably don’t remember what it was like to be dependent for survival after a natural disaster almost entirely on politicians in Congress working feverishly to produce emergency one-time-only ad hoc rescue packages. These ad hoc bills have largely gone extinct since around 2011 as FCIC crop insurance has replaced them. This accomplishment is no small thing. Even the recent House-passed special emergency bill for 2017’s devastating Hurricanes Harvey, Irma, and Maria, which does provide aid for certain crop losses, links that aid directly to crop insurance participation.

But before 1994, FCIC crop insurance was a tiny program, with participation barely a fourth of modern levels and total guarantees barely a tenth. As a result, every farm disaster required an emergency ad hoc disaster bill. During the decade before 1994, these ad hoc disaster bills averaged about a billion dollars per year, peaking at $4 billion each following the monumental 1988 drought and 1993 flood. These disaster bills, in turn, discouraged farmers from buying coverage.

This was the system that modern crop insurance was designed to replace. The disaster bills at the time were necessary lifelines in the absence of other support, but they were also a nightmare: for farmers, for taxpayers, and for USDA staff trying to administer it. Beyond the sheer uncertainty, a parade of reports from GAO, the Washington Post and other newspapers, and Congressional oversight committees disclosed legions of mis-payments and program abuses, not the fault of farmers or agency staff but simply the fact that USDA was required to implement these bulky, multibillion-dollar programs with little notice and inadequate infrastructure, the result of being, in fact, ad hoc.

FCIC crop insurance, unlike disaster aid, is a business model that rewards farmers for being good managers and good businessmen. Claims are paid reliably in 30 days after being filed, based on stable, pre-set contracts. Farmers purchase their coverage, paying good money from their own pockets, yes at subsidized rates, but still large enough to force them to make serious choices about risk. Producers who keep good production records enjoy better guarantees, and those who incorporate crop insurance into business plans linked with credit, banking, precision agriculture, and related risk-management tools like forward contracting and futures and options, do even better. For farmers who pre-contract their crops to processors, FCIC policies are often designed to incorporate those contacts seamlessly with their coverages. No wonder that private lenders today routinely require crop insurance as a condition of extending credit, as do other rural businesses.

The “reforms” that claim to “fix” crop insurance, be it through means testing, eliminating coverages like the Harvest Price Option, or similar steps, all work against the program’s basic strength, its business basis reflected in established systems for underwriting and rating.

President Trump Wants an ‘On-Time’ Farm Bill with Crop Insurance

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It’s been more than 25 years since a sitting U.S. President addressed the American Farm Bureau Federation.  But President Donald Trump made up for lost time with a rousing speech yesterday to the Farm Bureau convention in Nashville.

From tax and trade to immigration and infrastructure improvements, he touched on a myriad of important issues during a 35-minute speech.  Yet, it was his comments about farm policy and crop insurance that proved to be one of the afternoon’s biggest applause lines.

“I’m looking forward to working with Congress to pass the Farm Bill on time so that it delivers for all of you,” President Trump told the group of nearly 5,000. “And I support a bill that includes crop insurance.”

The President singled out Senator Roberts, a long-time champion for farm policy and for crop insurance, and praised his relentless efforts on behalf of agriculture.

“We are working hard on the Farm Bill, and I think it’s going to go well,” he noted.

President Trump’s support of a strong farm policy isn’t surprising, considering his opinion of America’s farm and ranch families.  The President opened his remarks with these observations:

We’ve been working every day to deliver for America’s farmers just as they work every single day to deliver for us.

 We know that our nation was founded by farmers.  Our independence was won by farmers.  Our continent was tamed by farmers, so true.  Our armies have been fed by farmers and made of farmers.  And, throughout our history, farmers have always, always, always led the way….

 The men and women in this room come from different backgrounds and from all across our land, but each of you carries the same title that’s been proudly borne by patriots and pioneers, inventers and entrepreneurs.  The title of, very proudly, American farmer.  Thank you very much.

He also explained, “Our farmers deserve a government that serves their interest and empowers them to do the hard work that they love to do so much.”

Assuming Congress agrees, rural America should expect a good Farm Bill sooner rather than later.

And that would provide lawmakers and President Trump the opportunity to take a victory lap next year.  He promised the group that he would be returning to help the Farm Bureau ring in their centennial convention next January.

Most Farmers Get a Bill, Not a Check, with Crop Insurance

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We all carry insurance on something: Our homes, our cars, maybe even a special vacation or a treasured antique.

And, we all get bills in the mail to pay premiums on those insurance policies. When disaster strikes, and we have to use the policies we’ve paid for, we must first absorb part of the loss as a deductible before aid is received.

Farmers are no different, despite what farm policy critics might have you believe.

As with any line of insurance, farmers receive crop insurance payments only when there are verified losses and only after shouldering a chunk of those losses themselves through deductibles.

More often than not, farmers pay into the crop insurance system and don’t get indemnities at all. That’s why it’s often said with crop insurance, farmers get a bill not a check.

An examination of recent USDA figures shows farmers purchased 2,364,338 policies between 2015 and 2016. Of those, there were 563,506 claims, meaning 1,800,832 policies were not triggered.

In fact, if we look further, we find that farmers spent $7.2 billion out of their own pockets for insurance protection in 2015 and 2016. They also shouldered $13.6 billion in losses as part of deductibles. Indemnities totaled $10.2 billion, meaning farmers collectively put much more into the system than they got out.

This trend appears to have continued in 2017, too.

In other words, a bill, not a check.  Exactly like insurance is supposed to work.

But farmers are not complaining about helping fund their own farm policy. Crop insurance is not about making money. It’s about managing risk and paying into a safety net that kicks in when the worst happens so farmers can recover and continue to provide safe and affordable food for U.S. customers.

Farmers are happy to pay that bill.

‘Don’t Mess with Crop Insurance’

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“Don’t mess with crop insurance.”

The phrase has become a battle cry among farmers in the Midwest, especially as legislators headed out for listening sessions and town halls ahead of the next farm bill.

And so far, legislators are hearing the message.

That’s the opening of a recent Farm Futures article about crop insurance.

The piece points out that crop insurance has become the most popular safety net for farmers because it replaces the costly emergency disaster relief bills of the past. Back then, when a storm destroyed crops, farmers had to ask Congress for help. The system was expensive for taxpayers and inefficient for farmers because of slow government payments.

Today’s modern crop insurance – where farmers design their own policies, pay premiums, shoulder deductibles and only receive indemnities after losses are verified by trained adjusters – is easier to manage and more accountable. And, since farmers are paying into it, taxpayers aren’t left shouldering all of the cost when disaster strikes.

It’s no wonder, as the article notes, that 83 percent of farmers in a recent survey said crop insurance was a very important part of their risk management plans.

Unfortunately, 75 percent also said they were worried that the next farm bill won’t provide an adequate safety net, showing the angst in farm country over low commodity prices and increasing weather unpredictability.

Amazingly, some lawmakers are looking to weaken crop insurance and leave farmers even more vulnerable.  Art Barnaby of Kansas State University detailed why that would be such a mistake in a follow-up Farm Futures article.

Among the consequences, he found, of making crop insurance less affordable and less available:

  • Most farmers, including relatively small grain growers, would be affected if the Harvest Price Option were eliminated – a popular product similar to “replacement value” in other lines of insurance.
  • Proposed caps on premium assistance would be hit by numerous farms across the country, including specialty crop farms as small as 200 acres in some California counties.
  • Forcing farmers to pay more for insurance could affect coverage levels and weaken the system – an idea backed up by the Farm Futures survey, which found that 84 percent of farmers said they couldn’t afford adequate coverage without federal assistance.

Farm Futures also looked back at crop insurance data since the late ‘80s and found a system that is in balance and is providing high levels of protection.

“Since 1988, crop insurance policies have covered $15 trillion to guard against losses,” the publication noted.  “During the same period, total premiums paid were $136 billion and total indemnities paid to farmers came to $116 billion.”

In other words, crop insurance is working as designed and the consequences of weakening it could be dire.

“Don’t mess with crop insurance.”

Thank a Farmer, It’s Thanksgiving and They Helped Make It Possible

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As your family sits down to a Thanksgiving meal this week, take a look around at all the wonderful food and consider where it came from.

The sweet potatoes, peas, corn, rice and the wheat in the bread. The cranberries in the sauce and the sugar and pumpkin in the pie. The onions and tomatoes in the salad. The almonds that might be on your green beans.

American farmers brought all this to your table. This week, we are thankful for their hard work and the great risk they took in spending their time and money growing the food we enjoy as our Thanksgiving Day meal.

Just as we give thanks to farmers, they are thankful for the crop insurance that allows them to bring us a Thanksgiving meal every year.

Crop insurance covers most every crop that goes into the food on your table today – not to mention the clothes on your back.

In fact, it covers more than 130 different crops grown on 290 million acres in the United States with an insured value of $100 billion.

For the food made with crops that are not covered, we can all be thankful that crop insurance is built so it can expand as needed. Any farmer, or farm group, or university researcher can design an insurance tool to cover an uncovered crop and take it to the U.S. Department of Agriculture for consideration.

And more and more growers want to make sure policies are tailored to their specific needs.  That’s because crop insurance is a cornerstone of America’s farm safety net that helps farmers pick up the pieces after a flood destroys their pumpkin fields or a storm knocks down all the corn stalks.

It’s not a handout. Just like with any other insurance, farmers pay premiums and must meet deductibles before policies cover losses. And those losses are investigated by trained adjusters.

Sure, the insurance doesn’t cover all of a farmer’s losses just like most car insurance won’t buy you a brand-new car after a wreck. But, crop insurance offers farmers a chance to stay in business year after year with unpredictable Mother Nature and volatile world prices.

For that, we should all be thankful.

Attacks on Revenue Insurance Harm America’s Farmers

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Farm families across America are struggling.  Crop prices are down.  Farm incomes have fallen drastically in the past several years and weather disasters have hit farms in most parts of the country.  And the pain is trickling down to small businesses and communities throughout rural America.  Yet, some lawmakers are pushing proposals that will make it nearly impossible for farmers to rebound.

Senators Jeff Flake (R-AZ) and Jean Shaheen (D-NH) and Rep. John Duncan (R-TN) recently introduced bills to eliminate premium support for the harvest price protection component of the Revenue Protection (RP) crop insurance policy.  Revenue Protection protects against a loss of revenue caused by low prices or low yields or a combination of both.  Revenue Protection has become a valuable risk management tool for farmers across the United States and accounts for more than 75 percent of the Federal crop insurance policies sold today.

One of the key components of the revenue policy is the utilization of the fall harvest price, which allows a farmer to receive the greater of the fall harvest price or the projected harvest price to insure against revenue declines. The loss due to an increase in the harvest price occurs when a farmer suffers a yield loss.  Those lost bushels are worth more when the harvest price increases and therefore the loss of revenue is greater because the insured could not sell the bushels lost at the higher price. The farmer automatically has harvest price protection when buying an RP policy, but can choose to exclude it by selecting the Harvest Price Exclusion (HPE).  If the farmer opts to do so, he or she will pay a lower premium rate.

“This legislation specifically targets crop insurance policies that farmers pay more for out of their own pockets to provide some revenue stability amid price declines and low yields,” said Tom Zacharias, president of National Crop Insurance Services (NCIS).  “For example, corn farmers in the Midwest can pay more than 40 percent more in premiums for RP, depending on coverage level, than if they choose to exclude the harvest price protection. And because this is still an insurance policy, farmers face upwards of a 30 percent deductible before an indemnity is even paid.”

He continued: “Amazingly, supporters of this anti-farmer proposal tout taxpayer benefits as the justification for weakening the farm policies that are so important today. This is disingenuous considering farmers help pay for their own insurance protection and crop insurance represents less than one-third of one percent of federal spending.  It is also worth noting that crop insurance is operating below budget projections.”

Zacharias also noted that, despite critics’ accusations, revenue polices are not paying out frequently.  In its current form, RP has only been available since 2011.  However, according to an NCIS analysis of soybean and corn price movements, had RP been in effect since 1990, the price component would only have triggered in 11 out of 28 years for soybean farmers and even less for corn farmers – only eight out of the last 28 years.

NCIS analysis also shows a drastic increase in insurance costs for farmers if this proposal is enacted. A corn farmer in Illinois who selects the highest level of coverage for an RP policy – 85 percent – would see premiums climb by almost 30 percent.  Meanwhile, premiums at the 75 percent coverage level would increase by a staggering 98 percent.

Such increases in premium would likely result in dramatic declines in overall crop insurance participation.  Farmers would lose an essential risk management tool and be more inclined to turn to Congress to pass expensive, taxpayer-funded disaster packages when revenues plummet.

