For Farmers, Risk Comes in Many Forms

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When thinking about the risks faced by farmers as a part of their daily lives, what is first to come to mind are the risks related to Mother Nature, like drought, flooding, freezes and hail. But there are many other obstacles that farmers face in addition to the elements that they must manage in order to produce the feed, food, fuel and fiber that we need.

The May issue of Crop Insurance TODAY provides a broad overview of the tools farmers have at their disposal to manage the risks they face, examining where specific strategies are useful, the risks they can and cannot mitigate, as well as assessing their limits and overall value to farmers.

While crop insurance is the most ubiquitous risk management tool used by farmers – 89 percent of total planted acres in 2013 are insured – there are other tools that many farmers use as well. These tools are, by category:

Agricultural Practices

• Crop rotation. Crop rotation is the practice of growing different types of crops on the same field in different years or growing seasons. One of the most common crop rotations in the U.S. is interchanging corn with soybeans.

• Crop diversification: Crop diversification is a strategy whereby farmers diversify geographically, or by crops, or both.

• Seed varieties. Hybrid seed varieties have been developed that produce plants that are tolerant to different kinds of stresses.

• Irrigation. Irrigation is the practice of bringing water to plants using various methods, including flooding the fields, overhead, pivot-irrigation and drip irrigation.

• No-till planting. No-till planting is a way of planting crops without breaking the soil through tillage. This practice increases the amount of organic matter and water maintained in the soil while decreasing overall erosion.

• Timing of planting and harvesting. Farmers must hit the window for the best time to plant to maximize the potential of their crop. The same is true for the harvest. For example, harvesting during a dry spell reduces the costs of drying the grain before storage.

• Pest management. Farmers and ranchers can use various herbicides to reduce competition from weeds and use insecticides and fungicides to combat unwanted insects and disease in farming operations. They may also employ scouting to detect pests to best time their applications.

• Use of advisors. Agriculture extension agents or professional crop advisors are present in most states to advise farmers and ranchers on a wide variety of topics, such as marketing, nutrient use or pest management. Usually, this advice is “free” or requires a “small” charge.

Marketing Instruments

• Product differentiation. Product differentiation is the process whereby farmers or ranchers manipulate the quality, characteristics or inputs involved in the production of their product in hopes of attaining a premium from the consumer. Examples of this in ranching would be “humane raised” or “free range.” Examples in farming would be “organic”, “certified natural” or use of specific varieties that improve processing performance (high oil, high fermentable starch, etc.).

• On-Farm Storage. For storable crops, farmers can invest in on-farm facilities to store their production allowing sales to be prolonged until prices improve.

Financial Instruments

• Crop insurance. Crop insurance is a private insurance policy, purchased by a farmer or a rancher – partially underwritten by the federal government – that insures crops or livestock against price volatility and/or weather losses.

• Marketing Contracts. Marketing contracts include the various types of contracts between producers of commodities and buyers that lock in prices in advance, including forward contracts. The product is owned and controlled by the producer during the production process. Similar marketing contracts may also be used by producers to acquire production inputs and reduce input price risk.

• Options and futures contracts. Both options and futures contracts are specific types of marketing contracts – that protect against price risk only – between the producer and a specific buyer at a price on a given date. The basic difference between the two is that options give the holder of the contract the right to buy or sell the asset during a given time period, while the holder of a futures contract is obligated to take delivery or deliver the asset by the end of a given time period under the terms of the contract.

• Production contracts. A production contract is a legally binding agreement made between two parties, generally a producer and a contractor, where the producer transfers ownership or control of the product to the contractor. For example, the producer may agree to sell the output prior to production or agree to produce the ouput that is owned by the contractor in exchange for a payment. The agreement is for a fixed period of time – either one crop year or several production cycles – and begins prior to production.

Financial Strategies

• Share rent and variable cash leasing arrangements. Rather than own farmland, a producer may rent farmland under various rental arrangements. For example, land may be rented just for cash or rented under a flexible-cash arrangement where the landlord may pay some expenses or bear some risk. Or farmland may be rented under a share rent arrangement where the landlord receives a share of production as rent.

• Maintaining cash reserves and liquidity. Holding cash or near-cash allows farmers to weather adverse events. Essentially this tool is self-insurance.

It should be noted that most farmers use many of the above strategies to protect against the many risks they face during any typical year. The question for the farmer is one of profitability: How many risk mitigation strategies can be employed while maintaining the profitable margins needed to keep the farm running?

Also, most of the strategies above only mitigate fairly specific threats, and not the whole gamut of risks faced by farmers. Crop insurance is the only tool available that helps farmers mitigate both natural disasters and market fluctuations, which is why it’s a complimentary risk management tool to all of the above strategies.

In 2013, nearly 294 million acres (more than 89 percent of total acres planted to crops) are protected by crop insurance, which, along with some of these other strategies listed above, will help farmers and ranchers manage their risks. That statement alone underscores the fact that crop insurance has become the preferred risk management tool for America’s farmers, and underpins the stability of the nation’s food supply.

Crop Insurance Is Critical for this Nation’s Fresh Produce Industry

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Sometimes, timing is everything. And for fresh fruits and vegetables, there has been a recent convergence of trends and preferences that bode well for the industry.

The first is the federal government’s decision to ensure that more fresh fruits and vegetables are consumed as part of the school meal programs, which will expose children who would otherwise have limited access to these important foods. The other trend is the locavore – or eating local – movement, that underscores the importance of buying local and eating fresh produce.

But to ensure that fresh fruits and vegetables are available for a population that is increasingly asking for them, we need to have wise public policies in place that help the farmers who grow these important foods to manage the many risks they face brought on by Mother Nature.

And for specialty crop growers – farmers who grow this nation’s fresh fruits and vegetables, nuts and berries – the quintessential risk management tool is crop insurance.

Many of the public policies that underpin food production – typically known as farm programs – chiefly support the major food and feed commodities like corn, wheat and soybeans. Those crops and the programs that support them are critical and have been a major factor behind why the United States is a global player in food production.

But for those raising specialty crops, crop insurance is the only public policy tool available to deal with extreme weather patterns. Crop insurance is a public-private partnership whereby farmers purchase their own policies to cover the risks they choose to pay for. And farmers are quite happy to purchase it, having spent $4.1 billion out of their own pockets in 2012.

There has been a lot of media attention about the historic drought of 2012, and deservedly so. But that drought was preceded by a very devastating late spring freeze here in New England that nearly wiped out a year’s worth of income for many of the growers who raise this nation’s fresh apples.

Without the protection of crop insurance, these growers might have been completely knocked out of business from such a devastating freeze. And the ones who hadn’t purchased crop insurance might have been. But the majority of the region’s farmers who purchase crop insurance every year, were able to bounce back from the freeze, continue to care for their orchards and prepare for the 2013 crop.

But having just one bad year would have actually been good news for me. Six out the last seven years, I’ve had hail damage on my apple crop. Last year, I lost 90 percent of my apple crop on that late frost and then the other ten percent was demolished by hail. For my peaches, another big crop on my farm, I’ve also had major losses 6 out of the last 7 years. Needless to say, if I hadn’t purchased crop insurance, I would have had many lean years in a row.

Since crop insurance is sold, managed and delivered by the private sector, when disaster strikes, indemnity checks usually arrive less than a month after the paperwork is completed. In the past, when farmers would rely on disaster assistance from the federal government, it took months, or more than a year in some cases, for those funds to finally reach the hands of the growers who had lost everything. And for a grower whose entire apple crop has just been frozen, a year can be about 11 months too long.

Crop insurance is available for 128 different crops, and that list is expanding. In some ways, the abundance of America’s farm sector seems like a miracle, but it’s not. If it weren’t for hard work, investment, infrastructure and crop insurance to manage some of the major risks, there might be a lot fewer consumers enjoying America’s fresh fruits and vegetables.

Tom March grows fruits and vegetables on his farm, which has been in the family since 1915, in Bethlehem, Connecticut.

This op-ed appeared in the Hartford Courant on July 29, 2013.

New Video Highlights Success of Crop Insurance in Managing Disaster

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America’s Farmers Bounce Back from Record Drought of 2012

On the heels of the worst drought in decades, Americas farmers — and the rural economies they support — bounced back and are expecting a record corn crop this year, due in part to the fact that 86 percent of planted cropland was protected by crop insurance last year.

“America’s breadbasket rebounded after a punishing drought and farmers have shown that with the right risk management tools in place, they are among the most resilient and productive workers in the nation,” said Tom Zacharias, president of National Crop Insurance Services (NCIS).

A new NCIS video offers an oversight of risk management in agriculture and the various risks farmers face, including those from Mother Nature, market forces and rising input costs. “America used to handle agricultural risk through unbudgeted, after the fact ad hoc disaster bills,” noted Zacharias, adding that this was all taxpayer funded, very costly, and slow to deliver.

Finally, America turned to a before the fact, affordable and more accountable way to handle agriculture disasters: Crop insurance. In 2001, crop insurance began its rise in prominence as farmers’ most useful, and popular risk management tool, all while overall federal agriculture spending was trending down. “The idea here was to reduce taxpayer burden and put the system on a planned, sustained basis, noted Zacharias.

The drought of 2012 put that model to the test. “Crop insurance was credited with helping to keep the rural economy afloat,” he added, noting a recent study that credited crop insurance with saving 22,000 jobs and $2.2 billion in four Midwest states alone after the 2012 drought. “This was an enormous benefit,” he added, noting that as we saw the drought sweep through the nation last summer, “indemnity payments were paid back to the farmers within ten to thirty days, and money went back into the rural communities.”

“An important part from the aspect of farm policy is that there was no call for an ad hoc disaster bill,” he added. “And taxpayers were not on the hook for the whole thing.”

Farmers Belong on a Tractor, Not Under the Bus

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By Mark Gerdes

One of the beauties of life in our great democracy is that spirited debate about important public policies is not only expected, it’s encouraged. One of the intrinsic rules of these discussions, if they are to be productive and fair, is that the policy itself should be scrutinized from every angle without demonizing or castigating the various groups affected by these policies.

In other words, we should be able to discuss education policy without demonizing teachers or impugning the integrity of students. Likewise, we should be able to debate defense policy without bashing soldiers or peace activists. Unfortunately, when it comes to discussions about farm policy — in particular the decision by many farmers to purchase crop insurance — critics have chosen to throw farmers under the bus time and time again instead of debating the policies on their merits.

Last year, we had one of the worst droughts our nation has seen in decades. And while America’s farm families watched their crops shrivel in the fields, some critics said “farmers are praying for drought, not praying for rain.” Another critic said that farmers who purchased crop insurance last summer “were laughing all the way to the bank.” In short, they argued farmers make more money from collecting a crop insurance check than harvesting a crop, and in fact they would prefer to watch their crops wither or livestock die and collect a crop insurance check than to take the fruits of their labors to market.

As a farmer, I must point out that statements about the integrity and motivation of farmers and their decision to purchase crop insurance demonstrates both incredibly poor math skills as well as a complete lack of understanding about the core values and beliefs of America’s farmers.

Take, for example, the charge that farmers hope their crops will fail so that they can collect a crop insurance check. Critics are quick to point out that more than $17 billion will be paid out to farmers and ranchers who purchased crop insurance for their losses in 2012. The implication here is that the $17 billion is some sort of windfall being bestowed upon farmers by the federal government.

But the math tells a very different story. Insurance policies must first be purchased, and then policy holders must absorb the policy’s deductible after suffering a verifiable loss, before they can collect a single dime. In 2012, farmers paid $4.1 billion out of their own pockets to purchase crop insurance policies. Then, farmers shouldered $12.7 billion…

Mark Gerdes, a fourth-generation farmer, raises corn, soybeans and cattle on 2,800 acres in Aredale, Iowa. This op-ed appeared in the Ames Tribune on June 7, 2013.

NCIS Responds to Unfair Bloomberg Series on Agri-Talk

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Mike Adams, radio host of Agri-Talk, recently interviewed National Crop Insurance Services President Tom Zacharias regarding a recent Bloomberg News series that contained numerous factual errors and obvious bias, claiming for instance, that the government “pays farmers to buy [crop insurance] coverage.”

“Farmers are not paid to buy crop insurance,” noted Zacharias. “Farmers pay for crop insurance.” Zacharias explained that crop insurance was a new kind of risk management tool which required farmers to purchase policies with their own money in order to enjoy the relative protection that crop insurance provides.

Zacharias noted that farmers “spent about $4 billion of their own money in 2012 for premium, and last year when we had the catastrophic drought through the Midwest, before those deductibles kicked in, farmers absorbed just under $13 billion in uninsured losses.”

He explained that contrary to farm safety net programs of the past, there is no subsidy in the traditional sense of the word to farmers who purchase crop insurance. “Farmer premiums are discounted which makes crop insurance affordable,” he said, adding that farmers only receive an indemnity payment if they receive a verifiable loss.

Zacharias also pointed out that Bloomberg News led its readers to believe that the costs from last year’s historic drought had become the norm, “not putting it into perspective of what we were going through – the drought of 2012,” he said.

Zacharias told Adams that contrary to the claims in the Bloomberg News series, crop insurance companies are never guaranteed a profit; in fact they have suffered losses in a number of years. “Companies lost money last year, so I don’t think that they view this as a guaranteed profit.”

Zacharias explained that the lengthy series also failed to mention that crop insurance has taken $12 billion in funding reductions since the 2008 Farm Bill. “So there’s a laundry list of issues here” that Bloomberg failed to report correctly or completely omitted, he said.

“Unfounded, sensationalist headlines are uncalled for, it does not serve the public interest, nor the Bloomberg readership.”

Congressional Leaders, Academics, Government Leaders, Farm Leaders and Farmers Underscore Value of Crop Insurance

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Over the last several years as the future face of U.S. farm policy has been debated, crop insurance has emerged as the best and most cost-effective risk management tool for farmers, ranchers and taxpayers. The debate over crop insurance, however, has not been confined to the halls of Congress. It has happened on the airwaves, in the newspapers, in academia and on tractors in the fields.

As a public-private partnership, crop insurance is a new hybrid risk management tool whereby farmers purchase policies that are partially discounted by the federal government. As Senate Agriculture Chairwoman Debbie Stabenow pointed out during the recent Farm Bill debate, when a farmer signs up for crop insurance, “the farmer gets a bill, not a check.” And many, many others have voiced their opinions too:

  • “Crop insurance payments made a huge difference for many farmers that suffered drought losses. U.S. crop insurance is easy and a comprehensive marketing tool that protects against yield losses and price declines. The program works.” — William Edwards, an agricultural economist at Iowa State University, Bloomberg News, January 15, 2013
  • “Over the last 15 years, crop insurance is where we have been trying to help move farmers in terms of taking advantage of risk management tools for their crops. It is still the central focus of where we think farmers ought to be able to have easy access to insure their crops and insure some type of revenue out of it. It makes the most sense to me and always has.” — Congressman John Boehner, Agri-Pulse interview, March 4, 2013
  • “After two years without rain, Kansas producers are dealing with a severe drought. It is critical that risk management tools like crop insurance are in place to make certain the United States remains the most food-secure country in the world. Crop insurance is an example of a public-private partnership that uses taxpayers’ dollars wisely and benefits farmers and consumers alike.” — Kansas Senator Jerry Moran, Topeka Capital-Journal, March 26, 2013
  • “But farmers aren’t the only group that has come to love crop insurance. Bankers love it too. That’s because when farmers approach bankers for production loans, bankers regard a crop insurance policy as a form of collateral. Additionally, bankers know that a farmer who has paid his own money for a crop insurance policy is a farmer who has risk management in mind.” — Bill Bridgeforth, a farmer from Tanner, Alabama, in the Athens News Courier, April 27, 2013.
  • “The federal government provides crop insurance subsidies to farmers in part to achieve high crop insurance participation and coverage levels, which are intended, according to USDA economists, to reduce the need for ad hoc disaster assistance payments to help farmers recover from natural disasters which can be costly.” — GAO Report on Crop Insurance, March, 2013
  • “To this day, I have yet to have a single producer call me with a complaint about crop insurance. That is a testament to just how well your agents, your adjusters, the companies, and Risk Management Agency (RMA) worked together in one of the worst droughts in the history of this nation.” — USDA Under Secretary Michael Scuse, February, 2013
  • “But there are those who are making uninformed and uneducated criticisms about crop insurance – and America’s farmers – in the midst of this national tragedy. According to the Washington-based Environmental Working Group, farmers have been “praying for drought, not rain.” Really? I’ve seen a lot of looks on the faces of my fellow farmers this past summer, as their crops and have withered despite their best efforts and their hopes for a great harvest have been dashed. — Mark Drewes, a farmer from Custar Ohio, in the Bowling Green Sentinel Tribune on September 18, 2012.

CROP INSURANCE IN ACTION: Tom & Mike Audet, Orwell, Vermont

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Ledge Haven Farm might be one of those Vermont farms that would be most likely to end up on a postcard. The place is just about everything you would think of when you put the words Vermont and agriculture together. The 550-acre farm, owned by brothers Tom and Mike Audet, is a family-run dairy and maple sugaring operation located near the idyllic shores of Lake Champlain, just down the road from historic Mount Independence in Orwell, Vermont.

The Audet brothers have been in business together since 1972, having been raised on a farm just down the road that is still operated by yet another Audet brother. “We have been making pure Vermont Maple Syrup for over 40 years right here on our farm,” says Tom Audet. “It is an Audet family tradition with three generations of our family pitching in to make the final product,” he says.

The brothers manage their risk using one of the gold medal standard rules of modern agriculture: Diversify. The brothers milk 270 dairy cows, attend to another 280 young stock and breeding stock, manage 450 acres of corn, hay and alfalfa, as well as tapping hundreds of maple trees on the 50 wooded acres of the property. “Diversifying is our first line of defense in managing risk, and crop insurance is the second,” said Audet.

Read Tom and Mike Audet’s story here.

Crop Insurance Keeps Rural America Healthy and the Country Fed

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Hearings are already starting in Washington on the next Farm Bill, and major decisions will soon be made about which tools best manage the many risks faced by farmers. I count myself as one of the many farmers who will stand together and urge Congress to “do no harm” to crop insurance.

Crop insurance has become the frontline risk management tool for farmers in virtually every corner of this great nation. Crop insurance is a public private partnership whereby individual farmers, like myself, put some “skin in the game,” by purchasing crop insurance policies to manage the many risks we face in this line of work. It does not guarantee profits, nor does it ensure farmers cannot fail. It protects farmers against circumstances beyond their control but does not prevent poorly managed farms from going under. In essence, it allows market forces to work.

Farmers gladly purchase crop insurance, and last year spent $4.1 billion out of their own pockets to do so. And how well is crop insurance working? Last year, most of the Midwest sizzled under a heat wave and drought that cut harvests in half for some farmers and virtually destroyed entire crops for others. When all was said and done, it was the worst drought this nation had seen in decades.

In the past, such widespread destruction in the Food Belt would have ignited a massive call for disaster assistance from Washington. Forty-two such emergency disaster bills in agriculture cost taxpayers $70 billion since 1989, according to the Congressional Research Service. Curiously, after last year’s drought, there wasn’t a single widespread call for disaster assistance for cropland.

And the simple reason why is that 86 percent of planted cropland was protected last year by crop insurance. But crop insurance isn’t just a risk management tool for farmers and a disaster management tool for the federal government; it’s also a rural investment engine for small-town America.

In fact, according to a new study by economists in Lincoln, Nebraska, indemnity payments from farmers who purchased crop insurance generated off-farm economic impact of nearly $2.2 billion across Iowa, Nebraska, South Dakota and Wyoming. That figure includes $721 million of labor income that preserved 20,900 off-farm jobs in the region.

The economists noted “the income from crop insurance payments can play a key role in stabilizing local economies both in the year of the drought and in subsequent years. In agricultural states such as Iowa, Nebraska, South Dakota and Wyoming, crop insurance can also play a key role in stabilizing the statewide economies.”

Here in Illinois where the losses were steep in 2012, nearly $3 billion in indemnity payments flowed back into the state to cover the losses from the drought. And because farmers need to buy seed, equipment, energy, fertilizer and services, they are constantly reinvesting back into their communities. On good years, that money comes from their harvests. On bad years, that money comes from crop insurance.

You see, crop insurance is not only a risk management tool, but also a working capital insurance tool. In short, unlike farmers in other countries, American farmers aren’t forced to bank all of their money on the good years to weather the bad. Instead they can reinvest in their farm and by extension in their communities year after year, generating wealth for other families and much-needed rural development.

For many farmers who are highly leveraged, purchasing a crop insurance policy is nearly a requisite to obtaining a production loan from a bank. And for farmers who are well established and not in need of production loans, the ability to purchase a crop insurance policy allows farmers to pay off other loans faster, generating much-needed economic activity in other sectors. I would not be paying down my debt as quickly if I were required to hold cash reserves in the absence of crop insurance to account for Mother Nature’s whims or volatile futures markets.

There are few things you can count on in farming, and that’s why we are all hoping for a new, five-year Farm Bill. And at its centerpiece, let’s hope there is a strong, vibrant crop insurance policy, a policy that helps keep the ag sector moving when Mother Nature throws us a curve ball; a policy that provides food security to the nation, and the world.

Andrew Bowman is a fifth-generation farmer from Oneida, Illinois.

This op-ed appeared in the Peoria Star Journal on May 18, 2013.

Crop Insurance Costs Americans Two Cents Per Meal, According to CBO Data

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Americans will spend ONLY two cents per meal on crop insurance – the risk management tool most used by farmers to protect themselves from the whims of Mother Nature – through FY 2023, according to CBO’s latest 10-year budget projections. That figure is up from one cent per meal, which was the average cost for the period of FY 2000 to 2011.

Those estimates might come as a surprise to many Americans, who are watching ongoing Congressional action surrounding the five-year, $100 billion per year Farm Bill. But most of that money actually goes towards spending on domestic food programs, with roughly 15 percent directed to farm programs and crop insurance.

The cost per meal figure is derived from CBO’s projected crop insurance program outlays, the Census Bureau’s projections of total U.S. population, the Department of Commerce’s data on consumption spending on food, and the assumption that consumers eat three meals a day.

Total government spending on crop insurance is projected at roughly $8.5 billion per year, with farmers paying $4 billion out of their own pockets to purchase their policies. With the elimination of direct payments in the Farm Bill currently being discussed, crop insurance will be the primary risk management tool available to many farmers, and the only risk management tool available to some farmers, like specialty crop growers.

But crop insurance faces some hurdles in the upcoming House and Senate debate, which could leave it strained or incapable of handling upcoming farm crises. “The U.S. experienced the worst drought in decades last year and we didn’t have a crisis in agriculture,” said Keith Collins, former USDA chief economist. ““Do we want to risk unraveling that?”

Because most farmers carry crop insurance, despite back-to-back years of poor harvest due to weather anomalies, the U.S. farm sector remained vibrant and was one of the driving forces that pulled the U.S. out of the prolonged, deep recession.

Learn more about crop insurance here.

CROP INSURANCE IN ACTION: Jimmy Miller, Interlachen, Florida

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For centuries, blueberries were gathered from the dense forests and bogs by northeastern U.S. Native Americans, and they are one of the only fruits we consume that are native to North America. So when most of us hear about blueberry farms, we conjure up images of cool, damp climates and cold winters.

Jimmy Miller’s blueberry farm, which is well south of the Mason-Dixon line in Interlachen, Florida, in an exception. Miller has operated the farm, which is the oldest existing blueberry farm in the state, since 1979. Miller, along with his two daughters and son-in-law, operates the 124-acre operation using a variety of blueberries developed by the University of Florida that tolerate the summer heat and mild winters.

Miller explains that one of the main issues for blueberry growers in Florida is that the plants require at least 200 hours every winter where the temperature dips below 45. If that doesn’t happen, fruit production can tumble quickly.

But the primary risk is a freeze or hail. “We never had a real loss until this year,” said Miller. “It was an early spring, and then all of the sudden, we had a front blow through that dropped our temperature to 24 degrees,” he explained.

The next day, the Miller clan was hopeful that the crop would be okay, “but we also knew that it could be catastrophic,” he said. Thankfully for Miller, he always purchases crop insurance, so if the blueberries didn’t look better in a few weeks, he knew he’d be filing his first-ever claim.

Read Jimmy Miller’s story.

Good Farming Practices Aren’t Always Enough

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It is hard to talk about the state of Alabama without mentioning agriculture. Alabama boasts more than 48,000 farms, covering roughly 28 percent of the state.

But being a farmer in the Deep South – given our weather patterns – is like owning an unpredictable dog. One day it loves you, the next day, it bites you.

In farming, when that dog decides to bite you, it comes in the form of powerful thunderstorms, hurricanes or droughts. That’s why for every year of the last thirty-five years that I’ve farmed, I purchase crop insurance. In fact, I can’t even conceive of farming without crop insurance.

In the past, when large-scale natural disasters hit farmers, Congress was immediately pressured to pass expensive, ad hoc disaster bills that were completely paid for by the public. Such disaster bills, while appreciated by farmers, took up to a year or more to arrive. But farmers need money in hand quickly after disaster strikes, because they must start planning, and purchasing inputs, for the next season.