Farmers all across America have repeatedly asked Congress to protect crop insurance – to keep it available and affordable for all farmers.  Unfortunately, this proposal would do exactly the opposite, leaving many without the means to weather these tough economic times.

ICYMI: Crop Insurance Critical for Farmers and Consumers

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The Farm Bill debate is heating up in Washington and that has me thinking back to 2015.

We received way too much rainfall in central Missouri that spring and my family’s farm in Boone County, like many across the state, suffered big losses. We were only able to plant 40 out of our normal 500 acres of soybeans. Statewide, more than a million acres of soybeans went unplanted.

Without crop insurance, an event like that would have financially broken our farm.

It would have been nearly impossible to stay in business for the following year because of overhead costs like equipment and land, not to mention the input costs required to raise a crop that were already applied.

That was a tough year for my dad, Nathan, and me. We farm 1,000 acres raising corn, soybeans and occasionally small grains. My dad also runs a cow-calf operation.

Crop insurance, which is part of the farm bill, helped us that year but it doesn’t cover all of the costs. Prevented-planting coverage, in the 2015 example, only covered 60 percent of our per-acre revenue, minus the premium we paid.

But it’s certainly better than going out of business. And that’s something I hope Congress considers in the 2018 farm bill.

I grew up on a farm. I studied agricultural systems management at the University of Missouri and worked as a field test engineer for three years after college. I enjoyed it and was able to travel all over the United States and across parts of South America.

But you can only travel like that for so long, and I love farming. So, when an opportunity opened up back home I gladly returned to the family farm.

It’s an honor to grow food for America and the world. But it’s also much riskier than a paycheck from an employer, like when I worked as an engineer. Crop insurance for me, as a young producer, is a critical risk management tool.

Row crops especially are very capital intensive. The equipment, machinery, buildings and structures on the farm and the land all have costs. Then you add in costs like seed, fertilizer, pest protection and fuel, and it equals a significant investment per acre every year.

All of those dollars invested each year are subject to risk that farmers cannot control based upon the weather and the markets.

Crop insurance is a way we can mitigate risk and hopefully be able to continue to farm the following season if we do have a weather disaster that prevents us from being solvent.

Crop insurance is not unlike other forms of insurance. Whether it’s your automobile or health insurance, you don’t intend to ever have a claim or use the policy, but it’s a safety net when something goes wrong. It’s there as risk protection, and it’s something that is necessary to be successful in today’s farming operations.

That’s why it has become a cornerstone of the American farm safety net. It’s a public-private partnership that protects the investments farmers make in each crop and it protects taxpayers from costly disaster-relief bills.

It means when weather strikes in central Missouri, the insurance companies help cover the losses, not Congress. That’s why it is so strange that some lawmakers are angling to make crop insurance more expensive and less available.

I hope Congress remembers in the next farm bill that crop insurance is not only necessary for rural America, but that ultimately it protects the consumer. Without it, we would not be able to provide a safe, reliable and affordable food supply for America and the rest of the world.

Brian Martin raises corn, soybeans, and small grains with his father, Nathan, in Boone County, Missouri.

This op-ed was published in The Kansas City Star.

Farm Bureau President Urges Farmers to Speak Up for Crop Insurance

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Zippy Duvall, president of the American Farm Bureau Federation (AFBF), is urging farmers to make their voices heard as the next Farm Bill is being considered.

“Constantly communicate with (legislators) week in and week out,” he said during a recent visit to Indiana, where he met with members of the media.

“And then when these congressmen and senators and other representatives come to their community and have town hall meetings, our farmers need to get off their tractors and out of their barns and then need to be present,” Duvall added.

He also encouraged farmers to share their own stories.

“Farmers can be involved on social media and bring the truth to the surface,” Duvall said. “Invite people to come to the farm. Let them see for themselves. It’s so valuable to a mother, to a congressman, to see and ask questions about farms.”

Duvall said that if there is a fight over crop insurance funding, that kind of grassroots engagement is critical.

“We’ve got to make sure that we have congressmen and senators who understand the importance of crop insurance. Crop insurance is a requirement of most lending institutions today, and it is important to have that risk management tool there for our farmers,” Duvall said.

Maintaining a strong crop insurance program in the upcoming Farm Bill is a top priority of the Farm Bureau, the nation’s largest farm organization.

“The cornerstone of the 2014 farm bill was crop insurance,” Duvall said. “Our first need and want [in the next Farm Bill] is to maintain that support of our crop insurance program, to make sure our farmers have that risk management tool.”

Duvall’s visit to the Hoosier State was part of his commitment to visit farmers in every state during his first two years.

Wheat Growers Voice Support for Crop Insurance

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Opponents of agriculture recently gathered in Washington, D.C., to strategize for ways to dismantle farm policies in the upcoming Farm Bill.

Crop insurance was among their targets – specifically making insurance protection less affordable and available to farmers, and less economically viable for the private sector to deliver.

Many agriculture groups, including the National Association of Wheat Growers (NAWG), cried foul, calling the farm policy critic summit short-sighted and ultimately harmful the farming community and a struggling rural economy.

David Schemm, NAWG’s president and Kansas farmer, said that critics fail to consider challenges unique to agriculture, including lower rates of return and weather-related risks.

In addition, American farmers also compete with foreign countries that use trade-distorting support programs that violate their World Trade Organization (WTO) commitments.

“Rural America and farming families are experiencing some of the worst economic hardships in decades. Now isn’t the time to implement policies that harm these families and stump economic growth,” Schemm said.

Ben Adams, a farmer and president of the Washington Association of Wheat Growers (WAWG), also weighed in. He explained that farmers pay premiums into the program each year with the hope of not collecting an indemnity.

“It is very misleading to consider federal crop insurance a hand-out when its purpose is to provide a risk management tool when unforeseeable conditions arise,” Adams said.

Adams noted that recently eastern Washington farmers have experienced weather conditions that have greatly harmed their bottom lines.

“Crop insurance does not generate excess income, but rather it aids in recovering some of the loss so that we might be able to farm another year,” Adams said.

The wheat groups called on Congress to “ignore the rhetoric” of farm critics during the 2018 Farm Bill debate and to continue working with farmers during the process.

“In order to provide a safe, abundant and affordable food supply, farmers across the country need a strong safety net. And that includes federal crop insurance,” the groups concluded.

University Researchers: Limiting Crop Insurance Cuts Deep

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Crop insurance has been hailed by lawmakers and farmers alike as an essential risk management tool during recent House and Senate Agriculture Committee hearings. Despite the praise, there are still critics who hope to weaken farmers’ protection against natural disaster and wild swings in the market.

Farm policy opponents are specifically aiming to cap the discounts farmers receive on insurance premiums, eliminate a key revenue insurance product pegged to commodity prices, and exclude some growers from the system altogether based on their income.

Such proposals are meant to target America’s biggest farms, but recent work out of the University of Illinois and Kansas State University shows that the effects would be far wider, hitting many family farms, too.

To get a better idea of the impact of a proposal to limit premium discounts, Dr. Gary Schnitkey of the University of Illinois looked at the heart of corn belt in McLean County, Illinois. The area has prime growing conditions with deep and fertile soils.

There, he found, farmers with insurance coverage on 85 percent of their crops, the highest amount offered, would hit the proposed $40,000 premium discount limit after 2,944 acres – a large farm, but by no means a giant operation.

Meanwhile Illinois counties where land isn’t as fertile, like Saline County, would hit the cap at the same coverage level on just 884 acres – a mid-sized farm similar to most family farming operations. This cap would be hit even sooner by growers considered riskier because of past losses or bad yields.

It’s not just Illinois either. Drs. Art Barnaby and Mykel Taylor from Kansas State found similar results in other Midwest states. For example, nearly 15 percent of Kansas farms would hit the cap, they noted.

The pain grows exponentially, Barnaby and Taylor explained, if farm policy critics are successful in eliminating harvest price tools available for revenue coverage. These tools enable a grower to insure a crop at its harvest price rather than its price at the time planting in order to take advantage of forward contracting opportunities.

Eliminating it, the researchers found, would “reduce crop insurance protection for nearly 95% of Iowa’s crop farmers…[and] about 80% to 90% of the crop acres in many other states, including Kansas.”

Another anti-agriculture proposal to exclude farmers with incomes over $250,000 from crop insurance benefits would also hit ag country, and it may not just hit large farms.

“Such a policy would likely impact farms that had high levels of off-farm income from a spouse and or other business activities,” according to Barnaby and Taylor. Furthermore, because most farmers’ incomes are tied to crop prices, some growers could be ineligible in some years and eligible in others, creating a compliance nightmare for the USDA and farmers alike.

Guest Editorials Stress Importance of Crop Insurance to Nation’s Farmers

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As Farm Bill discussions continue, so do the misguided attacks on America’s farm policy. But the ag community is making its voice heard, taking to newspaper opinion pages across the country to stress the indispensable role crop insurance plays in helping American farmers provide affordable food for America and the world.

Dorian Culver, a soybean farmer and crop insurance agent from from Harrisonville, Missouri, said that crop insurance is more important than ever in a guest column appearing in The Columbia Daily Tribune.

He pointed out that in addition to the typical weather rollercoaster, farmers are facing another year of low prices. Meanwhile, input costs (farm equipment, fertilizer, land rent, etc.) remain the same.

“It doesn’t take a math whiz to see that the numbers just aren’t adding up for our nation’s farmers,” Culver wrote.

Culver, a lifelong farmer, said that he hasn’t seen this kind of downturn since the farm crisis of the 1980s. But thankfully, a few things have changed since then that puts us in a better position to weather this latest storm.

“One of the most important developments is the emergence of a strong crop insurance program,” Culver wrote.

According to Culver, a strong crop insurance program protects not only farmers, but everyone who eats. He said that farm policy critics would do well to remember that every American consumer relies on agriculture.

“Access to affordable crop insurance allows American farmers to continue to provide affordable food for America and the world. Without it, I can guarantee you it wouldn’t take long for it to hit everyone’s pocketbook at the grocery store,” Culver wrote.

Culver called on lawmakers in Washington to also keep this in mind as they develop the next Farm Bill and to work together preserve a strong crop insurance program.

“After all, as the famous saying goes, those who do not learn from history are doomed to repeat it. And that’s something none of us can afford,” Culver concluded.

G. Bradford Reeves, a longtime crop insurance agent from Leonardtown, Maryland, also discussed the importance of the crop insurance program in a letter to the editor that appeared in The Enterprise recently.

Reeves’ letter, “Keep crop insurance affordable in Southern Maryland,” recalls a time when crop insurance wasn’t as widely available and affordable as it is today.

“When bad weather hit, farmers had to ask Congress for help through ad-hoc disaster legislation. Taxpayers had to cover the cost and famers waited years for much-needed relief arrive,” Reeves wrote.

Reeves noted that public-private partnership of modern crop insurance eliminates some of the stress that comes from working in agriculture. But even with the modern crop insurance we have today, many farmers are still struggling to break even.

Reeves called on lawmakers to “remember this program is the only thing standing between bankruptcy and the ability to plant again for many Maryland growers. And they should appreciate that crop insurance is not a handout.”

Reeves noted farmers across the country have collectively spent $50 billion out of their own pockets in the last 17 years for coverage. They also absorb the first 25 percent of any loss before their coverage kicks in.

“Our farmers want to be out in the field planting the crops and harvesting them to sell at market for a reasonable price. The best way to give them the chance to do that is to keep crop insurance affordable and widely available in the next Farm Bill,” Reeves concluded.

Misleading Crop Insurance Attacks Hurt America’s Farmers

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Agriculture’s opponents use terms like “guaranteed profits” to disparage the crop insurers that protect America’s food and fiber supply, help farmers pick up the pieces after disasters, and shield taxpayers from footing the whole bill through unbudgeted ad hoc disaster packages.

These criticisms unfairly confuse basic business concepts like gross returns and net income. The National Corn Growers Association (NCGA) asked economists from the University of Illinois and Cornell University to study this issue in depth, and noted:

“What we discovered is that the returns private crop insurance companies receive are much smaller than opponents claim, and they are well within the standards set by [the USDA].”

It’s easy to see how this conclusion was reached once you compare the expected versus actual returns under the current Standard Reinsurance Agreement (SRA) – the business agreement between the government and crop insurers.

The 2011 SRA set a target gross return of 14.5%. This measure of revenue does not include business expenses or reflect profit. But the target has not been met, according to the Government Accountability Office, which calculated returns of 13.7% from 2011-2016.