That’s the beauty of crop insurance. First of all, taxpayers aren’t stuck footing the whole bill if and when disaster strikes. Crop insurance is purchased by each individual farmer, tailored specifically to the crops grown, the land the farm sits on and the farmer’s tolerance for risk.

Crop insurance isn’t cheap by any stretch of the imagination. The policies I purchase cost several hundred thousand dollars a year. But I consider that just a cost of production, because if disaster strikes, I can expect my crop insurance indemnity in about a month or less, not the years it takes for federal help to arrive. Those months saved can mean the difference between success and failure in farming.

Farmers across the country spent $4.1 billion purchasing crop insurance policies in 2012. The policies purchased insured 271 million acres, or roughly 86 percent of all planted cropland in the U.S.

But farmers aren’t the only group that has come to love crop insurance. Bankers love it too. That’s because when farmers approach bankers for production loans, bankers regard a crop insurance policy as a form of collateral. Additionally, bankers know that a farmer who has paid his own money for a crop insurance policy is a farmer who has risk management in mind.

Of course like any other public policy, crop insurance has its enemies. Some of those groups used last year’s historic drought to not only criticize the availability of crop insurance, but to also attack the character of farmers like me, who purchase it. One group said that farmers were “praying for drought, not rain,” implying that farmers would get rich from their crop insurance policies.

I was one of those farmers who suffered from the drought last year and let me set the record straight: We do everything we can to have the highest production possible every year. We select a good variety of seed, purchase the best fertilizer and do everything we can to protect the crop. If there ever were any farmers trying to live off of crop insurance, they’re long gone. The cost of production is just too high.

But if America is going to continue to enjoy its plentiful and affordable food supply, the country must also focus on helping the next generation of farmers to gain their footing and learn the trade. To that end, I am a founding member and Chairman of the National Black Growers Council, which serves as a network for black men and women who are involved in agriculture. Our mission is to improve the viability and profitability of the black row crop farmers, and to develop black talent for the next generation of farmers.

To that next generation of farmers who is seeking my advice, one of the first things I’d tell them is to make sure crop insurance is a line item in your annual budget. Because all of the best farming practices in the world aren’t going to stop Mother Nature from raining on your parade, at least every now and then.

Bill Bridgeforth farms corn, cotton, soybeans and canola and lives in Tanner, Alabama.

This op-ed appeared in the Athens News Courier, on April 26, 2013.

CROP INSURANCE IN ACTION: Keith Miller, Great Bend, Kansas

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Wheat CropGreat Bend, Kansas, farmer Keith Miller looks at the big picture. Crop insurance, he declared, is not just an agricultural safety net for the farming community. It is an economic imperative.

“I do feel that the general public doesn’t understand that 95 percent of all farmers are trying to do the right thing,” he said. “If we didn’t have crop insurance in some form, the cost of food would go up considerably.”

“Crop insurance was a significant part of our operation,” he said, “even before the drought.”

Kansas, the biggest wheat-producing state in the country, has been ravaged by the worst drought to hit the Great Plains in a quarter century. All 105 counties experienced drought conditions, according to Gov. Sam Brownback as he appealed to residents to conserve water. Loss from the long-running arid condition beginning in 2011 was estimated at more than $2 billion.

Crop insurance has allowed the farmer to survive and get to the next planting season. Said Miller, “For the most part every farmer tries his best to raise a crop so we can feed the hungry people around the U.S. and the world.”

A third-generation farmer, Miller began with 400 acres of wheat farms in the 1970s. Today, he is farming land equivalent to acreage being farmed for a dozen of his father’s neighbors, the survival and expansion made possible by his hardy farming smarts, the grace of the Lord, and his insurance coverage.

“When I started, a tractor was $20,000 new and today they are $300,000 plus,” he said. “Today I am farming land that 12 of my dad’s neighbors were farming.”

His insurance coverage was able to cushion the blow, so to speak, when he experienced a “100 percent loss” from a major late freeze on his wheat crops.

“It froze when the wheat was pollinating and killed the plants,” he explained. He added that he was also covered for hail “and other disasters.”

The Farm Bill is extremely important to preserve a constant supply of safe food for the economy of the U.S., Miller said, echoing what almost every farmer acknowledges as a personal creed.

“If we were to lose the Farm Bill, the family farmer would start going by the wayside because they would not be able to stand all of the risks incurred in the farming industry,” he warned. “It would be the beginning of the end as we know [it for] the family farmers.”

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

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

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

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

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

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

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

Total Farm Safety Net Spending Drops By Two-Thirds as More Farmers Purchase Crop Insurance

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Total government spending on farm safety net programs – including all commodity programs and crop insurance – dropped by two-thirds from fiscal years 2000 to 2012, according to data provided by USDA and the Congressional Budget Office. The reduction took place as spending on commodity programs – including direct, counter-cyclical, loan deficiency and other payments which once represented the lion’s share of safety net spending – has been slowly phased down in favor of crop insurance, which is partially self-funded through farmer premiums and farmer deductibles.

Inflation-Adjusted Expenditures on Commodity Programs DisasterIn 2000, nearly $28 billion was spent on commodity programs and less than $3 billion on crop insurance. Over the course of 12 years, the overall amount of spending slowly but consistently fell and commodity spending and crop insurance spending equalized. In 2012, total farm safety net spending was $10 billion, and was split equally between the two.

During the same period, while spending on farm safety net programs dropped precipitously, the value of crop sales more than doubled, from roughly $93 billion in 2000 to nearly $220 billion in 2012. This exponential growth in crop values was cited by the Federal Reserve as one of the bright spots that brought the country out of the long recession, by bolstering rural America as well as giving a strong shot in the arm to U.S. exports.

Moving forward over the next two years, crop insurance spending will be up in 2013, due to the 2012 drought. Beyond that, USDA projections show spending on commodity programs will remain flat at $5 billion, while crop insurance spending will decline from the 2013 level. After that crop insurance spending slowly trends up, reflecting the increasing value of U.S. crops and continued expansion of crop insurance products that farmers can purchase. Also, Farm Bills proposed by both the House and the Senate will cut the overall farm safety net even more moving forward.

Keep crop insurance affordable in new Farm Bill

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Bing Von Bergen.jpgThere is a lot of buzz in Washington again this year about the prospects of a farm bill. For those of us in agriculture, a five-year farm bill is one of the few things Congress can do to take some of the guesswork out of farming.

That’s because farming is an inherently risky venture, and Mother Nature never seems to run out of tricks to play on America’s farmers. Floods one year, droughts the next, followed by a year or two of great weather peppered with a tornado, a late-spring freeze, and then a crash in commodity prices just as your crop comes into harvest.

How in the world can one businessman plan for all of those possibilities? The simple answer is crop insurance.

Crop insurance is a nationwide program that enables farmers to purchase insurance to partially protect themselves from both weather-related and market-related disasters. I’ve been a wheat farmer for 34 years, and when I started farming, crop insurance was just a shell of what it is now. Back then, it was not widely available, was not purchased by many farmers, and was completely administered by the federal government.

Today’s crop insurance policy is a completely different animal. It’s partially underwritten by the federal government but sold and delivered by private sector insurance companies, ensuring efficient handling of claims and speedy delivery of indemnities when claims are filed. Today, it protects about 86 percent of planted cropland in the United States.

Most Reliable Safety Net

Farmers today find crop insurance to be critical, and in 2012, they spent $4.1 billion out of their own pockets to purchase its protection. One thing that farmers today can agree on, despite which commodity they grow, is that in the next farm bill, crop insurance is a top priority. It’s our principal, and most reliable safety net.

As unbelievable as it sounds, during last summer’s great drought, which was the worst this country had seen since the Dust Bowl years, there were groups claiming that “farmers are praying for drought, not praying for rain.” People who make an appalling statement like that have no business talking about agriculture.

But those same groups are calling for big changes in crop insurance.

One of those changes is an idea called means testing. In a nutshell, means testing would force many large farmers to pay more for their federal crop insurance coverage, which could keep many of them from buying any crop insurance coverage at all.

Means testing would be a big mistake and could spell higher premiums for all farmers who purchase crop insurance. Why? Because by parsing out the biggest farmers, the pool of insured shrinks and thus the risk for those remaining gets bigger. For example, if a car insurance company excluded the best drivers from their pool of insured, the only drivers left would be those who are the riskiest, and thus the costliest to insure. This fact would drive up the premiums for all remaining drivers.

Risky Montana business

The fact is that farming in Montana is riskier than in other parts of the country because our rainfall is generally much less than in the Corn Belt. The fear for me as a wheat producer is that means testing would alter the mix of those who purchase crop insurance and skew it against those of us who are in the high-risk areas. Premiums in Montana, and through out the rest of wheat country, will go up.

Think about it this way: this country has faced back-to-back years of major natural disasters. The year 2011 saw record floods, freezes, droughts and even a hurricane. Then 2012 was the worst drought we’ve seen in decades. Yet despite this level of farm loss, there wasn’t a single call to Washington for a farm disaster bill for cropland. That’s because most farmers were already protected by crop insurance policies they had purchased for themselves.

When Congress begins its discussion of the next farm bill, crop insurance is sure to be a key topic of conversation. Congress should remember a simple saying that has been my north star through my life: “If it’s not broken, don’t fix it.” Congress should do no harm to crop insurance.

Bing Von Bergen, the president and acting CEO of the National Association of Wheat Growers, is a farmer from Mocassin, Montanta. This op-ed appeared in the Billings Gazette on April 27, 2013.

Farmers Shoulder Nearly $17 Billion in Losses in 2012

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Before farmers received a single dime in crop insurance indemnity payments, they shouldered $12.7 billion in losses as part of their deductibles to crop insurance policies, according to a guest editorial published today by Tom Zacharias, president of National Crop Insurance Services (NCIS).

“When combined with the $4.1 billion farmers paid out of their own pockets to purchase crop insurance last year, total farmer investment neared $17 billion,” explains Zacharias in the May 6 edition of Roll Call/CQ.

Zacharias noted that it was important to get those numbers out because of the ongoing assault on the “the men and women who put food on our tables and clothes on our backs” over their purchasing of crop insurance. “Critics called crop insurance a farmer bailout and said things like farmers were ‘laughing all the way to the bank’ and were ‘praying for drought, not praying for rain,’” the article notes. “Farmers even have been compared to cheap drunks at an open bar and told to pay their fair share.”

The article points out that when assessing the value of crop insurance, there are undisputed facts of what transpired after the worst drought our country has seen in decades:

  • Indemnities to farmers cost about $17 billion, but “thanks to crop insurance’s design, these indemnities were not completely borne by taxpayers because farmers and insurers picked up a major portion of the costs and sustained significant economic losses.”
  • “This was the sixth time since 1983 that crop insurers lost money. Compare that to the property and casualty insurance industry, which has lost money only once as far back as data is available.”
  • “It is also important to note that when crop insurance premiums exceed losses, the government sees underwriting gains that help offset payments in bad years. In fact, the government experienced nearly $4 billion in gains from 2001-2010.” And just as importantly, “Congress was not asked to fund an ad hoc disaster bill despite the historic devastation endured by our agricultural producers.”

Zacharias welcomed reasoned debate on farm policies, but added that “lawmakers and the American public deserve an intelligent conversation about the future of agriculture that is kept to just the facts.”

To see the guest opinion in its entirety, click here.

NCIS, RMA Team Up To Help African American, Limited Resource Farmers Develop Risk Management Plans

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Thanks to a joint effort between USDA’s Risk Management Agency and National Crop Insurance Services (NCIS), limited resource farmers and African American producers of specialty crops and under-served commodities in Mississippi and Arkansas were instructed on how to develop personal risk management plans in five risk areas..

The courses consisted of three, day-long structured workshops, held roughly one month apart and lasting six hours each day. Participants, who attended workshops in either Pine Bluff, Arkansas or Jackson, Mississippi, were instructed on how to manage risk in the areas of production, marketing, financial, human resource and legal. The instructors included Dr. Albert Essel, Delaware State University and Dr. Laurence M. Crane, NCIS.

The classes were organized by NCIS and funded through a Cooperative Agreement from RMA, which selected several areas in the country where rural poverty was endemic, to focus its resources. Over the course of the workshops, participants were educated in the various risks they could expect when running farm and ranching operations. The goal was that by the end of the third class, each farmer would leave with his or her own personalized risk management plan in hand.

NCIS_carousel_image_62The seminars sought to educate producers through a combination of instruction, discussion, interactive group activity and roughly 60 hours of homework assignments (20 hours after each workshop). “These classes are a great opportunity to help a group of eager, hard-working farmers learn more about managing the risks they personally face on their farms and how to better prepare themselves for the adversity that is all too common in agriculture,” said Dr. Crane.

The classes also allowed farmers and producers to network and share best practices with their peers, helping to build valuable business connections that could prove profitable in the future. “Not only did students walk away with valuable risk management plans and risk mitigation strategies, they also made invaluable contacts with other farmers who have faced many of the same challenges they do,” said Dr. Essel.

Essel gave an overview of many of the risk mitigation strategies available to farmers, including crop insurance. “Crop insurance can be very important to farmers who are growing crops that are insurable,” he said.

Many of the students and local extension agents who attended, applauded the workshop series and expressed hopes that follow-up courses would follow. “In addition to the students who have already attended these course to have a refresher, there are many, many more people in this area who would benefit from attending this seminar who just couldn’t make it this year,” said John Coleman, a research associate with Alcorn State University’s extension program.

Crop Insurance: An Approach That Better Fits This Nation’s Fiscal Reality

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The historic drought that wilted the corn and soybean fields of Illinois and other Midwest states was one of the costliest events to hit rural America in decades. As the nightly news reported, losses on farms in large swaths of the Midwest were staggering, with some farmers having such low yields that harvesting was a waste of time.

Patrick editedI feel like I live in an oasis. The drought and heat wave that crippled farmers in neighboring counties and nearby states somehow spared my farm and a few others here in north central Illinois. I don’t know if it’s where the farm is located, the soil it sits on or just the luck of the draw in getting a few rain showers here and there, but somehow, I was spared. This makes me feel lucky, on one hand, since I did not face the dread of losing my crops, but guilty on the other hand because so many other farmers did.

In past years, a disaster on this level would have triggered a massive, ad hoc disaster bill in Congress, which would have given every farmer in Illinois and most other Midwest states – including farmers like me who had a good crop –federal disaster assistance. This approach to farm disasters is not only expensive for taxpayers but wastes money by offering a “one-size-fits-all” remedy.

Forty-two such emergency disaster bills in agriculture have cost taxpayers $70 billion since 1989. That’s a very expensive, cumbersome and untargeted approach to managing natural disasters. Realizing that fact, Congress, in the mid 1990s, decided to encourage farmers to purchase crop insurance by offering them a discount on their premiums if they did so. The idea was that if crop insurance was affordable and widely available, farmers would already have insurance in place when a natural disaster strikes.

And guess what? It worked. The year 2011 saw an unprecedented string of natural disasters, ranging from an early freeze, to floods, droughts, wildfires and hurricanes. The year 2012 saw the worst drought in decades. But despite these calamities, Congress wasn’t pressured for a major farm disaster bill, because more than 86 percent of planted farmland was protected by crop insurance in 2012.

That’s why I buy crop insurance every year to protect my farm, my family and my investment. Crop insurance is a public-private partnership that has become this nation’s new hybrid approach to risk management, and taxpayers don’t pay out all of the losses when disaster strikes. Private insurance companies take a hit, and farmers fund much of the payments through premiums paid out of their own pockets.

And farmers are happy to fork over more than $4 billion annually because they love crop insurance. First, farmers sit down with their crop insurance agents and design and purchase their own plans, tailored specifically to their farms, their crops and their comfort with risk. This gives farmers some peace of mind when the things go awry.

When disaster strikes and there is a verifiable loss, crop insurance indemnities are managed and delivered by private sector companies, usually arriving within 30 days of a claim being finalized. Large disaster bills – like the Hurricane Sandy relief bill – took three months just to pass Congress and will take months more to get help into the hands of the victims.

I started buying crop insurance about 11 years ago, because in farming, the costs of the inputs are so high, that you have to have some kind of backup plan in place. In addition, most of the farmers I know have to borrow operating loans every year from banks, which often require crop insurance as collateral for the loan.

Consumers should like crop insurance, too. The availability of a safe, affordable and healthy food supply requires the presence of some form of disaster protection for farmers, who increasingly face wild weather patterns that challenge the food production system. In the U.S., the ability for farmers to purchase crop insurance is actually this nation’s “insurance policy” against widespread food shortages or sharp price hikes in food products.

I sleep a heck of a lot better at night because I know I have crop insurance coverage. If I have a major loss, I know I have a backup plan. I certainly won’t make any money off of my insurance indemnity, but I also won’t lose the farm. And if I’m lucky enough to not have a loss, I collect nothing other than the proceeds from selling my crop — which is the way the market is supposed to work.

Patrick Solon is a corn and soybean farmer and lives in Streator, Illinois. This op-ed appeared in the Ottawa-Streator Times on March 15, 2013

NCIS Releases ‘Crop Insurance: Just the Facts’

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As the nation’s crop insurers prepare for the Farm Bill and funding deliberations in the future, National Crop Insurance Services (NCIS) has released a detailed question-and-answer resource laying out the facts about crop insurance and dispelling some of the most common arguments against crop insurance put forth by its critics.

“Crop insurance is the single most important risk management tool available to farmers today, and the public needs to understand why it is so valuable, how it benefits taxpayers and how it helps maintain a stable agriculture for the benefit of consumers,” said Tom Zacharias, president of NCIS.

“Crop Insurance: Just the Facts” resides on the “About Crop Insurance” page on the Crop Insurance Keeps America Growing website where it will be a continuously updated, convenient and accurate resource for industry, farmers and consumers. “This resource will provide a much-needed explanation on the value and need for crop insurance,” said Zacharias.

The series covers important topics such as how crop insurance benefits the public, economics of the industry, the globalization of risk management, benefits to producers, and many other important issues.

Zacharias noted that when it comes to the mechanics of crop insurance policies, why farmers spent more than $4.1 billion out of their own pockets last year purchasing it, and why it is the risk management tool of the future, there is a lot of misinformation and misrepresentation about the program. “Crop Insurance: Just the Facts,” lays out the details and provides a balanced and reasoned perspective,” he said.

Congressional Leaders, Administration Officials and Farm Groups Praise Crop Insurance

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“Over the last 15 years, crop insurance is where we have been trying to help move farmers in terms of taking advantage of risk management tools for their crops,” House Majority Leader John Boehner told Agri-Pulse during a taped interview. The leader’s comments came as both the House and Senate began hearings on the next Farm Bill and would be debating the future of farm safety net programs.

Boehner assured listeners that crop insurance would remain as a centerpiece for managing risks on the farm. “It is still the central focus of where we think farmers ought to be able to have easy access to insure their crops and insure some type of revenue out of it. It makes the most sense to me and always has,” he noted.

Crop insurance enjoys strong support in the Obama Administration as well. USDA Under Secretary Michael Scuse told attendees at the 2013 crop insurance annual conference that recent weather disasters have put the nation’s crop insurance system to the test, and the popular public-private partnership had met the challenge. “To this day, I have yet to have a single producer call me with a complaint about crop insurance,” he said. “That is a testament to just how well your agents, your adjusters, the companies, and Risk Management Agency (RMA) worked together in one of the worst droughts in the history of this nation.”

Just days after those comments were made, a coalition of more than 40 commodity groups, lending organizations, input suppliers and other agricultural industry stakeholders sent a letter to members of the House and Senate Agriculture Committees in support of meaningful and affordable crop insurance.

The letter reminded elected officials that in agriculture, risk is always present and that crop loss will occur in some part of the United States each year.

“The significant, widespread crop losses of 2011 and 2012 have clearly demonstrated the need for crop insurance protection and the public-private partnership of program delivery,” the letter stated.

The signatories noted that crop insurance is the cornerstone of most farmers’ risk management portfolios, and that farmers pay a premium to enjoy its protection. “Federal crop insurance provides and effective risk management tool to farmers and ranchers of all sizes when they are facing losses beyond their control, reduces taxpayer risk exposure, makes hedging possible to help mitigate market volatility and provides lenders with greater certainty that loans to producers will be repaid,” the letter stated.

Farmers Rely On Crop Insurance When Nature Turns on Them

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There is a huge story playing out right before our very eyes this year in agriculture that nearly everyone is missing: Despite the fact that this nation has faced two of the worst farming years in decades – with devastating drought in the Southern Plains and flooding in the Midwest in 2011, and widespread drought over major corn and soybean growing regions in 2012 – there has not been a single call for an ad hoc disaster bill from America’s crop farmers.

And why no calls for disaster assistance from crop farmers? Because 86 percent of planted farmland in 2012 was protected by crop insurance, the best risk management tool available to farmers. Before crop insurance was widely available, natural disasters like we have just experienced would have triggered a very costly, unbudgeted ad hoc disaster bill. Forty-two such emergency disaster bills in agriculture have cost taxpayers $70 billion since 1989, according to the Congressional Research Service.

Crop insurance was designed by Congress to largely replace the need for ad hoc disaster legislation, thereby helping to shelter taxpayers from the full costs of agricultural disasters and avoiding the need to enact new disaster assistance following every major farm disaster, such as was recently experienced with Hurricane Sandy.

Farmers rely on crop insurance, and they show their support by voting with their pocketbooks. In fact, since 2000, farmers have spent nearly $30 billion out of their own pockets to purchase crop insurance protection. Yes, crop insurance premiums are partially discounted by the federal government, but first and foremost, farmers must put skin in the game to gain coverage.

Farmers must suffer a verifiable loss to collect an indemnity. Contrary to allegations, most farmers purchase crop insurance and do not collect an indemnity. In fact, of the nearly 1.1 million policies purchased in 2012 – the worst drought we have faced in decades — less than half of the policies were indemnified. And that is in a really bad year.

When farmers who purchase crop insurance suffer a loss, they usually receive their indemnity checks within 30 days of finalizing the claim. By contrast, it took the federal government three months to pass the Hurricane Sandy relief bill, and it could take months more before those funds reach the victims.

Of course, it is easy to criticize insurance after a costly disaster, which is why opponents of crop insurance, like the Environmental Working Group (EWG), are jumping on the bandwagon right now. EWG is not only critical of farm policy, but farmers as well. In fact, this summer, EWG claimed that farmers were “praying for drought, not praying for rain,” a statement that makes no sense whatsoever and points to EWG’s lack of understanding of the farm community and rural economy.

In an unusual and catastrophic year like 2012, there will be heavy losses and all participants will feel the pinch. That is how all insurance works. In crop insurance, losses are shared by farmers, who pay premiums — $4.1 billion last year — and who have deductibles, thus shouldering a percentage of loss; private insurers when premiums do not offset losses, as was the case in 2012; and, the government, which acts as a reinsurer and provides premium support.

But losses by the federal government are buffered by underwriting gains that they make during the good years. That was the case from 2001-2010 when the government saw $3.99 billion in underwriting gains.

So while opponents of crop insurance criticize a policy that has been embraced by farmers, farm groups, bankers and politicians of all political stripes, it is noteworthy that critics have conveniently glossed over the fact that this policy ensures that taxpayers are never stuck with the whole tab, as they were in the era of ad hoc disaster assistance, and they can rest assured that the food production system is financially stable.

But two bad years in a row might actually turn into three. Unless the spring rains break this pattern, 2013 is starting off as an incredibly dry year for many farmers, with roughly 57 percent of the continental U.S. in some level of drought. Thankfully, most of those farmers will purchase crop insurance, a

smart, fiscally sound and reliable approach to risk management.

This op-ed appeared in The Hill’s Congress Blog on March 1, 2013. Tom Zacharias is president of National Crop Insurance Services in Overland Park, Kansas.

Farmer Leaders Call Crop Insurance “Most Important Risk Management Tool”

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Farmer leaders from across the country called crop insurance their “most important risk management tool” and said it is essential to keep agriculture strong and bring young farmers into an aging business. The comments were made during a panel discussion at the 2013 crop insurance industry conference in Indian Wells, California.

Curt Friesen, a member of the Nebraska Corn Board, said his son-in-law, who is currently a university teacher, is coming back to his fourth-generation farm. And given the capital requirements and risk associated with farming today, he said, a strong crop insurance policy will be the key to his son-in-law’s ability to succeed.

“He sees a future in agriculture,” Friesen noted. “I’m excited to bring him back but a little scared because I know times aren’t always going to be this good – crop insurance is going to be critical down the road for me to help him get started.”

Crop insurance helps highly leveraged beginning farmers qualify for financing, he told the group at the 2013 crop insurance industry conference. Mark Nichols, a cotton grower from Oklahoma agreed, adding it is important for growers of all ages.

“In our area, whether it’s a guy 25 years old trying to get into farming, or a guy like me in his 50s, it’s not a choice whether we have federal crop insurance,” Nichols said. “Our banks look at it as our main risk management tool.”