After subtracting expenses like technology and compliance costs for government regulations, the net income realized by insurers is even lower, as the chart below from the NCGA study shows.

Year Net Income
2011 11.3%
2012 -20.2%
2013 -0.7%
2014 3.0%
2015 13.9
Average 1.5%

*2016 data not yet available

In other words, there are no guaranteed profits in crop insurance. In fact, crop insurers had underwriting losses in 2012, 2002, 1993, 1988, 1984 and 1983 – a far cry from other lines of insurance, which are historically more profitable than crop insurance.

As a result, the crop insurance industry has witnessed consolidation and the exit of major agribusinesses since the implementation of the 2011 SRA. If farm policy critics are successful in their efforts to reduce returns by another 33%, other providers will follow suit, and farmers could be left without the tools necessary to manage falling crop prices and extreme weather events.

Then, the burden of providing billions in disaster assistance will again fall squarely to U.S. taxpayers.

GAO Forgets Its Own Lesson in Proposing Crop Insurance Cuts

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In the wake of weather disasters in 1983, 1984 and 1988, U.S. agriculture was struggling, and an unparalleled farm debt crisis was only compounding the problem.

Back then, the federal government responded differently to agricultural crises. There was no overall strategy to deal with recurring farming disasters, and responses were generally reactive and after-the-fact.

So, in 1989, the U.S. Government Accountability Office (whose name has since changed from the General Accounting Office) published a report that examined the role of USDA’s three main disaster programs: Ad hoc direct payments, disaster emergency loans, and crop insurance.

GAO compared the effectiveness of these three programs, using eight different criteria that weighed the ability of the programs to deliver at the lowest possible cost, provide a disincentive to risky operations and pay farmers for actual losses, among other points.

The report concluded that “crop insurance is a more equitable and efficient way to provide disaster assistance,” than both taxpayer-funded disaster payments and emergency loans.

GAO recommended strengthening crop insurance to ultimately serve as the primary program for providing farm disaster assistance. And in 1994, President Clinton signed the Federal Crop Insurance Reform Act, which restructured crop insurance to increase farmer participation, increase the private sector’s role, and enhance provisions of the crop insurance program for farmers.

The GAO’s report and the 1994 Act set the stage for the affordable and widely available crop insurance system we have today, with modern products like revenue coverage that help farmers plan for not only weather-related disasters but the massive price fluctuations in the global market.

And, instead of ad hoc disaster relief bills, farmers now help cost-share their own farm policy, paying $50 billion out of their own pockets in the last 17 years for insurance coverage. Farmers also absorb the first 25 percent, on average, of any loss before their coverage kicks in.

The system is also much more efficient and accountable than direct government payments because private insurance companies sell policies and pay indemnities only after verifiable losses.

Fast forward 28 years and it seems the GAO has forgotten its own lesson. The GAO, in a July report, recommended effectively dismantling the same crop insurance system that has become a cornerstone of America’s modern-day farm policy. Specifically, GAO proposes changes that would weaken the very private-sector delivery system that provides aid efficiently and reduces taxpayers’ risk exposure – a plan that would ultimately lead to more government dependence.

The recent GAO report, in essence, advocates a return to a prior era, back when farmers, lawmakers and taxpayers were equally frustrated with the way rural America received needed support.

Luckily, most lawmakers aren’t giving the recent GAO report the same warm reception its counterpart received decades ago.  It’s already been criticized by Senate Agriculture Committee Chairman Pat Roberts (KS), who said, “Now is not the time for additional cuts to a program that producers rely on.”

He’s exactly right.  A financially stable agricultural sector is fundamental to the well-being of our economy and society, and crop insurance is fundamental to agriculture’s success.

ICYMI: Insurance Vital for Farmers

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By: Luke Sandrock
Published in the Herald & Review
August 25, 2017

Even the best-laid plans sometimes go wrong. No one knows this more than a farmer. They can plan out the entire year for how they will harvest a crop, but a single storm or a drop in the market can change everything. It can leave a farmer in financial ruin, and in the worst of cases, it can leave them without the ability to start again the following year.

This is why most farmers purchase crop insurance. It is the one part of the plan that holds together in a crisis. It is a tool that farmers rely upon when things go awry.

This hasn’t always been the case. When crop insurance got its start in the 1930s, it was a poorly run government program and rarely used. The premiums were too high and the coverage area was too limited, which resulted in low participation. Farmers mainly relied on costly ad hoc disaster assistance when natural disasters wiped out their crops, but that required Congress to not only act to authorize this assistance, but to act quickly. It was a clumsy system that didn’t provide any peace of mind to farmers or their bankers, and it was a costly way to operate since Congress was never budgeting for this disaster assistance.

This led lawmakers to rethink the mechanics of the program. In 1980, Congress passed the Federal Crop Insurance Act, which created the successful public-private partnership that remains today where risk is shared among farmers, the Federal government, and private insurance providers.

Premiums are more affordable for farmers through a government discount. Insurance products have expanded to include more crops across the country. Both of these factors have increased participation and broadened the risk pool, which makes the program more actuarially sound. Private companies are servicing the policies and making sure any claims are processed in an efficient and timely manner.

Another part of this success story is that Congress no longer has to worry about authorizing unbudgeted disaster assistance. Further, the current cost of crop insurance is under budget.

With Congress gearing up to write a new farm bill, a central concern for farmers all across the country is that lawmakers will fail to recognize this success story and will create new policy that undermines a farmer’s ability to manage risk.

The farm economy is struggling with net farm income half of what it was four years ago. Planning for the future is challenging enough given these circumstances, let’s not make it harder by eliminating a farmer’s ultimate backup plan when everything else fails.

Luke Sandrock is a junior partner and crop insurance agent at The Cornerstone Agency, Inc. in northern Illinois.

Crop Insurers Respond to GAO Calls for Additional Budget Cuts

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The farm economy is struggling, with depressed prices and falling farm incomes reminiscent of the farm crisis in the 1980s. Back then, the Government Accountability Office (GAO) studied the best way to help farmers through tough times and noted, “crop insurance is a more equitable and efficient way to provide disaster assistance” than both taxpayer funded disaster payments and emergency loans.

GAO then recommended strengthening the country’s crop insurance program, which Congress did. Now, crop insurance is a cornerstone of America’s farm policy, farmers call it their top Farm Bill priority, and taxpayers are saving money because farmers and private-sector crop insurers help fund farm policy.

Given crop insurance’s success and popularity, it is disheartening that GAO recently recommended weakening farmers’ primary risk management tool. It’s even more troubling that GAO would gloss over important facts about the returns crop insurance providers receive for delivering America’s farm safety net. For example:

  • Insurance providers are not even achieving the returns targeted in the Standard Reinsurance Agreement with the USDA – GAO buried deep within its report the fact that actual returns have been 5 percentage points lower than USDA’s target from 2011-2015.
  • GAO’s data do not take insurers’ full business expenses into account – essentially, they are confusing gross and net returns.
  • A 2017 study by economists from the University of Illinois and Cornell University noted that net returns for crop insurance providers were just 1.5% from 2011-2015.

Farmers all across the country are depending on crop insurance to help them weather the current economic crisis. And private-sector crop insurers are delivering that assistance in an efficient manner that has come in billions under budget.

Clearly the system is working and does not need to be weakened when it is needed most. Luckily, most lawmakers recognize crop insurance’s value and are dedicated to keeping it affordable, widely available, and economically viable in the next Farm Bill.

First Video in Agri-Pulse Farm Bill Series Highlights Importance of Crop Insurance

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The importance of crop insurance and other risk management tools to our nation’s farmers is the main message of the first segment in a new Agri-Pulse Farm Bill video series.

“We all rely on farmers and ranchers, but farming is riskier than other businesses out there,” the video begins. “Crop insurance helps farmers manage their risk.”

The video notes that with crop insurance, farmers put skin in the game, paying premiums and shouldering deductibles. This protects taxpayers from expensive ad hoc disaster bills.

The video features a number of interviews with farmers and ranchers, including Craig Hill, Iowa Farm Bureau president, who discussed the unique challenges farmers face.

“We have to negotiate with Mother Nature each and every year to grow a crop and that risk is fairly significant for most growers and so the crop insurance program is essential,” Hill said.

But it’s not just the weather that the modern farmer has to worry about. It’s the price of the crops they grow, which can respond quickly to a weather disaster or change of demand in the U.S. or around the world.

Kevin Paap, president of the Minnesota Farm Bureau, says that this uncertainty makes crop insurance “his bankers’ best friend.”

“Not only is it the drought and the things that you think about typically with crop insurance as far as yield loss, but also it’s the revenue side,” Paap said. “Having that ability to make sure that you can manage your risk, you can use your crop as collateral, by far is the #1 thing.”

And crop insurance isn’t just critical for traditional row crops. When it comes to specialty crops, crop insurance is a vital tool.

Kay Rentzel, executive director, National Peach Council, noted that when a farmer puts a tree or a bush in the ground it takes at least three years before they actually produce a harvest. So one catastrophic freeze potentially could wipe out an industry.

“We desperately want to be able to feed America, we want to be able to feed the world and we want to provide them with healthy, good-for-you food products and crop insurance is one of the roles and one of the tools they have to do that,” Rentzel said.

Blake Hurst, Missouri Farm Bureau president, stressed the importance of crop insurance to beginning farmers.

“For my sons-in-law who are just beginning farming, it is very important to them that they have some stability, some ability to plan, some ability to secure financing,” said Hurst. “If they don’t have a guarantee that that program is going to be there over the next several years as they make long-term plans, it becomes difficult for them to grow, for them to expand, for them to be successful in their farming careers.”

The segment concludes by stressing the importance of passing a strong Farm Bill in the near future.

“Uncertainty is never good,” said Russell Boening, Texas Farm Bureau president. “If you don’t know what your risk management tools are going to be or how they are going to work – yes it can be nerve wracking; it can cause sleepless nights.”

Texas and Minnesota Farmers Praise Crop Insurance During Listening Sessions

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The House Agriculture Committee has been crisscrossing the country this summer to visit with farmers and ranchers about their priorities in the upcoming Farm Bill. These listening sessions have been extensive, and Committee members have touted their usefulness.

Following the most recent forum in California this week, Chairman Mike Conaway (R-TX) addressed the sugar industry’s annual meeting in San Diego.

“One of the common themes on the listening sessions has been the importance of crop insurance,” he told the sugar producers. “Over and over and over we’ve had that conversation with folks.”

What’s Cropping Up was interested in what Agriculture Committee members have been hearing, so we watched nearly five hours of footage of sessions in San Angelo, Texas, and Morgan, Minnesota.

The Chairman’s assessment was correct. Crop insurance has been front and center. Below is a sampling of what was said about farmers’ primary risk management tool.

“Crop insurance is so vital to this state; so vital to every crop in (Texas). Whether it be corn, wheat, or cotton – all of the crops come very much into play when it comes to crop insurance.”
– Russell Boening, president, Texas Farm Bureau

“Farmers, ag leaders, equipment dealers – everyone involved in agriculture – agrees that crop insurance should remain a viable and affordable tool for managing risk.”
– Richard Gaona, president, Rolling Plains Cotton Growers

“How can I and my fellow farmers stay in business? Number 1 (priority) is crop insurance. … Crop insurance is indispensable.”
– Ben Scholz, National Association of Wheat Growers

“With more frequent and intense weather patterns, rising interest rates and production costs and lower commodity prices, our risk has gone up while our balance sheets have gone down. We simply have to have affordable crop insurance to manage those risks.”
– Kyle Peterson, chairman, Southern Minnesota Beet Sugar Cooperative

“Farmers borrow more in one year to produce a crop than most Americans do in a lifetime. Our growers, and our bankers, need strong risk management tools like crop insurance that are essential in order to secure operating loans to grow our crop.”
– Kyle Peterson, chairman, Southern Minnesota Beet Sugar Cooperative

“When there’s a crop loss, there’s going to be a loss of income on the farm but with a good crop insurance program, and working capital, we may help them farm another year.”
– Howard Olsen, AgCountry Farm Credit Services

“I was involved in a hailstorm this year where we lost the corn and the bean crop on one farm. With crop insurance, we’re not going to make any money at that this year, but I am going to be able to farm again next year because of risk management tools.”
– Kevin Paap, president, Minnesota Farm Bureau

“Crop insurance – please protect it. Crop insurance is so vitally important. … It is a key component to obtaining credit.”
– Bruce Peterson, Minnesota Corn Growers

“Crop insurance is so important to me. We have three families directly that drive income from our farm and if we did not have crop insurance we would not be able to survive.”
– Noah Hultgren, Minnesota Corn Growers

ICYMI: US farmers rely on crop insurance

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By: Rex Williamson
Published in The Columbus Dispatch
July 26, 2017

My family has been in agriculture in northwest Ohio for generations. My great-grandfather, grandfather, and dad farmed. I followed in their footsteps.