Bill Bridgeforth, chairman of the National Black Growers Council, knows first-hand why banks look to insurance as a way to protect a farmer’s investment. A fifth-generation farmer from Alabama, Bridgeforth told the group that he “has used crop insurance every year since 1980.”

“We’ve had some pretty good years, and we’ve had some years that, if it hadn’t been for crop insurance, we probably wouldn’t be in business today,” he explained.

Friesen applauded crop insurers for the speed in which claims were processed following the historic 2012 drought. But crop insurance isn’t just about obtaining financing or surviving disaster, it is also a useful marketing tool, he noted.

“It allows me to market my crop better,” Friesen told the group. “I use it to set a [price] floor. It makes me a lot more comfortable using Chicago Board of Trade futures to market grain. I can market early, I can adjust my positions and I know I’ll have a backstop with crop insurance as my base.”

When asked about critics attacking crop insurance, panelists were quick to defend the public-private partnership, noting its cost effectiveness and the lack of expensive taxpayer-funded ad hoc disaster legislation following the 2012 drought.

Bing Von Bergen, a Montana wheat farmer and director of the National Association of Wheat Growers, also explained that in good years the government makes underwriting gains on crop insurance because farmers pay premiums.

He criticized legislative attempts to reduce crop insurance participation by attaching arbitrary benefit caps, income limits and duplicative conservation compliance mandates to the program. Such attempts, he said, could wind up increasing premium rates for all farmers.

 

New NCIS Video: Criticisms Against Farmers Who Purchase Crop Insurance Naïve, Untrue

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Critics who said that farmers who purchased crop insurance were “praying for drought, not praying for rain” or were “laughing all the way to the bank” during last summer’s historic drought were strongly rebuked by farmers, crop insurance agents and claims adjusters in a new video released by National Crop Insurance Services (NCIS).

Marvin Andris, a farmer from Milford, Illinois, responded to Environmental Working Group’s accusations, noting that their comments underscored how little they know about farmers. “They obviously haven’t brushed shoulders with any farmer,” he said. Andris said he didn’t know a single farmer who farmed for an insurance check. “We’re into this because we want to raise crops, and the more bountiful, the more excited we become,” he said.

“I certainly don’t see anybody, as far as I know, that is seriously farming looking for a drought, and looking for a crop insurance check,” said Ben Hanawa, a field claims adjuster from San Benito, Texas. He explained that crop insurance can help you make it through a bad year, “but it certainly is no way to make a living.”

David Finch, a claims adjuster from Tulia, Texas, noted that charges that farmers are happy to incur losses demonstrated both a misunderstanding of the nature of farmers and how crop insurance works. “I’ve never heard of anybody or talked or visited with any farmer who would rather have an insurance check than he would have a good crop that he could bank on his own,” he said. “It’s a matter of pride.”

Robert Geddes, a farmer from Hoopeston, Illinois, explained that crop insurance is not any different than other forms of insurance that consumers buy on a daily basis, like homeowner’s insurance or car insurance. “You don’t buy insurance on your car with idea of going out and having a wreck,” he said. “It’s to take care of [you], when things truly go against you.”

Todd Harris, an insurance agent from Rossville, Illinois, explained that most of the farmers in that part of the state have never had a claim of this nature. “All you got to do is be a mathematician, really, to figure out if you’d be better with a claim, or a crop,” he said. Harris noted “if you ask that question of a farmer, they’ll laugh at you.” That’s because farmers make far more from a good crop than an insurance claim, he explained.

These were not the only misrepresentations farm policy critics made during last year’s historic drought. Claims were made that indemnity payments for the drought would range from $30 billion to $40 billion. The Congressional Budget Office noted earlier this month that 2012 indemnity payments will be closer to $16 billion.

Those same critics also led people to believe that taxpayers would be responsible for nearly all crop insurance payments to farmers, which is another fallacy. Final program costs will reflect the $4.1 billion in premiums farmers paid to purchase insurance policies, losses by private crop insurance companies, as well as government investment.

 

Crop Insurance One Way to Help Protect Farmers

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Right before our very eyes, the nation’s specialty crop capital has turned into the nation’s frozen food section, as the San Joaquin Valley suffered several consecutive nights of freezing temperatures. While the extent of the damage to some crops could take weeks to assess, one thing is clear: Some farmers will take a big loss.

Loss is common in agriculture, and there has been a lot of it lately, though most of it was not here in California. In 2011, we saw a freeze in Florida that hit the citrus crop, then Midwestern droughts, floods in the South and even hurricanes. Last year started off looking like a banner year but morphed into the worst U.S. drought in decades. Much of the Midwest is still suffering.

Thankfully, most farmers are protected by crop insurance, a backstop for when the bottom falls out. Crop insurance helps farmers manage risk. It combines the public sector with the competitiveness of the private sector. Farmers buy policies that are partially underwritten by the government, but the private sector services the policies and pays off when the farmers takes a loss.

For many farmers, particularly the thousands who grow specialty crops, crop insurance is the only risk-management tool available. Most of the growers I know buy crop insurance every year, yet nine times out of 10 they don’t collect a dime.

It’s not cheap. In fact, some growers spend $100,000 on policies they seldom use. Those who say farmers are getting rich off crop insurance, do the math.

When there’s a natural disaster, losses can be steep. If a farmer loses his entire crop to disease or disaster, many could go under without a backup plan. That plan is crop insurance.

California’s citrus industry is a window into the national crop insurance program and how it works. It was first introduced after a devastating freeze in 1990. Initially, growers were hesitant to spend large sums for protection. But participation has grown over time as premiums dropped.

The growth of crop insurance is a testament to the market and the dedication and professionalism of those who service the plans.

But there are those in Washington who will take the failure to pass a four-year farm bill and use it as an opportunity to eviscerate crop insurance. Every day I speak to California farmers, who, like farmers elsewhere, are worried about what would happen if their only risk management tool is weakened or eliminated.

Their message is to “do no harm to crop insurance.” If Congress feels the need to revisit the program, it should only be to strengthen it and expand the number of crops it covers.

California agriculture generates more than $37 billion a year. Sixty percent of our farms are less than 50 acres, just one indicator of the growing number of specialty crop operations. California needs specialty crops, and specialty crops need insurance.

 

Jordan Roach is the CEO of Global Ag Insurance Services in Fresno, the only crop insurance provider headquartered in California.

This op-ed appeared in the Modesto Bee on February 8, 2013.

 

Three Year Drought Continues to Stalk Farm Country; Maps Show Dramatic Progression

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The area of the continental U.S. plagued by drought has more than doubled since February 2011, according to the U.S. Drought Monitor. Even more disturbingly, the portion of the country locked in a level of drought considered “severe, extreme, or exceptional” has increased by more than 400 percent over that same period of time, according to archived data and maps from the first week of February 2011 through the first week of February 2013.

Although one of the biggest stories in agriculture in 2011 was the intense drought and heat wave in the southern plains that seared crops and eventually led to widespread wildfires, only about 24 percent of the continental U.S. was experiencing drought on February 8 of that year, with nine percent of that sample facing “severe, extreme, or exceptional” drought.

The drought caused major losses that year, and combined with other natural disasters, set a new crop insurance indemnity record of $10.8 billion.

The year 2012, by comparison, started off quite a bit drier, with roughly 38 percent of the continental U.S. in some level of drought by the first week of February, with 18 percent of that area considered “severe, extreme, or exceptional.” The drought continued to intensify and spread into the nation’s breadbasket over the course of the summer, leaving farmers not accustomed to losses with fields that produced little.

The drought was the largest weather story of the year, and caused deep losses for farmers. While crop insurance indemnities have not been finalized, they have already eclipsed the 2011 record by nearly $3 billion.

Unless the spring rains break this pattern, 2013 is starting off as an incredibly dry year for many farmers, with roughly 57 percent of the continental U.S. in some level of drought. Forty percent of that area is considered “severe, extreme, or exceptional.” Drought is covering nearly 20 percent more of the continental U.S. than it did a year ago, with the amount of area locked in the most severe stages of drought more than doubling in that same time period.

Looking ahead, unfortunately, the persistence of drought throughout a good portion of the heartland remains a definite possibility.

According to the U.S. Seasonal Drought Outlook, published by the National Oceanic and Atmospheric Administration, a break for farmers doesn’t appear to be in the cards, at least not in the short term. So while farmers are surely praying for rain, it also helps that they can manage their risk through the purchase of crop insurance.

 

 

CROP INSURANCE IN ACTION: Trent Patterson, Lake County, Tennessee

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For Trent Patterson, 2012 was a very dry year.

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

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

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

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

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

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

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

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

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

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

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

 

The Truth Could Set Us Free; If They’d Print It

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The ongoing discussions about resolving our national debt continues to provide plenty of fuel for those who wanted to torch a key aspect of farm policy, crop insurance.

The New York Times came out swinging against crop insurance – again – with a January 15 article that led “the worst drought in 50 years could leave taxpayers with a record bill of nearly $16 billion in crop insurance costs because of poor yields” adding that the “staggering” cost of the program was drawing attention from budget cutters.

Yes, indemnities could possibly hit $16 billion, but all of those costs will certainly not fall on the laps of taxpayers. What was missing from the article was mention of the more than $4 billion spent by farmers to purchase crop insurance as well as losses that will be realized by the 16 private sector companies who underwrite policies.

Dallas Smith, Deputy Under Secretary, Farm and Foreign Agricultural Services, United States Department of Agriculture, 1993-1999, submitted a letter-to-the-editor, pointing out:

“Your article about crop insurance indemnities missed several essential points. For 2012, farmers will pay about $4.1 billion in premiums for crop insurance coverage. With crop insurance, farmers only receive an indemnity when there is an insurable loss. There is no ‘direct’ cash subsidy.

“Previous to the current-day crop insurance program, response to agricultural weather-related exigencies was in the form of disaster legislation. In the past, the aid from disaster packages could take up to 18 months to reach the farm community. Not in all cases, but many drought-stricken farmers receive indemnity checks within weeks of filing a claim. With the current program, farmers, crop insurance companies and taxpayers all share in the cost of the program.

“As we have observed from the experience of Hurricane Sandy, disaster aid can be highly uncertain and slow in coming. Crop insurance is a better solution.”

The New York Times article was picked up by the Minneapolis Star-Tribune, which sparked a quick response from Greg Schwarz, a farmer from Le Sueur, Minnesota:

“The reason why crop insurance enjoys such broad political support in Congress while receiving the endorsements of nearly every major commodity group is simple, because it works. Your recent article about crop insurance indemnities, “Crop Insurance Could Cost $16 Billion,” (1/15/13) missed many of the key reasons why crop insurance is good for farmers, and taxpayers alike.

“First, prior to the emergence of crop insurance, Congress regularly turned to taxpayers when disaster struck, tapping them for $45 billion in supplemental disaster assistance from FY 1989 to FY 2001. The current public-private partnership that is our modern crop insurance system was designed to minimize taxpayer risk exposure and speed assistance to farmers when they suffer loss. Private insurers help shoulder the loss in bad years and have a sophisticated infrastructure to deliver assistance to farmers when they need it most.

“Second, farmers paid $4.1 billion out of their own pockets in premiums last year to purchase crop insurance coverage. In years when major disasters don’t strike – and that’s the majority of years – crop insurance companies and the government earn underwriting gains from these premium investments. These gains have added more than $3.93 billion to federal coffers, and help offset losses in years when natural disasters strike.

“The health and vitality of the rural economy has been one of the few positive economic trends over the last few years. A strong, viable crop insurance policy, which has helped rural America recover from back-to-back natural disasters in 2011 and 2012, is part of the reason behind that success.”

Not to miss an opportunity to chime in, a January 20 Washington Post editorial also let fly a salvo against crop insurance and the farmers who purchase it. The editorial repeated the misstatement contained in the earlier New York Times article, stating “The government’s total cost for crop insurance could hit nearly $16 billion for 2012, an all-time record,” and then continued by calling crop insurance “corporate welfare,” despite the fact that it is purchased by farmers with their own money.

Tom Zacharias, president of the Overland Park-based National Crop Insurance Services, responded in kind:

“It is unfortunate that the Post’s recent crop insurance editorial misled readers into believing the total cost covering the record drought losses of 2012 will fall solely on taxpayers’ shoulders. That would certainly be the situation under the old paradigm of ad hoc disaster legislation. Under today’s crop insurance system that is simply not the case because farmers and participating insurance companies are also helping to shoulder the burden.

“First, farmers contributed $4 billion of their own money for crop insurance premiums. Second, participating insurance companies will lose money in 2012 because total payouts will exceed premiums collected and the companies share in the losses. The final cost is still unknown, though it could be in the billions of dollars.

 

Linda Vickers Presented Crop Insurance Industry Lifetime Achievement Award

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Linda Vickers, Rural Community Insurance Services (retired), was presented with a 2013 Crop Insurance Industry Lifetime Achievement Award at the 2013 Crop Insurance Industry Annual Convention.

Ms. Vickers was raised on a cattle and wheat farm in northwest Oklahoma. She attended college at Northwestern Oklahoma State University and graduated with Bachelor of Arts In 1969 and Master of Arts in 1975.

In 1977, she joined Ed Jaenke and Associates as a congressional lobbyist. Ed Jaenke was a former Governor of the Farm Credit Administration. In 1978, Ms. Vickers went to work at the Federal Crop Insurance Corporation (now the Risk Management Agency) as a Congressional Liaison. Later that year she joined Secretary of Agriculture Bob Bergland’s staff as a Congressional Liaison with responsibility for passing the Federal Crop Insurance Act, which expanded the crop insurance program. In 1980, the Act was passed by Congress which allowed the private sector to begin selling and servicing federal crop insurance policies.

Linda went to work for the National Association of Crop Insurance Agents in early 1981 as a lobbyist for the crop insurance program. She stayed in the private sector and eventually began working for Rural Community Insurance Services and all its predecessor organizations until December 31st, 2012, when she retired.

She was integral in shaping, drafting and eventual passage of all major pieces of farm legislation, in particular, crop insurance legislation, including the Federal Crop Insurance Act of 1980, 1994 and 1996, and the Agricultural Risk Protection Act (ARPA) of 2000.

Ms. Vickers spent many hours educating Congressional members, as well as their staff, on the benefits of a sound multi-peril crop insurance program. She was known in the halls of Congress as “Mrs. Crop Insurance.” She was also instrumental in bringing the commodity groups and trade associations together, which has resulted in regular meetings between these groups to address issues facing crop insurance.

Linda has been married to Gene Vickers, an international agriculture consultant, since 1975, and they currently live on the Oregon coast.

 

Photo Caption: (left to right) Greg Deal, Chairman of American Association of Crop Insurers, Linda Vickers, and Tom Zacharias, President, National Crop Insurance Services.

Midwest Loss Ratios Soar as Indemnities Continue to Rise

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Twelve states have loss ratios of at least 1.1 — meaning crop losses paid are $1.10 for every dollar received in premiums for the 2012 crop year — according to the January 21 data from the Risk Management Agency. The highest loss ratio states are in the heartland, with the top five states including Illinois at 2.36, Missouri at 2.24, Kentucky at 2.16, Nebraska at 1.83 and Iowa at 1.66.

To date, most of the crop losses are to corn and soybeans, with corn producers accounting for 59 percent of all indemnities paid and soybeans accounting for roughly 12 percent. Cotton, wheat and grain sorghum make up the other top five crop losses.

While most of the losses nationally can be attributed to the record drought of 2012, other parts of the country suffered from other weather anomalies. The spring freeze that damaged crops in New England and the upper Midwest resulted in high losses in many apple orchards, with loss ratios in New Hampshire coming in at 1.24 and Massachusetts at 1.1. Nationally, the loss ratio is 1.12 and rising.

In 2012, farmers paid more than $4.1 billion in premiums to purchase crop insurance. To date, more than $12.3 billion has been paid out to farmers, easily surpassing 2011’s old record of $10.8 billion in indemnities paid. Unlike disasters of the past however, the private sector is paying for a significant portion of the bill.

In fact, past natural disasters – prior to the widespread availability of crop insurance – cost taxpayers $45 billion from FY1989 to FY2001, according to the Congressional Research Service. And while the data is still not in, private sector losses from 2012 will almost certainly be in the billions of dollars.

What’s worrying many producers is that there are early indications that 2013 could be even drier than 2012. More than 60 percent of the continental U.S. – including a good portion of the nation’s breadbasket – remains in some stage of drought, compared to roughly 32 percent a year ago, according to the January 8 U.S. Drought Monitor.

Every county in the states of Iowa, Minnesota, Missouri, Oklahoma, Kansas, Nebraska, South Dakota, Colorado, Wyoming, New Mexico, Arizona and Utah are either abnormally dry or in some level of drought. USDA has already designated 597 counties in 14 states as primary natural disaster areas due to drought and heat, making all qualifying farm operations eligible for low interest emergency loans.

CROP INSURANCE IN ACTION: Paul Penner, Hillsboro, Kansas

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In 2012, the drought in Kansas was in its second year, and wheat, corn and soybean farmer Paul Penner was just trying to survive to the next season.

Crop insurance has been Penner’s lifeline for the last two years and the years before that. It has given him and his wife, Deborah, the means and security to plan ahead and prepare for another year should the drought persist. “Without it, many farmers, including us, would face financial uncertainty as revenue would be insufficient to cover production expenses,” said Penner, 60, of Hillsboro, which is about 45 miles north of Wichita.

In 2012, the Penners had a 75 percent insurance coverage plan for wheat crops and 70 percent coverage for fall crops, such as corn, soybeans and sorghum. Just like car insurance, his goal is to “never have to use it.”

Penner has been covered by crop insurance policy for more than 25 years now. If not for this federal safety net, he said, “I wouldn’t be in farming today.”

The insurance helps him recover part of his losses. “It pays for a little bit of your crops or production if we had a bad year like the last two to three years’ drought. The insurance pays me a certain percentage of the revenue I have lost. They don’t pay all of it,” he explained. “They will never pay you 100 percent.”

But he said he’s OK with not recovering 100 percent because even in a bad year, he said a farmer does not really lose a 100 percent of his production. “At least you’re given enough so you can pay your bills,” he said.

Insurance estimates are based on actuarial history of crop yield and the price of the commodity, among other parameters. Premiums could be higher for one crop per acre than the other. In Penner’s case, corn has a higher premium cost than wheat and soybeans.

Filing is straightforward process. A farmer reports his losses to the crop insurance agent, and the insurance company will then send an adjuster to verify the claims based on established guidelines. The farmer and the adjuster will work through production data sheets. Once approved, help is on the way.

His agent is a local, family-owned company with businesses around the Midwest. It’s the third insurance company Penner has contracted over the years, as many have folded up and sold their business.

The premium varies year to year. Penner said he has paid anywhere from $8,000 to $20,000 over the years he has been using crop insurance. The federal government picks up part of the premium – about 60 percent – as the cost to the farmer would be “prohibitive.”

With the current mood in Congress to cut the national debt, there are some who would like to see the entire crop insurance bill “disappear,” he said. He asserted not all so-called “subsidies” should be painted with the same brush, and it’s his view that ad hoc disaster legislation “is a thing of the past.”

Like many in Kansas, Penner was born to farm. Kansas ranks sixth in farm exports. Beef, grain sorghum, and wheat – introduced to the state by the early Russian Mennonite settlers – are the major products. Hillsboro, where Penner Farms is located, has a population of about 3,000.

“Farming is a risky business as weather is the biggest uncontrollable factor,” Penner said. “Without an adequate risk management tool like crop insurance, a farmer cannot make marketing plans with the reasonable certainty he will be successful.”

Penner says that he can’t fathom managing all the risks of farming without crop insurance. “Crop insurance is absolutely necessary, period,” he said. He says that what crop insurance helps this country do is to ensure food security — the country’s ability to provide a reliable and safe food supply for its people, and not be forced with “going to China and Brazil to purchase our food.”

Crop Insurance Will Help Missouri Farmers Plant Again Next Year

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It’s no big secret that Missouri is facing its worst drought in 30 years. This has had a catastrophic impact on the state’s farm and livestock sector, prompting Secretary of Agriculture Tom Vilsack to declare every county in the state a disaster area in July. And while tropical storm Isaac brought us some much-needed rain, every county in the state remains in some level of drought.

As a Missouri farmer, I can tell you that there are few disappointments in life bigger than losing a crop. The loss not only robs you of the income that it should bring – especially with commodity prices at record highs – but also robs you of the joy of the harvest, which is what we farmers are all about.

If I hadn’t purchased a crop insurance policy this year to help me through an event like this, I possibly wouldn’t be able to farm again next year. But that’s the main reason why the federal government teamed up with the private sector years ago to form this public-private partnership that helps farmers manage their risk while shielding taxpayers from expensive farm disaster bailouts.

Droughts like this don’t happen often, but they do happen. And when they happened in the past – before crop insurance was widely available and affordable for most farmers – Congress responded with expensive ad hoc disaster bills. In fact, these disaster bills totaled $45 billion from FY1989 to FY2001.

They don’t call Missouri the “Show Me State” for nothing, and crop insurance has proven its value. Last year, although conditions here were fairly good, there was a string of natural disasters across the rest of the country – from freezes to floods to hurricanes and even wildfires – that left many farms in shambles. And despite these disasters, there wasn’t a single call for a federal farm bailout, because roughly 84 percent of all eligible land was protected by crop insurance.

Crop insurance isn’t cheap for farmers, who have forked over $4 billion out of our own pockets this year to purchase policies, which protect 128 different crops from a wide variety of natural disasters.

This is a great example of the federal government and the private sector working hand in hand for the common good of the country and the food, feed, fuel and fiber supply. In this unique partnership, farmers purchase crop insurance policies – that are partially underwritten by the federal government – and they only receive an indemnity if they incur actual losses. The crop insurance system is efficient, because it is sold, serviced and delivered by the private sector.

In fact, in years past, federal aid for farm disasters like the one we’re in would have taken months or years to get into the hands of the farmers. Compare that to crop insurance, which has been delivering indemnities to farmers as they filed their claims, and thus far this year has put more than $2 billion into the hands of farmers who suffered losses.

Agriculture is certainly a very risky business, which means that banks are often hesitant to lend to farmers, particularly those who are just starting off. But farmers who purchase crop insurance are deemed a much lower risk by the banks, who count the crop insurance indemnity as collateral for the loan.

As disagreeable as things might seem sometimes in Washington, D.C., the fact that crop insurance is a quintessential risk management tool for farmers is one of the few things that both Republicans and Democrats can agree on. And farmers made their feelings on the issue quite clear earlier this year when they delivered a unified message to Congress regarding the upcoming Farm Bill: “Do no harm to crop insurance.”

Of course, there are those who would like to see all farm programs cut, either because of their dislike of government spending or their dislike of family farming. They charge that farmers would rather collect a crop insurance indemnity than harvest a crop. Imagine if a similar charge was leveled against someone who purchased car insurance. Can anyone really believe that people purposely crash their cars to collect the indemnity?

If rains don’t come this winter, we could be looking at the second year of this. Mother Nature strikes in cycles, so that possibility isn’t entirely out of the question. But there are things that we can count on. And at the top of that list is this country’s crop insurance system, which will allow farmers like me who take a beating this year to come back to the table again next year for another try.

Jeremie Nothdurft is fourth generation farmer from Gordonville, Missouri who raises corn, soybeans and wheat on the family’s 1,200 acre farm. This op-ed appeared in the Kansas City Star on Sunday, October 28, 2012.

Record 86 Percent of Planted Farmland Protected by Crop Insurance

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Eighty-six percent of all planted U.S. farmland – some 281 million acres – is protected by crop insurance this year, up 2 percent from 2011 and a nearly three-fold increase from the late 1990s when only about 30 percent of farmers purchased policies, according to data from USDA’s Risk Management Agency.

The growth in coverage has been fueled by a number of factors, including fewer federal risk management alternatives for farmers, many farmers’ desire to have increased control of their risk management choices, federally-funded premium subsidies for those who purchase policies, a wide array of policy options and the value banks place on crop insurance when making loans.

But many would argue that private sector crop insurance agents, who operate largely on commission for the policies they sell, should be included in that list as well. Ruth Gerdes, a farmer and crop insurance agent from Auburn, Nebraska, nearly lost the land that she and her husband were farming 28 years ago and decided that other farmers needed to learn more about the benefits of crop insurance to avoid a similar brush with foreclosure.

One of the undeniable factors behind the growth of crop insurance, according to Gerdes, is “a motivated workforce” of agents. “We all strive to provide a quality service,” she said, adding that in an industry where premiums are decided by the government, the only way agents can distinguish themselves is through superior customer service.

“We all work to know the products and markets and are willing to be called upon at all hours when disaster strikes,” she said. Gerdes explained that agents, who are often farmers, or have farmed themselves, take great pride in their work and want their customers – the farmers – to be happy with both the insurance products they purchase as well as the service the agents provide. “And of course, part of it also is because we want the producer’s business again the next year,” she added.

Gerdes argues that “this competitive business model is good for the farmer and good for the system,” which is evident by the ever-increasing number of new crop insurance products developed, which today protect 128 different crops.