It was a great blessing. We were taught to love and appreciate hard work, and we learned to work as a family.

I carried this same work ethic into my own business 30 years ago, when I decided to leave the family farm and go into crop insurance full time. Today, my son runs the company and I help him. My wife is still involved, as is my daughter. It is a true family business and is rewarding for all of us.

I know firsthand that families devote vast amounts of financial resources, time and energy to growing the food that feeds the world. I also know firsthand that farming is extremely risky. The 1980s provided periods of challenging weather and prolonged low commodity prices.

Back then, farmers had to go to Congress and ask for ad-hoc relief bills. Taxpayers had to cover the cost and it often took years for farmers to get relief. It wasn’t a fair system so Congress asked the private insurance sector to help solve the problem.

Thankfully, we now have modern crop insurance that eliminates much of the stress that comes from competing with Mother Nature and volatile markets. Revenue coverage allows a farmer to market grain well before harvest and take advantage of profitable sales opportunities that are often not available at or after harvest. Revenue coverage would have been a great blessing for Ohio farmers during the 1980s, when ongoing low commodity prices took a huge toll on grain farms.

In my insurance business, I help farmers purchase policies that are uniquely tailored to their operations. When disaster strikes, a private-sector claims adjuster verifies the loss just like any other insurance product. Farmers pay their premiums, shoulder their deductibles and get checks in weeks, not years.

It is important for policymakers to understand the part about farmers paying for coverage. This is not a handout. Farmers across the country have collectively spent $50 billion out of their own pockets in the past 17 years for coverage. They also absorb the first 25 percent, on average, of any loss before their coverage kicks in.

Congress is starting its debate on the new Farm Bill, which sets out rules for crop insurance.

Our policymakers often agree that coverage for natural disasters like wind, hail and drought are critical and appropriate. But the debate often focuses on whether revenue coverage is really needed. I can assure you this product has become a critical tool that is equally as important as the amazing technological advancements that have made our farms the most efficient and productive in the world.

I urge Congress to keep in place the system of crop insurance we have today and allow it to expand to meet new demands.

Crop Insurance Takes Center Stage at Senate Farm Bill Hearing

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Crop insurance industry leaders testified this week before the U.S. Senate, touting the benefits of the program to our nation’s farmers and ranchers.

But they were far from the only ones promoting crop insurance in what was the Committee on Agriculture, Nutrition and Forestry’s largest Farm Bill hearing to date.

Committee Chairman Pat Roberts (R-KS), an architect of the modern crop insurance system, sang the program’s praises in his opening statement.

“When producers put seeds in the ground, they do not expect a hail storm to hit right as they are ready to harvest their crops,” said Roberts. “They would much rather reap the benefits of their hard work in the marketplace than receive an indemnity. The last Farm Bill made significant changes, and unlike previous policies, today’s commodity programs — like crop insurance — are triggered only when there is a loss.”

Michigan Senator Debbie Stabenow, the ranking Democrat on the Committee, explained some of the improvements to crop insurance she’s championed and noted her continued support.

“I have fought to expand and strengthen crop insurance for all farmers, from expanding coverage to specialty crop growers, organic producers, and beginning farmers, to providing a whole-farm option for diversified farms,” she explained.

Their efforts were lauded by the witnesses who appeared during three panels to describe their priorities for the next Farm Bill.

Bruce Rohwer, National Corn Growers Association board member, told the Committee that crop insurance has been critical to helping farmers survive sustained low commodity prices, and should be maintained.

“Without crop insurance and commodity title payments, the financial wherewithal of [family] farms would likely face serious erosion in the current environment,” Rohwer said.

Soybean farmer Kevin Scott said the American Soybean Association also strongly supported crop insurance and called on lawmakers to curb any attempts to put caps on the program, pointing to recent research that demonstrates such caps would reduce participation and have a significant impact on family farms.

Rohwer agreed, explaining, “A shrunken risk pool in insurance is not good for anybody. That would make crop insurance less effective, which would … make access to credit more difficult.”

David Schemm, president of the National Association of Wheat Growers, likewise stressed the importance of keeping the crop insurance program intact, highlighting the program’s low improper payment rates, which is about half that of the government average.

“The federal crop insurance program has been and continues to be farmers’ most important risk management tool. A farmer might go many years paying premiums for a policy and rarely get an indemnity,” Schemm said. “And they would much rather get a return from the market than become eligible for an indemnity.”

During the final panel of the hearing, Roger Johnson, president of the National Farmers Union (NFU), and Mark Haney, president of the Kentucky Farm Bureau Federation, weighed in and explained the importance of maintaining a strong safety net in today’s difficult economic climate.

“We continue to witness pressure in the countryside as commodity prices remain low and farmers and ranchers struggle to adjust,” Johnson said. “Given this scenario, NFU believes that the Farm Bill safety net should provide meaningful assistance in two fundamental circumstances: when disaster strikes and when prices are low and remain below the cost of production for extended periods of time. These two scenarios have separate solutions, the first is crop insurance and the second is commodity programs.”

To view this hearing, “Commodities, Credit, and Crop Insurance: Perspectives on Risk Management Tools and Trends for the 2018 Farm Bill,” click here.

Industry Leaders Tout Crop Insurance Benefits at Senate Hearing

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Crop insurance industry leaders testified today before U.S. Senators, stressing the vital role crop insurance plays in providing risk management to farmers across the country.

Their testimony was part of the Senate on Agriculture, Nutrition and Forestry hearing, “Commodities, Credit, and Crop Insurance: Perspectives on Risk Management Tools and Trends for the 2018 Farm Bill.”

Ron Rutledge, president and CEO of Farmers Mutual Hail Insurance Company of Iowa, emphasized the breadth of the protection that is provided by crop insurance in his testimony, noting that protection is available on more than 100 different crops in all 50 states, including rapid growth among specialty crops.

Rutledge reminded the Committee that crop insurance policies must be purchased by farmers and only pay an indemnity when producers face a verifiable loss above and beyond their deductible. Yet, despite the critical role crop insurance plays in providing fiscally responsible protection to farmers, crop insurance will face attacks during the 2018 Farm Bill process.

“I would like to point out, however, that on average over the last five years, 54 percent of Farmers Mutual Hail’s customers paid premiums out of their own pockets and received zero indemnity payments…That’s how insurance is supposed to work,” Rutledge told lawmakers.

Rutledge called on the Committee to continue their support for the private-sector delivery of crop insurance and for affordable and effective crop insurance for producers of all sizes, crops and regions.

Specifically, he asked that Congress oppose efforts to harm crop insurance in the 2018 Farm Bill, including cuts to the private-sector delivery of crop insurance, reductions to premium discounts, and arbitrary means testing participation.

William Cole, chairman of Crop Insurance Professionals Association, also testified before the Committee, applauding the work of the Committee Chairman Pat Roberts (R-KS), who authored the Agricultural Risk Protection Act of 2000. Since then, participation in crop insurance has doubled and costly, un-budgeted disaster bills have become a thing of the past.

“The Chairman’s work is largely responsible for the success story of federal crop insurance, which today insures 90 percent of all U.S. planted acres, 290 million acres in all, with $100 billion in liability protection in force today. Thank you, Mr. Chairman, for all you have done for America’s farmers and ranchers by ensuring that they have access to something as basic as insurance, which most Americans simply take for granted,” Cole testified.

Cole noted that in addition to benefitting farmers and taxpayers, crop insurance has consistently come in under budget. Since the 2008 Farm Bill, crop insurance has yielded $17 billion in savings and is on target to save taxpayers another $6.7 billion over the next 10 years, he said.

Cole asked lawmakers to consider three key principles while debating the 2018 Farm Bill: that the current Farm Bill is below budget; that crop insurance is critical and gives taxpayers a big bang for the buck; and that farmers have a strong “Title 1,” or non-insurance components of the safety net, for times of depressed markets.

In addition to Rutledge and Cole’s oral testimonies, The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”), the nation’s oldest and largest national trade association of independent insurance agents, provided a written statement to the Committee.

IIABA urged Congress not only to reject any attempts to cut or cap the budget for crop insurance, but to expand the role of the federal crop insurance program, and to continue its commitment to farmers and ranchers across the country.

Record Yields, Fewer Claims in 2016

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Favorable growing conditions and record yields for corn and soybean marked 2016 along with fewer losses, according to a report in the latest edition of Crop Insurance Today magazine.

Only seven states – all of which are in the Northeast – had loss ratios greater than 1.0, noted “2016: The Year in Review” authors Mechel Paggi, Frank Schnapp and Laurence Crane of National Crop Insurance Services. (Note: any number above 1.0 means that insurance claims paid out exceeded premiums received for policies.)

“This reflects a welcome change from recent years where drought and other extreme weather events drove up indemnities to historic highs,” the authors noted.  “The year-over-year variability of the returns is a reminder of the risk assumed by crop insurance providers in delivering this essential safety net for American farmers.”

It’s also a reminder of the risks and unpredictability farmers shoulder every day, which is exactly why so many purchase crop insurance to protect their businesses.

And the authors noted that farmers had plenty of skin in the game in 2016, paying $3.5 billion from their own pockets to purchase 1.2 million policies.  Of those policies, 218,000 had claims to cover losses, a lower amount than past years.

While the overall conditions improved in 2016, weather was varied across the nation and produced damaging events.

Fall was a record warm season with worsening drought in the Southeast that resulted in wildfires. Hurricane Matthew, and tropical rainfall, brought record flooding to the Atlantic region.

The 15-page report details precipitation for each state by season, crop yields and production, commodity prices since 2000, and more. Some highlights:

  • 2016 saw the most acres of soybeans planted in U.S. history
  • Peanut production continued to trend up
  • Rice acres were up 22 percent from 2015
  • Cotton rebounded to 10.1 million acres

“Looking to the future, the American public is assured that crop insurance will be in place to provide financial stability for the many small, family farms that comprise the core of U.S. production agriculture,” the authors concluded. “Crop insurance will ensure that when the repeated disasters of recent years strike again, as they most assuredly will, U.S. farmers will be able to bounce back to produce again at high levels the food, feed, fiber and energy crops on which the U.S. and world population have come to expect and depend.”

Insurance Caps Would Have Consequences for All Farmers

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Means testing measures like adjusted gross income (AGI) limits would have unintended consequences for all farmers and be detrimental to the long–term viability of crop insurance, warns Rodney Weinzierl, executive director of the Illinois Corn Growers Association, in a recent Agri-Pulse audio interview.

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Ag Secretary, Lawmakers Discuss Crop Insurance

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Secretary of Agriculture Sonny Perdue recognized crop insurance as an important part of the farm safety net and said the program is critical to the country’s food security during recent Senate testimony about the proposed United States Department of Agriculture (USDA) budget.

Committee members from both sides of the aisle also voiced support.

Sen. John Hoeven (R-ND) described crop insurance as “the number-one risk management tool for our producers,” adding, “particularly as we look at a drought year and low commodity prices, it is vitally important.”

Sen. Jon Tester (D-MT) meanwhile made it clear that farmers don’t make money off crop insurance and would rather plant a successful crop than receive an indemnity payment.

Tester’s comment was aimed at a recent controversial statement Secretary Perdue made in the Senator’s home state, when the Secretary implied some farmers may buy insurance hoping it will pay out on a lost crop. The Secretary has since asked that these remarks not be misinterpreted as no farmer hopes to lose a crop.

The numbers bear that out, proving that crop insurance helps farmers pick up the pieces after disaster, not profit. Over the past five years, the cumulative nationwide loss ratio has averaged 0.91 (any number below 1.0 means that insurance premiums paid were greater than what farmers received in indemnities).

In fact, one of the reasons that crop insurance is so popular on Capitol Hill is its structure that promotes accountability and reduces waste. Crop insurance requires all losses to be verified by a trained, independent third party, and farmers have “skin in the game” by paying premiums and shouldering a portion of losses.

Even in the aftermath of the historic 2012 drought, America’s farmers did not make money off crop insurance, but used it to survive losses and plant again the following year.  In fact, farmers paid more than $4 billion in premiums and shouldered approximately $13 billion in losses before their policies kicked in.

Furthermore, since crop insurance providers have dollars at risk on every policy, they are financially incentivized to eliminate wrongful claims.  That is why companies have invested millions in new technology and training and education efforts.

The efforts have paid off, with instances of improper crop insurance payments in 2016 at just 2.02%, down from 2.2% in 2015, according to the Office of Management and Budget.  This is significantly lower than the government-wide improper payment rates of 4.67% in 2016 and 4.39% in 2015.