In 2012, some 1.2 million crop insurance polices were sold, covering 128 different crops. While 84 percent of the polices sold covered corn (34 percent), soybeans (31 percent) and wheat (19 percent), policies were also written for specialty crops including cherries, almonds, cranberries and avocados.

2012 Drought Extends Its Grip Into 2013

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The 2012 growing season has ended for most of the nation’s farmers, but the drought that dogged many of them appears here to stay. According to the December 11, U.S. Drought Monitor, nearly 62 percent of the continental United States remains in some stage of drought. Forty-three percent of that area is considered to be in severe, extreme or exceptional drought.

Should this weather pattern continue, many farmers would start off the growing season with lower soil moisture contents than they had in 2012. According to the U.S. Seasonal Drought Outlook, which forecasts through the end of February 2013, “persistence of drought is deemed the best bet across central and southern portions of the Intermountain Region, the Rockies and the Plains. Persistence of existing drought, or the development of new drought areas are expected in Texas.”

The long dry spell is already taking its toll on the winter wheat crop. USDA says that this year’s wheat crop is the poorest at this stage in development since the agency started tracking crop condition ratings 25 years ago, according to Feedstuffs Online.

In its November 26 “Crop Progress” report, USDA pointed out that only 33% of the wheat crop was rated in good to excellent condition, while twenty-six percent of the crop was rated poor to very poor. Fifty-two percent of last year’s crop, by comparison, earned the top two condition ratings, while only thirteen percent scored in the bottom two tiers.

The persistent lack of rain is not only hurting the Heartland’s farmers, but also other agribusinesses and commerce in general. The ongoing drought is pushing water levels in the Mississippi so low that portions of the river south of St. Louis might have to be closed to shipping soon.

Tom Allegretti, president of American Waterways Operators, says that more than 20,000 jobs are at risk, as well as $130 million in wages and benefits if the river is closed for two months. Allegretti estimates that more than $2.3 billion of agricultural products, $1.8 billion in chemicals and $1.3 billion worth of petroleum products normally ship on the river in December and January.

Crop Insurance: Smart, Fiscally Responsible Farm Policy

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Every county in the state of Iowa is experiencing severe or extreme drought conditions, according to the U.S. Drought Monitor. This time last near, not a single county in the state was experiencing drought. In fact, it would be fair to say that farmers saw quite the opposite conditions last year, especially here in Western Iowa.

We had water, and lots of it. In fact, counties bordering the Missouri River had thousands of acres of farmland – homes and communities – that were under water for four months. The Missouri River, which is typically less than 1,000 feet wide, was roughly six miles wide from bank to bank.

From a farmer’s perspective, the only thing last year and this year have in common is that crop losses will be steep. But this is the nature of agriculture, where we are blessed with some of the most productive land on earth in the good years, and then the threat of losing an entire crop, back to back, in the bad years. Thank goodness most farmers purchase crop insurance to help us get back on our feet after those bad years strike.

Last year, Iowa farmers shelled out more than $444 million from their own pockets to purchase crop insurance. Crop insurance has become the best risk management tool available for most farmers because it is a public-private partnership that limits taxpayer exposure to risk and helps farmers get back on their feet when disaster strikes.

Prior to widespread participation in crop insurance – which in 2011 protected 84 percent of eligible lands – farmers would often rely on federal disaster relief when a flood, or drought, or both, wiped them out. This disaster relief was not cheap for the taxpayers, who funded a string of relief bills totaling $45 billion from FY1989 to FY2001 for this very purpose.

While the disaster bills were greatly appreciated by the farmers who received them, they took a long time to arrive – up to two years – to get into the hands of the farmers who had lost everything and needed those funds badly.

Because crop insurance is sold, managed and delivered by the public sector, the indemnity checks come in a much more timely manner. In fact, more than $1 billion has already been paid out nationally to farmers who suffered losses this year.

For those worried about federal spending, crop insurance is a smart, fiscally responsible farm policy. It requires farmers who want protection to put some “skin in the game,” in the form of purchasing premiums, and it only benefits those who suffer a real, verifiable loss. As crop insurance has grown in use, spending on farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.

Because we are blessed with great soil and a usually amenable climate, many Iowa farmers – and others in the Corn Belt – rarely collect indemnities. The returns that the companies have made over the years, combined with the $3.5 billion the federal government has made in underwriting gains, will help pay for big losses, like the ones we have experienced back to back this year.

But like all farm policies, crop insurance has taken its fair share of criticism from those in Washington who would like to see a much less robust agriculture sector. These critics are actually using this year’s drought to paint farmers as self-serving and living off the government; people who, according to the Environmental Working Group, are “praying for drought, not rain.”

What nonsense! Suffice it to say that only in Washington DC would a group think that a check for an insurance loss could possibly be anywhere close to as satisfying – both financially and emotionally – as a bountiful harvest. The statement is ludicrous, and would lead one to conclude that people purchase car insurance in the hopes of having a bad wreck and cashing in on that misfortune.

Some rains have returned to Iowa but in most cases, it’s too late for the corn crop, of which 53 percent is considered in poor, or very poor condition. The rains will not renew our crops, but they do remind us of the promise of the future. But promises don’t pay creditors, so in addition to the rain, I’ll be thanking my good instincts for purchasing crop insurance yet again this year. Because I can tell you for certain, that if I hadn’t purchased multi-peril crop insurance this year with the drought, or last year with the flood, I’d be out of the farming business altogether.

Richard Archer is a corn and soybean farmer from Onawa, Iowa

This op-ed appeared in the Sioux City Journal on October 3, 2012.

CROP INSURANCE IN ACTION: Jimmy Miller, Interlachen, Florida

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For centuries, blueberries were gathered from the dense forests and bogs by Northeastern U.S. Native Americans, and are one of the only fruits we consume that are native to North America. So when most of us hear about blueberry farms, we conjure up images of cool, damp climates and cold winters.

Except on Jimmy Miller’s blueberry farm, which is located in Interlachen, Florida. Miller has operated the farm, which is the oldest existing blueberry farm in the state, since 1979. Miller, along with his two daughters and son-in-law, operates the 124 acre operation using a variety of blueberry developed by the University of Florida that tolerates the summer heat and mild winters.

One of the main issues for blueberry growers in Florida, Miller explains, is that they must have at least 200 hours every winter where the temperature goes below 45 degrees in order for the bushes to flower, and fruit, later that spring. Lack of enough cool days can mean very low fruit production the following year.

The Millers sell their blueberries, which are among the first in the nation to ripen each year, to both national and international fresh fruit markets. While they are relative newcomers to the blueberry market, they have been dealt quite the lucky hand by Mother Nature. That is, until early spring, 2012.

“We never had a real loss until this year,” said Miller, who explained that their primary risk is a freeze or hail. “And the way we manage freeze is with overhead water protection,” he explains, which protects the bushes by allowing a layer of ice to form on the plants and the berries, keeping the plants warmer than the outside air.

Florida, like much of the rest of the country, had a very early spring in 2012, which resulted in the bushes pushing out new growth and eventually blossoming several weeks earlier than usual. “The plants become vulnerable in late January or early February, and then the berries start to form,” Miller noted.

“It was an early spring, and then all of the sudden, we had a front blow through that dropped our temperature to 24 degrees,” he explained. That usually wouldn’t be a huge problem, given the sprinkler system, but this freeze was accompanied by 15 to18 mile per hour wind gusts, which made the water evaporate as quickly as you spray it.

“When water evaporates, it cools the plants, and we were trying to warm them,” he said. “We had plants that were vulnerable because they were in full growth, and then we had the wind,” he added. “The second night, the temperature actually got down to 18 degrees, but we were fine because we didn’t have the wind.”

The next day, the Miller clan was hopeful that it would be ok, “but we also knew that it could be catastrophic,” he said. Miller explained that one of the risk management strategies they have employed is the use of different varieties of plants that have different cold tolerances and will go into bloom at slightly different times.

The problem was, the bushes that should have fared well with the cold snap didn’t fruit fully that year because the mild winter had not met the requisite number of cool days. “And the plants that did put out a good amount of flowers were severely damaged by the freeze and accompanying winds,” he said.

Thankfully, for Miller, he always purchases crop insurance, and if the blueberries didn’t look better in a few weeks, this could be his first crop insurance claim. After the cold snap ended, Miller called his crop insurance agent who came out for an initial assessment.

“When you feel like it looks pretty bad, you need to give your agent notice,” said Miller. As the agent came out to inspect the bushes, Miller noted that “initially, as the plants came out of the cold snap, we were all hopeful.”

But hope wasn’t enough. As the season progressed, it became apparent that the losses would be staggering. “Without crop insurance, it would have been bad, real bad,” said Miller. In the end, the blueberry farm suffered a seventy percent loss.

“I would have been forced to borrow money just to get through the next year,” said Williams, explaining that without crop insurance, he would have to go to a bank and ask for a loan just for operating capital for the year. “And then two bad years in a row, and you are really out on the ledge,” he said.

“This is a tool, a necessary tool,” he said of crop insurance. “You can’t absorb this kind of loss, so you need to have a tool in place to transfer some of the risk to a private company.”

Luckily, the blueberry bushes appear to be recovering in the warm Florida sunshine and Miller is optimistic about his family’s and his farm’s future. “I feel like we’re going to be fine,” he said.

New NCIS Video Highlights Critical Role Adjusters Play

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“Some of the same people who had to deal with the floods last year along the Mississippi and Missouri rivers are now dealing with the opposite – extreme drought,” says Calamus, Iowa, claims manager David Bousselot, in a new NCIS video.

The video highlights the critical role that many of the 5,000 claims adjusters play in helping farmers pick up the pieces after the worst drought in decades, with $3.6 billion already in the hands of farmers. “The adjuster is the connection with the producer,” says Bousselot.

Throughout most of the summer, more than 60 percent of the continental U.S. was locked in drought, which sent corn and soybean yields plummeting.

“I think it was a combination of the lack of moisture and the heat we had in early July that just cooked the corn,” says claims adjuster Tim Totheroh of Wellington, Illinois.

Bousselot notes that many adjusters have also farmed, and thus fully understand the pinch farmers find themselves in when Mother Nature strikes. “Getting the money back to them in the quickest way we can is the service we provide,” he added.

To date, more than 405,000 claims have been indemnified, with many more expected. In 2012, farmers will invest more than $4.1 billion to purchase more than 1.2 million crop insurance policies, protecting more than 281 million acres of crops.

Robert Geddes, a farmer from Hoopeston, Illinois, explains that after he experienced his first drought as a farmer, he had a chat with a local adjuster and has been purchasing crop insurance ever since. “It’s in the nasty years like this that it really helps,” he said. “If you miss a crop, things will go downhill for a farmer in a hurry,” he added.

The video underscores both the need of crop insurance and the efficiency of the public-private partnership, which makes crop insurance affordable while also being universally available. More than 128 different crops can be protected by crop insurance. These range from major commodities like corn and soybeans to specialty crops ranging from apples to cherries to asparagus. Crop insurance can also be purchased for livestock.

Hurricane Sandy Robs Some Delmarva Farmers of A Promising Harvest

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Delmarva farmers weren’t directly in the eye of Hurricane Sandy when the storm slammed into the East Coast, but they were awful close.

Most of the Delmarva Peninsula, comprised of Delaware and the Eastern shores of Maryland and Virginia, was just south of where the hurricane came ashore in Cape May, New Jersey. The peninsula is sandwiched between the Atlantic Ocean and the Delaware Bay on the east and the Chesapeake Bay on the west, and is thus susceptible to storm surges.

Before the storm, the area’s farmers had already suffered steep losses on their corn crop, which was stunted by the long summer’s drought. The patches of corn that survived had been harvested early – due partly to the early spring planting, continued drought conditions and high demand from local poultry feeders.

But the soybean crop was a whole other ball of wax, said crop insurance agent Harry Daisey, who was born and raised on a peninsula farm and lives in Bridgeville, Delaware. Before Sandy’s arrival, the area had received some much-needed, late-season rains, which breathed new life, and new hope, into the soybean crop.

“That’s really the sad part,” said Daisey. “The soybean crop, which had looked sad and shriveled all summer long, received a good shot of rain late in the season, and that sent the soybeans into a whole new growth cycle, with new blooms popping up and plants taking off,” he said. “It really looked promising.”

But then came Sandy. Unfortunately for the area’s farmers, much of their soybean crop was still in the field when the hurricane hit, and “it was literally a hit or miss situation,” said Daisey. Daisey noted that for someone who wants to know the reason why farmers need to purchase crop insurance, it can be summed up in one word: “variability.”

Daisey said that the losses varied greatly from farm to farm, which underscores the value of crop insurance, since it allows each farmer to personalize their risk management plan based on their crops, soil conditions and tolerance to risk.