As budget discussions continue—one thing is very clear. Crop insurance is an excellent taxpayer investment and is working to constantly improve.

Farm Leaders Take to Newspaper Opinion Pages to Defend Crop Insurance

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In the days surrounding the release of a proposed White House budget that includes cuts to crop insurance, farm leaders are taking to newspaper opinion pages across the country to defend the successful program.

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Crop Insurers Comment on President’s Proposed Budget

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The White House today released details of its FY2018 proposed budget, which included steep cuts to crop insurance and other farm policies.

The American Association of Crop Insurers, Crop Insurance and Reinsurance Bureau, Crop Insurance Professionals Association, Independent Insurance Agents and Brokers of America, National Association of Professional Insurance Agents, and National Crop Insurance Services released the following joint statement in response:

“Weakening crop insurance and making it more difficult for farmers to bounce back during tough times will jeopardize rural jobs and will find little support in rural America or on Capitol Hill. The rural economy is already suffering through a period of low prices and a multitude of spring weather disasters. Yet, the Administration’s budget proposal targets the primary tool farmers use to handle these risks.

“Lawmakers favor crop insurance because it reduces taxpayer risk exposure and has come in under budget since the 2014 Farm Bill was passed. Farmers are willing to help fund their own safety nets – collectively spending $50 billion out of their own pockets on crop insurance since 2000 – because they know private-sector efficiency will speed aid when it is needed most.

“Destructive cuts to crop insurance have been proposed by past Administrations and soundly rejected by Congressional leaders, who recognize the importance of maintaining a strong farm safety net. We fully expect that to be the case again this year, and we are hopeful to engage in meaningful dialogue about how to support America’s hardworking farmers and ranchers in difficult times like these.”

Michiganders Tout Crop Insurance at Second Senate Farm Bill Hearing

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Participants at the U.S. Senate Committee on Agriculture, Nutrition & Forestry’s second Farm Bill field hearing stressed that with tough times hitting farm country in the form of catastrophic weather events and falling prices, farmers need a strong farm safety net more than ever.

The field hearing was held at Michigan State University, Ranking Member Debbie Stabenow’s (D-MI) alma mater and where the last Farm Bill was signed into law.

“Agriculture is the riskiest business there is. Nobody else has to depend on the weather report for their success, but farmers also have grit and determination and passion for what they do and for that we all should be very grateful,” said Stabenow.

Committee Chairman Pat Roberts (R-KS) discussed the widespread damage he saw firsthand in his home state following one of the largest prairie fires in history. He also noted the importance of a strong and efficient agriculture sector to feeding our growing world.

“Agriculture production will need to double in the future to meet the increased demand over the next couple decades,” Roberts said. “Accomplishing this task requires efficiency, not just on the farm or on the ranch, but most certainly in our United States government. … It takes the government providing an adequate safety net and then getting out of producers’ way.”

The first panel of the hearing included testimony from producers across Michigan, who also stressed the importance of crop insurance as a key component of this safety net.

Chris Alpers of Redpath Orchards discussed the importance of crop insurance to his apple crop and the apple industry as a whole.

“No crop insurance program will make a grower devastated by a natural disaster financially ‘whole’ but it will allow them to survive a devastating loss and continue to support the economic engine of rural America,” Alpers told the Committee.

Alpers noted that crop insurance enables producers to invest back into their own business, creating good jobs in their local communities. Modern apple plantings cost upwards of $40,000 an acre before a single apple is harvested several years later. This enormous startup cost unfortunately scares many talented young entrepreneurs and lending institutions away from investing in apple production.

“I am thankful many producers (and lenders) recognize crop insurance as an important risk management tool. Without the ability to purchase a solid insurance policy and limit my exposure I would not be able to justify investing my future into the apple business,” he testified.

Rick Gerstenberger of Gerstenberger Farms, Inc., and Chairman of the Board of Michigan Sugar Company, said crop insurance is an essential risk management tool for beet growers as well.

“With a higher investment in growing sugarbeets than most other commodities, agricultural lenders are evaluating their lending risk and basing their loan approvals on the availability of an adequate safety net, which most crop insurance coverage provides,” Gerstenberger told the Committee.

Andy Snider, whose family farm raises turkeys, hogs, corn and soybeans, called on Congress to ensure adequate funding for all risk management programs and tools.

“Programs like crop insurance, livestock gross margin insurance, and FSA guarantees, are essential to maintain a stable and secure food system. Overall, net farm income was down nearly 50 percent from 2013 to 2016, and if net farm income continues to fall, the risk management programs may be the only remaining safeguard,” Snider said.

A press conference followed the hearing, during which Chairman Roberts also addressed the issue of protecting crop insurance.

“We are not going to see dramatic cuts in crop insurance,” Roberts said. “We’re just not.”

That’s good for farmers around the country and in Roberts’ home state, where a recent blizzard destroyed much of the wheat crop.

For more information on the hearing, click here.

Agriculture Remains a Great Return on Investment

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Tax season is finally over, and naturally many of us are thinking about how our checks to Uncle Sam will be spent in the upcoming year. Here’s a hint: Not very much will be going to the farm.

In fact, for every $100 spent by the Federal government, less than 25 cents actually goes to underpin the country’s food and fiber system. That’s a tremendous return on investment, according to Dr. Mechel “Mickey” Paggi, an economist with National Crop Insurance Services.

“Everybody in America eats and I think we probably have the best deal out there in terms of our food,” said Paggi in a recent interview with the National Association of Farm Broadcasters.

He noted that overall spending on farm policy is about one quarter of one percent of the federal budget. And as America’s farm policies have evolved, taxpayers are saving more and more thanks, in part, to crop insurance’s unique cost-sharing structure, Paggi explained.

“Taxpayers benefit because farmers are active participants in (crop insurance). They have skin on the game. … Farmers have to pay a premium to get protection,” he said.

All told, farmers have spent nearly $50 billion out of their own pockets since 2000. Farmers also must shoulder at least 25% of any loss before they get an indemnity.

In addition, private sector crop insurers pay indemnities from their own coffers on most claims, thus minimizing taxpayer cost.

“It’s a far cry from the old days of the ad hoc disaster bills, where taxpayers were on the hook for 100% of the payout,” Paggi told farm radio listeners.

Since the 2014 Farm Bill took hold, crop insurance has come in more than $3 billion under budget.

“There’s no secret as to why we hear leaders in both the industry and in Congress saying that we need to keep a positive attitude and a strong crop insurance program going into the next Farm Bill,” Paggi concluded.

NCIS President Stresses Importance of Crop Insurance At Farm Bill Summit

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Tom Zacharias, president of National Crop Insurance Services (NCIS), was among the speakers invited to address this week’s Farm Bill Summit in Washington, D.C. The well-attended event, organized by Agri-Pulse, included a diverse cross-section of agriculture stakeholders.

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Crop Insurance Has America Covered

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Don’t think crop insurance affects you? Check out this coverage map. The green areas represent counties where crops are covered by crop insurance.


(Click for a PDF version.)

About 90% of U.S. farmland is insured, providing $100 billion in protection to more than 125 different kinds of crops in all 50 states.

To see how crop insurance covers your state, just click here.

Hearing from the Heartland

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The Farm Bill debate is officially underway—and crop insurance took center stage at the first Senate Agriculture Committee field hearing, held last week at Kansas State University.

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Farm Credit Services Report Touts Crop Insurance

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Crop insurance saved nearly 21,000 jobs in four states during one of the worst droughts in two decades, according to a report from Farm Credit Services of America.

The 20-page paper breaks down the history of the crop insurance program from the start in 1930s, with the Great Depression and Dust Bowl, to expansions in the 1980s and 1990s after a string of unbudgeted disaster relief bills strained federal coffers.

The paper says farmers have plenty of “skin in the game” when it comes to crop insurance and their participation helps minimize risk exposure for taxpayers.

FCS provides a step-by-step guide to the public-private partnership that makes the crop insurance program efficient when it comes to covering losses. It also highlights key points including the fact that private companies sell the insurance products and that farmers, like all other insurance customers, pay deductibles and premiums.

But the story of the drought of 2012 is where the paper really shines in showing just how important crop insurance is to keeping America’s food, clothing and fuel supplies secure.

The drought was a devastating hit in a year that was supposed to be favorable for planting. Corn, soybean and hay production declined throughout that summer as the drought intensified.

Corn production was down more than 29 percent and soybeans fell 6 percent. The low yields were coming on a year that started with low beginning stocks, the report notes, and tight U.S. and global supplies.

Projected prices rose in anticipation of short supplies. Farmers faced low yields and ended up facing big expenses to buy crops at higher prices to fulfill forward marketing obligations and to feed on-farm livestock.

Crop insurance helped cover the shortfall and saved 20,900 jobs across Iowa, Nebraska, South Dakota and Wyoming, with an annual labor income of $721.2 million, according to the report.

That’s money that ended up in Main Street shops and restaurants. Money that allowed farmers to continue to pay the bills and get ready for the next season even after a disaster like the drought of 2012.

And best of all, farmers didn’t have to go to Congress for an ad-hoc relief bill – just like Congress designed.

“Crop insurance kept me farming,” farmer Denny Marzen, of Iowa, said in the report. “It’s a business tool I use with my marketing program and to help me deal with Mother Nature.”

An Introduction to Crop Insurance

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Welcome to “What’s Cropping Up.” If you’re reading us for the first time, chances are good that you’re either a new Congressional staffer or a reporter that’s joining the ag policy beat.

As such, we wanted to start with some of the basics. Of course, if you’re chomping at the bit to graduate from Crop Insurance 101, please checkout www.CropInsuranceInAmerica.org — the go-to source for crop insurance stats and information.

Crop insurance, simply put, protects the livelihoods of the farmers who grow the food we eat, the clothes we wear, and the fuel that moves us.

Farming is no easy task. It is one of the riskiest enterprises in the world, defined by uncontrollable conditions that are unlike any other profession. Bad weather, blight, insects, natural disasters, price fluctuations, and global subsidization all make it hard to make a living as a farmer.

That’s where crop insurance comes in. It’s basically no different than auto insurance or homeowner’s insurance. Banks require farmers to purchase it, just as they require insurance from homebuyers.

But because of the risks unique to agriculture, it can be cost prohibitive. Without a strong infrastructure and investment, crop insurance would be too costly for most farmers to afford or for most private-sector insurance companies to widely provide.

That’s where government steps in, acting as a middleman that encourages participation and ensures adequate coverage.

Without this middleman, crop insurance would flounder and work for just a few. And the responsibility of funding U.S. farm policy would again fall completely on taxpayers’ shoulders rather than the current cost-share system that is partially financed by farmers and insurers.

Crop insurance been around since the 1930s when the Great Depression and the Dust Bowl decimated family farms. And over the years, it’s been modernized to enable farmers to tailor individual protection for their own unique farms.

Today, it has supplanted costly, unbudgeted ad hoc disaster legislation and direct payments as the centerpiece of America’s farm policy. Here’s how it works:

  • Thanks to government investment, farmers receive a discount on coverage.
  • Private-sector agents help farmers pick the coverage that is just right for them, using historical farm data and other personalized information.
  • Farmers then spend between $3.5 billion and $4 billion a year to purchase crop insurance sold through private companies.
  • These companies service the policies and work closely with the U.S. Department of Agriculture, which acts as a reinsurer, oversees the system, and covers part of companies’ operating costs for administering it.
  • When disaster strikes, a claim is filed. A private-sector adjuster investigates, verifies the loss and an indemnity check is sent.
  • These checks usually arrive within 30 days to help the farmer rebuild – in sharp contrast to the months or years it took old-style disaster aid to show up.

Crop insurance is extremely popular, covering roughly 90 percent of farmland, or nearly 300 million acres. More than 1.2 million policies are sold nationwide, offering some $100 billion in liability protection.

Corn, cotton, soybeans, and wheat account for the largest percentage of U.S. farm acreage and crop insurance coverage. But, investments in designing new products means there’s now protection available for more than 120 crops.

What will tomorrow bring?

Those discussions will soon begin. When they do, it will be important to remember that crop insurance has proven to be a popular, efficient, lowest-cost safety net that underpins a secure domestic food, fiber, fuel and feed supply.

Insurance Basics: Skin in the Game

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Crop insurance is arguably the first farm policy in history that is largely financed by the farmers who benefit from it.

Unlike policies of the past, which were 100 percent backed by taxpayers, modern-day farm policy requires growers to take an active role in its funding – a concept sometimes called “skin in the game.”

The concept may be new to farm policy, but it’s not new to insurance. From the earliest shipping insurance at Lloyds of London in the late 1600s to the modern auto policy acquired via a smartphone app, the principal is the same.

A customer pays a premium to an insurance company based on the value of property, and predicted risks, to insure its worth. If the property is damaged, the customer absorbs a portion of the loss, called a deductible, and the insurance company covers the remainder through an indemnity payment.

The deductible acts as a deterrent to risky behavior and keeps the insurance policy intact for true disasters. Meanwhile, premium dollars help customers pool resources to more cheaply buy protection and fund the system that provides peace of mind.

The larger the pool of customers, the more risk can be spread, and the cheaper coverage becomes for all.

The same applies to crop insurance, which is why it would be a bad idea to arbitrarily exclude some farmers from participation.

Since crop insurance’s rise to prominence, famers collectively pay between $3.5 billion and $4 billion a year out of their own pockets in premiums. And they absorb hefty deductibles (on average, 25 percent of loss) when disaster strikes.

Famers love the set-up because it offers some predictability for marketing and for borrowing capital, and because it gives them the opportunity to tailor protection to their farms’ unique needs. Taxpayers reap the benefits, too.

Crop insurance means farmers aren’t running to Congress for one-time disaster relief bills every time drought ruins a corn crop in Iowa or frost kills apple trees in New York.

No wonder so many are singing crop insurance’s praises and calling it their “top priority” as we head into the next Farm Bill debate.

Sen. Grassley Sets Stage for New Farm Bill, Calls Crop Insurance His Top Priority

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220px-sen_chuck_grassley_officialIowa Republican Senator Chuck Grassley says his top Farm Bill priority in the 115th Congress is to preserve a vigorous crop insurance program, noting there is no safety net more valuable to farmers and taxpayers.

“It not only saves the taxpayers money, because obviously if we didn’t have crop insurance and you had disasters in agriculture, the taxpayers would be 100 percent of it,” Sen. Grassley, a member of the Senate Agriculture Committee, noted in a press conference last week. “In addition to saving the taxpayers money, we also are encouraging farmers to plan ahead and to manage risk…95 percent of the farmers in Iowa do that.”

This is not the first time that Sen. Grassley has taken to the airwaves to tout crop insurance’s importance. In September, he was outspoken in an Iowa Agribusiness Radio Network interview about the importance of crop insurance as eastern Iowa began rebuilding in the wake of severe flooding.

And just two months later, he joined Committee Chairman Pat Roberts (R-Kan.) in an interview with KIOW News and, again, emphasized that the policy works well for both farmers and taxpayers.

Grassley added in his recent press conference that Farm Bill discussions are set to begin soon with hearings in the Agriculture Committee

Thank You, Chuck Conner!

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charles_f-_conner_official_usda_photo_portraitPrior to the holidays, National Council of Farmer Cooperatives President and CEO Chuck Conner found himself in a strange place – onstage at a farm policy conference sitting between two of agriculture’s biggest opponents: EWG and Heritage.

Unsurprisingly, demands to rip holes in the farm safety net and mandate new government regulations were made.  It was an uncomfortable spot for an aggie indeed, but Conner defended agriculture fiercely and effectively against attack.

“Farmers and ranchers and the people of rural America, believe me, feel like they have been under attack over the past several years…these attacks range from the heavy hand of the EPA to unfounded criticism from consumers,” he explained.  “I believe it has had a huge impact in how they responded in the last presidential election.”

And that kind of “grass roots populism in rural America,” he said, will be vital to maintaining a strong farm policy in the future.

“If agriculture groups are successful in unifying themselves and tapping into this this powerful rural advocacy, then folks, I honestly do not expect, in all due respect, organizations such as the ones that are part of this panel, to have a huge impact on the next Farm Bill debate or on farm policy,” Conner explained.

“If we are divided…then these respective organizations will be successful in altering significant sections of the Farm Bill, including farm payments, payment limits, crop insurance, [and the] sugar program, just to name a few.”

And when it comes to crop insurance the critics were already making a case for weakening farmers’ most important risk management tool by excluding some farms from participation.  In response, Conner delivered a lesson in the realities of insurance.

“You cannot have an actuarially sound insurance program… if you exclude large portions of agriculture that are more likely to not collect,” he noted.

Conner continued: “For good sound crop insurance, you need to spread it over all producers, all regions and all crops in order to limit [agricultural] risk.  It doesn’t work, in my opinion, just to start saying we are going to lop off whole chunks of American agriculture…you’re only going to hurt everybody by creating a program that can’t stand on its own.”

Keeping crop insurance whole and protecting other key policies in the upcoming Farm Bill, he said, will be particularly important given today’s struggling farm economy

“[Farm] loans are being very, very carefully reviewed,” Conner explained, adding, “lenders do not handle risk well” and “uncertainty will eat [farmers] alive with their bankers.”

Getting a Farm Bill done in a timely fashion and keeping risk management tools in place are the best ways to overcome these challenges.

“Every time there is uncertainty, whether it is crop insurance, whether it is one of the [other farm] programs,” he concluded, “the lender has to sharpen that pencil more, and the margin between what they can lend, and what equity that farmer has, gets wider and wider.”

One thing that is for certain: crop insurance and the agricultural community have a great friend in Chuck Conner.  Let’s just hope his fellow panelists were paying attention.

ICYMI: Maine farmers know crop diversity is key to success. Our farm policies should reflect that

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Bangor Daily News
December 13, 2016

“Diversify, diversify, diversify.” This is the mantra of most financial advisors—a popular approach to protect investors in the face of volatile market swings.

The same strategy also has served agriculture—another unpredictable market-quite well.

Here in Maine, we have established one of the most diverse agriculture “portfolios” in the nation. Growing everything from potatoes to apples and plenty of things in between, our farmers contribute more than $825 million to our state’s economy every year.

It’s exciting to see the potential that this diversified approach holds for the future of farming.

But those in agriculture face challenges that are simply incomparable to other industries. Farmers certainly can’t control the weather, which is often unforgiving, and they also have no sway over markets or the moves of foreign competitors. So it is essential that we have a safety net that protects the small percentage of individuals we enlist to feed and clothe our nation.

Unfortunately, the kind of crop diversification in Maine has not always been reflected in farm policy discussions. Farm policies of the past often focused primarily on a few crops commonly grown in the South and Midwest, while leaving others, such as specialty crops like blueberries, for example, with little support.

That’s no longer the case thanks to improvements to crop insurance. Now, crop insurance is available for more than 130 commodities and has more than 62,000 county-crop programs. Premium support discounts are the same across commodities for each plan of insurance.

This has translated into more farmers from outside the traditional farm country purchasing risk protection. Here in Maine, for example, there has been a more than 20 percent increase in acres insured over the past decade, providing the state’s farmers nearly $30 million in additional protection, according to U.S. Department of Agriculture data. Overall, almost 90 percent of farm acres in the U.S. are covered by crop insurance.

For many farmers, crop insurance offers peace of mind. A crop insurance check will never come close to what a farmer will reap from a good harvest, but it does help them keep farming year after year. And for our beginning farmers, crop insurance is even more critical. It would be almost impossible to receive the needed credit from financial institutions without some assurance that beginning farmers would be able to pay it back if a natural disaster struck.

Taxpayers have benefited as well. Prior to the emergence of crop insurance as the top risk management tool for farmers, natural disasters regularly resulted in very expensive, unbudgeted ad hoc disaster bills from Congress. Now, when disaster strikes, farmers receive an indemnity check.

But just to be clear, crop insurance is not a handout—it’s far from it. To gain coverage, farmers have to put skin in the game. In fact, since 2000, farmers have spent $48 billion out of their own pockets to purchase crop insurance protection. They only collect an indemnity after they have suffered a verifiable loss and fallen below their guarantee.

It’s a win-win for both farmers and taxpayers, yet some farm policy critics would like to send us back to the days of unbudgeted, taxpayer-funded and after-the-fact disaster aid. Legislative proposals like those presented during the last Farm Bill negotiations to limit participation and cap insurance benefits to some farmers would disproportionately affect specialty crop growers and organic farmers whose crops tend to have higher values and therefore are more likely to have higher premiums for coverage. That’s a really bad idea, especially when you consider how important crop insurance is to allowing our producers to stay competitive with the rest of the world.

Crop insurance treats all farmers equally, regardless of operation, size, region, or crop. For Maine farmers, in particular, it is crucial that we protect this safety net that does not discriminate.

E.J. Dorsey is a crop insurance agent with United Insurance in Fort Fairfield. He has more than 22 years experience in the crop insurance field.

Insurance Basics: Delivery Costs

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Whenever a customer writes a premium check for an auto or home insurance product, part of that payment is allocated to servicing the policy.

That is, insurance companies include an expense load in the premium for each policy beyond anticipated losses to offset overhead costs, such as staff salaries, agent commissions, adjusting losses, employee training, computer systems, customer support, office space, marketing, etc. The expense piece also includes a profit component for the insurer.

Unlike other types of insurance, crop insurance policies are not loaded for expenses. Why? Because Congress wanted to make crop insurance policies more affordable so farmers would purchase protection with their own money and leave taxpayers less vulnerable to agricultural risk and ad hoc disaster payments.

Prior to crop insurance’s rise to prominence, Congress was routinely called upon to pass expensive, unbudgeted disaster legislation after extreme weather struck. In fact, from 1989 to 2012, 42 emergency agricultural bills cost taxpayers $70 billion, according to the Congressional Research Service – none of which was funded by farmers.

Congress’ plan to promote private-sector delivered crop insurance as a popular alternative worked. Today, farmers collectively spend almost $4 billion out of their own pockets annually to purchase 1.2 million policies, which cover 290 million acres – or 90 percent of America’s planted cropland.

Of course, private-sector insurance companies cannot afford to deliver and service 1.2 million policies for free. So, the government pays part of the delivery costs to insurance companies on farmers’ behalf.

This is known as an Administrative and Operating (A&O) payment. Unfortunately for crop insurers, A&O payments do not cover all of the costs they incur, which continue to climb as more and more Federal requirements and paperwork are piled on insurance providers.

In fact, A&O payments have fallen short of actual company delivery expenses, with an average shortfall of 6.4 percent from 1998 to 2014. The shortfall in 2014 alone totaled $782 million.

To offset such losses, providers of typical property and casualty insurance lines would simply increase expense loads in the premiums they set. But, crop insurers don’t set premiums – the Federal government does, and those premium rates have been on the decline.

This has made for a challenging business climate in recent years, where some insurance providers have exited the crop insurance business altogether or consolidated their operations. To stop this negative trend, it will be important to ensure that crop insurance remains affordable, widely available, and economically viable.

ICYMI: Crop Insurance: What a difference four decades make

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Agri-Pulse

November 4, 2016

For nearly four decades I have worked with Connecticut River Valley farmers to help protect their livelihoods. Over that time, I’ve seen many changes, both in the make-up of farms and the tools farm families have to manage uncontrollable risk.

As our population has grown, the amount of available farmland has gotten smaller. This means our farmers have had to adapt to survive. More and more local farmers today also work jobs off the farm to help support themselves, meaning we have more part-time farms. We’ve also seen an increase in diversified farms here. Many of our dairy farmers, for example, are growing their own crops for feed to help improve their bottom lines.

Our farmers—those with a passion for the land often stretching back generations—have proven to be amazing innovators in the face of challenges. But even for the best agricultural innovators, there is one thing that always remains out of their control: Mother Nature.

Here in the Connecticut River Valley, we know this all too well. We’ve seen spring seasons that have been too dry or too wet for planting. We’ve seen hailstorms come through the Upper Valley like tornadoes, bringing destruction to one area, while miraculously sparing another area just a few miles down the road. We’ve even seen hurricanes, like Irene in 2011, and blizzards in recent years.

Thankfully, as a crop insurance agent, I have also witnessed positive changes to the crop insurance system, enabling many of our farmers to protect their operations against circumstances beyond their control.

During the 1980s, which marked the beginning of the public-private partnership between the U.S. government and private insurance companies, I was among the first crop insurance agents in the region. And the program experienced plenty of growing pains.

Participation was lacking due to high costs, spotty service and slim margins. Congress was spending considerably more each year cleaning up messes after disaster struck than beforehand on protection. Lawmakers also paid far more attention to traditional Midwest crops than those specialty products more prevalent in New England.

Even as late as the early 1990s, crop insurance participation rates nationwide hovered in the 30 percent range.

Things began to change in the mid 1990s, with the passage of the Federal Crop Insurance Reform Act of 1994, which dramatically restructured the program by strengthening the partnership between the federal government and private insurers. Through premium discounts we also started to see increased participation.

Then in May 2000, Congress approved another important piece of legislation: the Agricultural Risk Protection Act (ARPA). The provisions of ARPA made it easier for farmers to access different types of insurance products including revenue insurance and protection based on their own historical yields.

All of this has resulted in more crop insurance participants than ever before, but there was still work to be done. The Farm Bill of 2014 made crop insurance a cornerstone of U.S. farm policy and took steps to make it more affordable and available to specialty crop growers, organic producers and young farmers.

Today, crop insurance protects more than 90 percent of planted acres nationally. And it’s so popular that farmers are willing to collectively contribute about $4 billion a year from their own pockets to purchase protection and help remove some degree of risk from a very volatile business. That cost-sharing structure makes it a good investment for taxpayers as well, replacing expensive disaster bills of the past, while ensuring a safe and plentiful food supply.

No, a crop insurance check will never come close to what a farmer can get from a good harvest. Like homeowner’s insurance, farmers don’t collect a dime without a verifiable loss and paying a deductible. But crop insurance does offer farmers some peace of mind, which allows them to focus on producing higher-yielding, better-quality crops.

Connecticut River Valley farmers are inventive and hardworking businessmen and women and it has been an honor to work with them for the past 40 years. Given their ingenuity, and the important safety net crop insurance provides, the next 40 years should be exciting to watch.

Randy Odell is a Vermont crop insurance agent who has been in the industry for four decades.

Sens. Grassley and Roberts: Crop Insurance is the #1 Issue for Farmers

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With discussions around the next Farm Bill right around the corner, Senators Chuck Grassley (R-Iowa), and Pat Roberts (R-Kan.) are passionately touting crop insurance as an essential risk management tool.

The two Senators recently addressed the issue in an interview with KIOW News Director A. J. Taylor.

“This is the Number One issue that farmers talk to (Sen. Grassley) and to myself about…all throughout farm country…all of us know…we have to protect crop insurance—it’s the Number One tool in the risk management toolbox that farmers must have,” said Sen. Roberts. “It’s a great program and it’s terribly important.”

Sen. Grassley, who has been outspoken about the importance of crop insurance to eastern Iowa in the wake of severe flooding, noted that with crop insurance, which is partially funded by farmers and delivered by the private sector, works for both farmers and taxpayers.

“If you have a hurricane, a flood, tornadoes—all the natural disasters you can have—when the federal government comes in…it’s 100% paid by taxpayers.  But with crop insurance, the farmers are paying into it, and you are buying ahead and you are trying to manage your risk,” said Sen. Grassley. “It’s such a smarter way to do it than going back to the old [ad hoc disaster] system.”

To listen to the interview in its entirety, click here.

Eliminating Farm Policy Punishes America and Rewards Foreign Competitors

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The news has been full of foreign subsidy stories lately – whether it’s the trade case America filed against China for excessive corn, wheat and rice subsidies, complaints about Thailand’s sugar subsidy scheme, or the WTO reporting growth in trade restrictions around the globe.

It is under this backdrop that some of U.S. agriculture’s fiercest critics have begun lobbying for the complete elimination of America’s crop insurance system, which was made the centerpiece of U.S. farm policy during the 2014 Farm Bill.  In other words, getting rid of America’s farm safety net at a time when our foreign competitors are expanding their subsidies.

So what would such a scenario look like if it were to come to fruition?

Art Barnaby, an economist with Kansas State University, and Levi Russell, an economist with the University of Georgia, provided a pretty good snapshot in a peer-reviewed paper that they recently wrote for Choices Magazine.

Among their findings:

  • Land values would fall.
  • America would have fewer farmers as consolidation would be inevitable.
  • Beginning and young farmers would suffer the most due to limited equity.
  • America would be less competitive on a global scale as foreign nations would continue to subsidize and erect barriers to U.S. farm goods.
  • Regulatory burdens on U.S. producers, such as EPA regulations, would disadvantage American producers even more.

As for the critics’ hypothesis that a new private-market insurance system would be there to pick up the slack, the authors warn:

It’s unlikely that a free market crop insurance industry would form unless all government subsidies were eliminated. Few farmers would be willing to pay the higher premiums required by a fully-private market as long as the USDA infrastructure is in place for some future Congress to provide ad hoc disaster aid or other cash transfers to farmers. Congress would need to close all forms of support including commodity program payments, disaster payments, and conservation payments. If not, producers would be reluctant to pay unsubsidized premiums for fully-private insurance and would instead push for the reinstatement of disaster payments using the existing infrastructure.

Put another way: Be careful what you wish for.

Eliminating U.S. farm policy in isolation would have devastating consequences for the rural economy and America’s efficient agricultural sector, while rewarding bad actors on the global stage who are eager to seize U.S. market share with the aid of subsidies.

ICYMI: This much is certain: For farmers, crop insurance is essential

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There are a number of certainties in life. I know, for example, that every morning on my farm, the sun will rise in the east, and that every evening it will dip beneath the west horizon. And we know Iowa summers will be warm, the winters will be harsh and when the soil has thawed, spring growth will begin anew.

But a life of farming is also full of uncertainties. We can’t control the markets, nor the role Mother Nature will play in bringing our crops to harvest. Let me tell you, farmers are always in a constant negotiation with Mother Nature. Some years, Mother Nature is a farmer’s best friend. In other years, it can be our worst enemy. And in those years, there is no substitute for the risk protection that crop insurance provides.

Crop insurance allows farmers to pay a premium to alleviate some degree some of the uncertainties involved in farming. A crop insurance check will never come close to what a farmer can get from a bountiful harvest, but it does provide some peace of mind.

I’ve been farming for almost four decades and have witnessed firsthand the difference crop insurance can make. In fact, in 1977, my first year full-time farming, we suffered a major drought that resulted in a pitiful 28-bushel corn yield. Crop insurance and other assistance is what kept me going after that first disastrous year.

As president of the Iowa Farm Bureau for the past five years, and a member for many years prior to that, I also have also had the opportunity learn why crop insurance works. It succeeds, in no small part, because of its diverse participation. By spreading the chance of loss among a wide and varied group of insured farmers, premiums become less expensive for everyone. It’s a concept known as a “risk pool” and it is what makes things like auto insurance and homeowners insurance work, too. None of these programs would work if only a few folks participated.

But it hasn’t always been this way. Farm leaders across the country have worked with legislators effectively in recent years to strengthen crop insurance by expanding the size of the “risk pool” through encouraging and incentivizing increased participation. If you need evidence that this approached worked, just look at the numbers.

Today, almost 90 percent of farm acres in the U.S. are covered by crop insurance. It has become the primary safety net for today’s farmer.  Because of this, it has also become one of the biggest targets for anti-farm policy critics.

Crop insurance’s detractors — many whom have never negotiated with Mother Nature — often weave a tale about farmers resting on our laurels and laughing all the way to the bank. But that’s all it is: a tall tale. These critics are especially prone to calling out a policy known as revenue protection, which shields farmers in periods of extreme market volatility. But crop insurance, no matter what type, is far from a handout. And having revenue protection doesn’t necessarily equal an indemnity payment, even in years with low crop prices. In 2015, for example, of total indemnities paid to growers, including revenue protection as well as coverage from weather events, only 3 percent were the result of low prices.

The safety net that crop insurance provides is essential and is more important now than ever before. Not only does the average American farm feed about 168 people worldwide, but one in five Iowans go to work because of agriculture. But our farm economy has seen better days, with farm income projected to decrease again.

Farming is a tough job and perils are many, especially in today’s environment. Crop insurance provides a measure of stability and is an investment in both today’s farm economy and our future.

Without it, we’d have a whole lot less American farmers growing affordable food for America and the world. That much is certain.

Craig Hill of Milo is the president of the Iowa Farm Bureau Federation. His family grows corn and soybeans and raises livestock.

Senator Grassley Touts Crop Insurance Amid Recent Flooding

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Crop insurance enjoys widespread bipartisan backing on Capitol Hill. And this week, one high-profile leader, Senator Chuck Grassley (R-IA), was emphatic in his support, saying the recent floods in eastern Iowa serve as an important reminder why crop insurance is so essential.

grassley-floodGrassley recently surveyed the flood damage in several eastern Iowa cities, and discussed his experience on Money Matters, a program on the Iowa Agribusiness Radio Network.

“I saw debris and damage left by receding floodwaters, many homes underwater, preparations to mitigate flooding downstream and farmers surveying their flooded crops,” Grassley told program host Ben Nuelle.

Grassley says crop insurance, which is partially funded by farmers and delivered by the private sector, will be crucial for farmers whose crops flooded this year so close to harvest.

“With grain prices as low as they have been in years, that program will provide some relief to insure producers who will be forced to take a complete loss on their flooded fields. It is important reminder heading into the farm bill of the critical role crop insurance plays in the farm safety net.”

“Without crop insurance, some of the impacted farmers could be knocked out of the business altogether,” Grassley added. And that would be bad news for farmers, rural communities, and consumers alike.

Current Farm Economics Reminds Us Why We Need a Farm Safety Net

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With a third straight year of declining farm income and reports of agriculture credit conditions deteriorating, we are reminded why lawmakers put a safety net in place for farmers, and why that safety net must be affordable and widely available to all producers in the country.

A recent report from the Federal Reserve Bank of Kansas City, which revealed the results of an ag credit survey, noted, “agricultural producers continued to reduce capital and household spending as profit margins generally remained weak.” And, these strenuous conditions are expected to continue for the foreseeable future.

It’s a fact that Todd Van Hoose, the president and CEO of the Farm Credit Council, recently discussed in an editorial for Farm Policy Facts.

“There is a lot of pain in farm country right now and we are seeing a lot of farmers limiting or foregoing equipment purchases and recalibrating other expense controls to balance their operations against the new commodity price level,” Van Hoose explained.

Consequently, the problem is not isolated to farmers and ranchers. It extends to the entire rural economy and beyond. Randy Nelson, the president of CHS Capitol, LLC, the financing arm of a large farmer-owned cooperative, told members of the House Agriculture Committee earlier this year that, “this is a far-reaching problem that goes down Main Street in the rural communities.”

Recent headlines suggest as much with John Deere announcing in July that it would cut more than 100 jobs at its East Moline, Illinois plant. This was followed by an August announcement to lay off another 120 jobs in Waterloo, Iowa. The company said both decisions were made due to anticipated decreases in the sales of agricultural equipment.

These are uncertain times for our agricultural producers and rural Americans, and the last thing they need is to have risk management tools like crop insurance ripped out from under them as some special interest groups in Washington, D.C., are pushing to do.

Critics spread false information about the mechanics and cost of crop insurance and then propose gutting it altogether. Meanwhile, they fail to appreciate that crop insurance has been the one thing that farmers, ranchers, and their lenders can count on in lean times.

“The role that farm policy and crop insurance plays in enabling that production cannot be overlooked or dismissed,” concluded Van Hoose. “In order to maintain and support a healthy, vibrant, competitive, and innovative farm sector, we must continue to invest in it.”

Farmer’s Daughter USA: Crop Insurance Vital to Keeping Family Farm Afloat This Year

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In a blog post appearing in Ag Daily, Farmer’s Daughter USA founder Amanda Zaluckyj shines light on the critical role crop insurance has played in keeping her family’s southwest Michigan farm afloat in 2016— one of those years where “everything just seems to go wrong.”

Zaluckyj says the problems on her family’s farm started early on, with a wet spring and flooding that delayed planting. Then, when the growing season got underway, her family found themselves facing the opposite problem—bone-dry fields.

Because of the adverse weather conditions, their corn yields have taken a huge hit. While many folks are posting their impressive harvest pics to social media, there will be no proud pics from the Zaluckyj farm this year, nor a bumper crop.

“But thanks to crop insurance, one bad season doesn’t (necessarily) mean our farm is going to go under,” Zaluckyj writes.

Zaluckyj praises crop insurance as effective because of its unique mix of government and private enterprise and proper oversight, as well as wide availability and required conservation practices.

Zaluckyj notes that the success of the crop insurance program was recognized during passage of the 2014 Farm Bill.

“While other farm support programs, such as direct payments, were completely eliminated or reduced, the crop insurance program was expanded. The 2014 changes included providing new options for farmers that face prolonged years of drought or other severe weather conditions,” she writes.

Crop insurance is essential to farming, Zaluckyj says, because unlike other businesses, these are more than market principles at work.

“Crop insurance will in no way be the same as having a good year with favorable weather conditions and high corn yields. But it will keep our family farm afloat. It means that (most of) the bills will get paid, we will still have a roof over our heads, and our family will survive to farm another year. To me, supporting, protecting, and preserving family farms is the mark of a good program,” Zaluckyj concludes.

To view Zaluckyj’s blog post in its entirety, click here.

Amanda Zaluckyj is a Michigan farmer’s daughter and a practicing attorney. She is founder of The Farmer’s Daughter USA blog, which aims help consumers better understand where our food comes from.

What They are Saying About Crop Insurance

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With 297 million acres of farmland covered by crop insurance, this risk management tool has become an integral part of the farm safety net for American producers. Policies are available for more than 120 crops for farmers of all operation sizes in all states. This is a fact that farmers, policymakers, lenders, and other agricultural leaders all recognize and appreciate. Below is a look at what people are saying about crop insurance and its importance in maintaining strong agricultural production in this country.

“One of the least understood points about crop insurance is that it’s not just for farmers. That’s how we as farmers talk about it, that it’s a way to keep us in business when we suffer a catastrophic loss. That it’s a way to protect our yearly investment when things go wrong. That is all true, of course, but we don’t explain that it is also insurance for every consumer.” – Zach Hunnicutt, Nebraska farmer

“The important message we can talk about is, keep crop insurance whole. It is worth the investment of the federal government in helping farmers manage the risk.” – Todd Van Hoose, CEO & President, Farm Credit Council

“The truth is that crop insurance is a highly successful public-private partnership between the federal government and private insurance companies. It functions as a risk management tool for farmers to mitigate the numerous risks – financial, meteorological or the like – that they take to produce the finest food and fiber in the world.” – Rep. Jim Costa (CA-16)

“The program keeps family farms in the family, even after a bad year, and provides a safety net that allows beginning farmers to pursue their dream of farming…. Federal crop insurance has become an essential part of the farm safety net due to its ability to provide dependable protection and grow with the needs of farmers and ranchers.” – Brandon Willis, Risk Management Agency Administrator

“Crop insurance and farm policy enables everyone – from the farmer to the banker to the taxpayer – to plan for those disasters and overcome them when they happen. If lawmakers continue to try and chip away at this safety net, farmers will not have the ability to survive. This is especially true for young, beginning farmers that have less access to credit and capital.” – Larry Kummer, Indiana farmer

“As farmers, we have no control over weather. We have no control over markets. We have no control over our foreign competitors. We cannot just turn our operations on or off. We have to take care of the land 365 days a year. We need a safety net when commodity prices fall. We need affordable and reliable crop insurance to protect our yearly investments.” – Jeremy Brown, Texas farmer

“We still have land and equipment payments to make regardless of whether we have a good or bad growing season, or whether a natural disaster wipes out our crops altogether. Crop insurance is something we purchase each year to manage this risk and we only receive an indemnity when we suffer a verifiable loss. Even then, it doesn’t make us whole, but it does soften the blow from a bad year.” – Lorraine Greco, California farmer

“This is why having a sufficient farm safety net — with crop insurance as the cornerstone — is more critical than ever. Crop insurance provides protection against the one thing that even the most resilient farmer cannot defeat — the wrath of Mother Nature.” – Scott VanderWal, Vice President of the American Farm Bureau Federation

Insurance Basics: Coverage Availability

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Suppose that you have a fire in your home, or you total your car and have to file a major claim with your insurance provider.

On one hand, you’re thrilled that an indemnity is on its way to help pick up the pieces.  On the other, you’re dreading future increases in premiums and the likelihood of receiving a notice that your insurance company decided against renewing your coverage.

In the insurance world, you now pose a higher risk because of your history, which means higher rates and even the denial of coverage.

This treatment can also extend to people who have never had to file a claim.  For example, coverage may be hard to come by if you just bought a home in an area prone to disasters, or if you are a very young or very old driver.

Insurance companies have the right to do business with anyone they chose, and like any smart business, they choose to work with the people who pose the lowest risk.  This ability to pick their customers may explain why providers of everyday property and casualty (P&C) insurance have only lost money once over the past 50 years – in 2001, the year of the 9/11 attacks.

Crop insurance is different.

Under the crop insurance system that has become the centerpiece of America’s farm policy, private-sector insurance providers must offer insurance to growers who are eligible for coverage and want it.  They cannot choose to simply do business with well-established farmers from states that have fewer droughts or are less likely to have violent storms.

For the safety net to be truly effective – and to ensure that taxpayers aren’t left footing the whole bill after disaster strikes – farmers who are statistically more likely to suffer loss must receive high-quality protection, too.

By not excluding farms, the policies carry more risk.  In contrast to the profitability of other lines of insurance, crop insurers lost money in 2012, 2002, 1993, 1988, 1984 and 1983.

Additionally, crop insurers don’t have control over premium setting.  A farmers’ rates are calculated by the government and, unlike lines of P&C coverage, prices will not fluctuate between insurance providers.

In other words, crop insurers compete on customer service, not price.  Conversely, recouping loss from a bad year isn’t as easy as simply raising premiums as is the case with other insurance products.

In return for private companies shouldering more risk and having less control over premium setting, the government serves as a reinsurer on some policies.  As such, the government shares in the losses in bad years, and the gains in years where fewer indemnities are paid out.

It’s a system that has married the best of the private sector with the best of the public sector, and the result has been the most effective, popular farm safety net in the history of agriculture.

Praise in High Places for Crop Insurance

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From South Dakota to Washington, D.C., crop insurance received praise in high places for its ability to help farmers and ranchers withstand the perils of growing food and fiber.

“Crop insurance provides protection against the one thing that even the most resilient farmer cannot defeat – the wrath of Mother Nature,” wrote Scott VanderWal, the president of the South Dakota Farm Bureau and the vice president of the American Farm Bureau Federation, in an editorial published this week in the Argus Leader.

Highlighting the importance of agriculture to both the nation’s economy and to South Dakota, VanderWal makes the case that crop insurance plays a vital role in ensuring a secure and affordable food supply by providing a safety net when the farm economy is hurting.

“It’s essential that we preserve S.D.’s farm economy, not just for our economic well-being, but for all Americans,” he explains.

Meanwhile, in another part of the country, Ken Ackerman, the former manager of the USDA’s Federal Crop Insurance Corporation, along with his partner at Washington D.C.’s OFW Law Firm, Marshall Matz, penned an opinion piece that examined the steady growth and improvements to crop insurance since it started nearly 80 years ago and the need to preserve the program going forward.

“Today’s modern crop insurance system is a vast improvement over what existed just a few decades ago,” they write. “Sheer numbers tell much of the story. Federal crop insurance today covers almost 300 million areas of American farmland, over 90 percent for major commodities and over 70 percent for specialty crops, representing over $100 billion in insurance guarantees.”

As Congress soon begins work to reauthorize a new farm bill it will be crucial to grow support for crop insurance and sound farm policy so we can maintain and build upon this success.

As VanderWal concludes, “Old-fashioned hard work, innovation, and smart farm policies like crop insurance…will secure a bright future for us all.”

New Video Spotlights Public Support for U.S. Farmers, Farm Policy

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America’s farmers and farm policies, including crop insurance, receive overwhelming, bipartisan support from voters, according to a new video released today by National Crop Insurance Services (NCIS).

The video comes after the Republican and Democratic parties wrapped up their national conventions, moving America into the heart of the election season.

“As the first Tuesday in November approaches, voters will be busy examining candidates from the left, candidates from the right, and hoping they won’t be left behind,” the video states. “But there’s one thing almost everybody can agree on: America’s farmers and farm policies are moving the country forward.”

The educational piece is based on results from a recent public opinion poll showing that nearly 90 percent of U.S. voters have a favorable view of farmers, with 92 percent agreeing it is important to provide farmers with federal funding.

NCIS’ video also illustrates that the majority of voters prefer crop insurance, which is delivered by private companies instead of the federal government and partially funded by farmers.

“That’s a winning set-up in most voters’ minds,” it states. “Nearly 80 percent of whom said they approved of farmers getting discounts on crop insurance premiums, with nearly three-fourths applauding farm policy’s current cost-sharing structure.”

These results, the video continues, shouldn’t be a surprise as eight in 10 voters agree that a strong and thriving farming industry is critical to America’s national security.

“So while agriculture’s critics may continue their unrelenting, misguided fight on farmers and farm policy,” it concludes, “the numbers show that Farm Country will have a powerful ally in its corner this November and beyond…the American people.”

A Story You Won’t Hear About From the Critics

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Agriculture’s opponents love to paint the picture of federal crop insurance as a program that just caters to big, conventional farming operations that only grow certain commodities. But, that narrative is simply not true. Crop insurance is widely available to farmers, regardless of their size or cropping choices.

And, now there is new data to demonstrate how crop insurance is helping farmers and ranchers all across the country manage the inherent risks of growing food and fiber.

“Year after year for 10 years in a row we are seeing growth,” explained Brandon Willis, the Administrator of the Risk Management Agency (RMA), to stakeholders during a recent meeting on the expansion of crop insurance. “It’s a tremendous success story.”

Much of this growth and success is due to efforts in the 2014 Farm Bill to improve existing products, as well as create new ones and expand them for all farmers growing in all regions of the country, especially beginning farmers, specialty crop and organic growers.

“We have made a concerted effort to make it work for all,” added Willis, who oversees the government agency that partners with private-sector insurance companies to deliver coverage.

The effort is paying off.

RMA estimates that the number of acres covered by crop insurance increased to 297 million in 2014 from 265 million in 2009. Roughly 85 percent of planted acreage for major commodity crops, 74 percent of all fruit and nut acreage, and 36 percent of vegetable acres are insured. Also, the number of organic acres insured increased by a staggering 110 percent during this same time.

Meanwhile, in 2015 alone, RMA and crop insurers helped 13,719 beginning farmers and ranchers who work more than 3.5 million acres start their operations and save more than $14 million through premium discounts and waived fees.

Investments in crop insurance have helped usher in new risk management tools like Whole Farm Insurance, which caters to diverse operations because it enables growers to insure all crops on the farm under one insurance policy. Whole Farm insurance is offered in all states with policies sold in 42 states this year covering an average of nearly 4 crops per policy.

Other new products like the Supplemental Coverage Option (SCO) and the APH Yield Exclusion have also helped farmers in all regions of the country secure better protection. RMA estimates that “nearly 1,000 fruit, vegetable, and other specialty crop policyholders are taking advantage of the APH Yield Exclusion for 2016.”

Additionally, while the program has expanded, the public-private partnership has made great strides in reducing mistakes, such as data entry errors or writing indemnity checks for incorrect amounts. Such actions are flagged by RMA as improper payments, and Willis said that such instances fell from a rate of 5.6 percent in 2014 to 2.2 percent in 2015. As a point of reference, the government-wide improper payment rate average is 4.39 percent.

Earlier in the year, Willis stated that cutting the rate in half demonstrated RMA’s “commitment to operating a well-run program that protects both taxpayers and farmers.”

Sadly, this success story is not one that you’ll hear about from the likes of the Environmental Working Group (EWG), the American Enterprise Institute (AEI), or the Heritage Foundation. These professional critics need something crow about in order to stay relevant and expand their own coffers even if it is at the expense of American agriculture.

But, as the old saying goes, they are entitled to their own opinions, but not their own facts. The facts are clearly on the side of crop insurance.

A Secure Nation Begins with a Secure Food Supply

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“I firmly believe that America’s first line of defense is our ability to feed and clothe the people,” Major General Darren G. Owens warned the House Committee on Agriculture during a recent hearing that focused on testimony from military leaders to highlight the link between agricultural production and national security.

Maj. General Owens continued to explain, “we would all be dependent on other nations” that would put our food security and national security at risk without strong agricultural production in this country.

These sentiments echo the beliefs of most Americans according to a recent national poll that the National Crop Insurance Services (NCIS) commissioned. By an 81 to 15 percent margin, voters polled said that, “a strong and thriving American farm industry is critical to American national security” with 92 percent of voters supporting federal spending to help farms and farmers.

In particular, Americans support crop insurance because it is a shared investment with a shared return for both farmers and taxpayers. Farmers purchase policies to protect their crops from catastrophic events and only receive an indemnity when they suffer a loss. The federal government discounts policy premiums to make policies affordable. Farmers have the peace of mind to know they can make it another year if a single hailstorm, flood, or drought destroys their crops. Taxpayers have assurances that they are not on the hook for costly, unbudgeted disaster assistance when calamity strikes.

“From my perspective, food security is first of all about ensuring that the plentiful supply of high quality food and agricultural products that we enjoy continues to be available,” said Major General James R. Sholar who also testified at the hearing.

Crop insurance ensures everyone has an affordable and secure food supply, which ultimately makes us a more secure nation.