“Many of the farmers who are closer to the bay had their fields inundated with salt water, which is never good,” he said.

Daisey explained that in addition to suffering damages to their immediate soybean crop, farmers were concerned that the salt water inundation could impact next year’s crop as well. “It all depends on how sandy their soil is and how quickly that salt can be washed out of it,” he added.

One farmer’s entire field was under water, and when the bay finally receded, the field was so waterlogged that the beans fell over. “It’s questionable if the farmer will even be able to harvest that field, given the combination of waterlogged soil and toppled-over plants,” said Daisey.

Daisey also noted that Sandy left the viability of the area’s winter wheat and barley crop in question. “With 10 inches of rain in a very short period of time, if the grain had sprouted already, it might be able to withstand the water,” he said. “Or it might have drowned the young wheat altogether, or it could have just washed it all away.”

The farmers who are determined to get their soybeans out of the field could very well suffer damage to their tractors and other machinery from the disheveled plants and deep mud; costly damages that will not be covered by crop insurance policies. “Those who have been saying that farmers can get rich off of crop insurance have a very shallow understanding of all of the costs of modern agriculture,” said Daisey.

“Both land and equipment are expensive, and when they’re damaged, it’s usually money right out of the farmers’ pockets,” he said.

Montana Farmers Need A Strong Crop Insurance Policy

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There are those who say that the grass is always greener on the other side of the fence. But the opposite can be true as well. Sometimes, it’s not until you look on the other side of the fence that you realize just how green your own grass is.

That’s certainly true this year. After good precipitation in the spring, weather in eastern Montana has been on the dry side since July; but the drought is not yet as severe as that in the Midwest weather is top of mind every year, since I’m a farmer who worries every year when I plant 2,300 acres of durum wheat, peas, lentils, flax and canola.

Last year, it was so wet from spring rains that I couldn’t get all of my land seeded. This year, after a promising start, it has become too dry. Mother Nature can be unpredictable, and a few bad years in a row without a good risk management strategy in place could mean the end of your farming career. That’s why I’ve purchased crop insurance every year since I started farming in 2001.

Crop insurance is a public-private partnership that not only reduces taxpayer exposure to risk, but also saves them money. When disaster struck last year with floods in the Midwest, drought in the Southern Plains and hurricanes on the East Coast, farmers who lost everything didn’t send their representatives back to Washington asking for a big farm disaster bill.

How was that avoided, given the extent of last year’s damage? Farmers didn’t need a disaster bill because 84 percent of eligible crops were protected by crop insurance. Prior to the emergence of crop insurance as the top risk management tool for farmers, natural disasters regularly triggered very costly, unbudgeted ad hoc disaster bills from Congress, costing taxpayers $45 billion from FY1989 to FY2001. Those days are over.

Crop insurance is no small expense for those of us who purchase it, but generally is the best – and in some cases the only – risk management tool available to many farmers nowadays. Crop insurance forces farmers to “put some skin in the game” by purchasing the insurance and taking charge of their own risk management strategies. Here in Montana, more than 16,000 farmers paid more than $85 million to purchase policies to cover their potential losses in 2011.

In the tight financial times we live in, crop insurance is a smart and efficient farm policy. In fact, as crop insurance has grown, taxpayer spending for farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.

While the government pays a portion of a farmer’s premium – which is a way to encourage as much participation in the program as possible – the government and private insurance companies share in the losses and gains of the program. The government has made more than $3.5 billion in underwriting gains over the last several years and that money goes right back into the U.S. Treasury.

With the large amounts of capital required to plant a crop every year, crop insurance is essential for farmers who have to go to banks for operating loans. That’s because the banks see a crop insurance policy as a form of collateral, making their loans to farmers less risky and thus helping to inject billions of dollars into rural America.

Because crop insurance is sold, managed and delivered by the public sector, the indemnity checks come in a much more timely manner. In fact, more than $1.4 billion has already been paid out nationally to farmers who suffered losses this year, with roughly $25 million of that coming to farmers with losses in Montana.

Of course there are those in Washington who seem to forget that they eat three meals a day and criticize every dollar spent on farm programs. They say that farmers in the drought-stricken areas are actually “praying for drought, not rain,” with the implication being that farmers would rather collect a crop insurance check than sell a bountiful harvest. That’s like saying that people purchase car insurance praying for an auto wreck. Not to mention the fact that in many years I purchase a crop insurance policy and don’t collect a dime. Period.

Yes, farming is a risky business, but for those of us who grow food, feed, fuel and fiber for consumers here and abroad, it’s a way of life. Some people might say that the grass is greener on the other side of fence, but because of crop insurance, the grass can be greener on both sides of the fence.

Chris Westergard is a fourth-generation farmer who lives near Plentywood, Montana.

This op-ed appeared in the Billings Gazette on September 30, 2012.

 

CROP INSURANCE IN ACTION: Andy Bell, Climax, Georgia

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On the first Saturday after Thanksgiving, you can chase a greased pig in the southwestern Georgia town of Climax as it celebrates its Swine Time Festival, which normally draws up to 30,000 people in an area where only 300 people live.

There is also corn shucking and a squeal-off. Climax is the highest point on the railroad line between Savannah and the Chattahoochee River. After its founding in the 1880s, the town served as a rail junction and an agricultural community. It was incorporated in 1905.

The weather for a farmer in Climax can be tricky. The town is located only a few dozen miles from the Gulf of Mexico which can bring in hurricanes as powerful as Katrina, which struck New Orleans with devastating fury in 2005. But this corner of southern Georgia has also been hit by a drought that rivals the one which hit this year in the U.S. Midwest, shriveling the cotton and peanuts that farmers grow in the area.

“We’re 90 miles from the Gulf of Mexico. We had a tropical storm come through in [20]09. We’re so close to the coast that we have to have some type of insurance,” said Andy Bell, who farms about 2,000 acres outside of town. On the other hand, “2007 was a terrible, dry year.”

“We buy crop insurance every year,” said Bell. “We typically buy 70 percent [of coverage]. You’re not going to make any money but it will prevent you from losing the farm.”

His main crops are peanuts, cotton and corn. Some 700 acres are sown to peanuts, about 1,100 acres to cotton and about 200 acres to corn. There is also a small herd of about 200 beef cattle.

Bell said there were some anxious moments before Hurricane Isaac veered away from their area a few months ago and headed for New Orleans. The storm season, which does not end until November 30, remains a threat, but the end to hurricane season is not far off.

For once, Bell is looking forward to harvest season as it looks like the weather is going to cooperate. “I think the peanut crop is going to be good this year. We dodged a bullet when the storm went the other way,” said Bell, who began farming in 1982.

The average yield for peanut farms would run around 1 to 3 tons per acre.

But just as Bell suspected, this year yields will be at record highs. USDA forecasts it at a record 3,714 pounds per acre, which would be 400 + pounds higher than last year.

Bell’s cotton crop is also in pretty good shape, with the Georgia farmer saying they may approach the yields of a few years ago when the harvest stood at 1,300 to 1,400 lbs an acre. That is pretty good considering the national average is about 800 pounds an acre.

His main problem though is the price of cotton. Since scaling a record high at $2.27 a pound in March 2011, cotton prices have shriveled and are now trading around $.75 a pound. “We have (had) a price collapse,” he said.

In good years and bad, Bell said crop insurance is indispensable simply because the weather in his area is so unpredictable. “It can rain here and then five miles down the road, you get no rain,” he said. Bell noted that crop insurance is ”not a fix-all,” but it gives farmers a chance to come back after a bad year.

For him, removing crop insurance is unthinkable. Banks and other lending institutions would not extend any credit to farmers if there is no safety net like crop insurance to give them some assurance that they will get part of their money back.

“I think it would be catastrophic,” Bell declared. “He [the American farmer] would be out of business. We’ve got to have some form of insurance.”

 

CROP INSURANCE IN ACTION: Bob and Mike Buntin, Thompsonville, Illinois

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The choices Illinois farmers faced in the past when drought struck the Midwest were unpleasant all around. They could borrow money from family, drain their hard-earned savings or go under.

In the last decade, crop insurance has made it possible for brothers Robert (Bob) and Michael Buntin, owners of Buntin Bros., Inc. in Thompsonville, to avoid any of that even as this summer’s severe drought hit the state. For those without such a buffer, said Bob, 72, “It’s like losing a job. You get by the best you can.”

Thompsonville, with a population of nearly 600, is bordered on the south by Kentucky and on the east by Indiana.

This past summer, the entire state of Illinois experienced varying degrees of drought — worsened by excessive heat — causing crops to shrivel and die from the blistering temperatures.

The Buntins operate a 5,000-acre family farm, planted to corn, soybeans and wheat. This drought has been the worst since 1988, said Bob, and their yield this year is projected to be a little lower than ever before. From 147 bushels of corn per acre, 60 bushels of wheat and 45 bushels of soybeans, he sees production this year slowing to an average of 15 bushels each for soybeans and corn and “above average” for wheat.

“We’re tired of the dry weather,” he said. “This is the worst this year.”

This year, the brothers wrote a crop insurance premium check for more than a $100,000; “You don’t pay monthly like most insurance companies,” said Bob. “You just write one check.”

And like a regular car insurance policy, they make sure they are covered for one year at a time. “You never know when your car is going to break down. You reapply every year so you can change your options.”

Bob says the process of purchasing crop insurance and filing for a claim is uncomplicated with very little paperwork. “If you keep your records straight, what kind of yield you get and report all these to government offices, it makes it easier,” he said.

“We’re going to be all right this year,” he noted. Such confidence comes from part wisdom, part history: A lower crop production traditionally results in higher prices. The Buntins are buoyed by current market prices at sky-high levels, which, Bob said, “should cover my losses this year.”

The brothers recalled past years when their farm faced weather-related crises. “It was dry here last year, dry here in 1983 and dry here in 1988, and you go back to the 1930s and the ‘50s.”

The U.S. has been experiencing extreme weather over the last few years, with 2012 now judged as the hottest year on record. The number of disasters that have run up costs into the billions of dollars have multiplied sharply since the beginning of the century.

In 2011, the worst drought in a hundred years crippled Texas, the biggest producer of cotton in the U.S. The next year, the drought moved to the Heartland.

But in addition to worrying about the weather, there are some ideas being floated in Congress that are causing some concerns as well. “I don’t think there should be a cap on insurance policy,” Bob mused, arguing how a farmer with 500 acres or 5,000 acres should be allowed to take out a policy based on his own needs.

“You got all the expenses; the big guy’s got more expenses than the little guy, but he’s got expenses, too,” he said. For a farmer who is just getting started, the banks will strongly insist that he get insurance for his own protection “at least to some degree.”

“Even the big, more established farms can’t afford to take a hit three or four years in a row,” said Bob, who has been farming since he was a young man in his teens. And the family tradition of farming will continue as one of Bob’s sons two grandsons have joined him and their uncle in meeting the upcoming challenges to feed a hungry world.

CROP INSURANCE IN ACTION: Jerry McReynolds, Woodston, Kansas

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On land where wheat stalks heavy with grain would normally wave on a breeze in the late summer, the searing drought of 2012 zapped nearly every inch of land across the Kansas plains, leaving it burnt and lifeless.

There was no way to hide from the drought in the Grain Belt. Just one year after the worst dry spell in a century devastated farmers in Texas, it spread like a virulent disease into the Midwest — the breadbasket for much of the world’s corn, soybeans and, of course, wheat.

The United States is a major wheat-producing country, with output typically exceeded only by China, the European Union and India, according to the U.S. Department of Agriculture (USDA) Economic Research Service.

The drought struck especially hard in Kansas, one of the biggest wheat producing states in the country. Jerry McReynolds, a well-known wheat producer in the northern part of the state, said the dry spell is “one of the most serious droughts we have ever encountered in my farming career.”

Each year, McReynolds plants 2,300 acres of winter wheat, 400 acres of corn, 250 acres of soybeans, 800 to 1,000 acres of grain sorghum and 150 acres of forage sorghum. He also runs his own cattle operation. His farm is located outside Woodston, Kansas, a place just 136 people call home; where “Main Street” is all of eight corners tucked away near Highway 24.

Like many American farms, it is a joint operation by the McReynolds family. He said his three children have always helped him and his wife, Diane, in running the farm.

“Our son is a part of the operation. Our married daughters return whenever possible for harvest or other times. One daughter owns some of the land we operate. Another daughter and [her] husband would like to return to the farm, if possible,” McReynolds said.

McReynolds has taken an active role in two decades of farming. He has held several leadership positions at the Kansas Association of Wheat Growers (KAWG) and, as its president, he helped start the Kansas Farm Bill Coalition. He was also involved in the process that culminated in Kansas Wheat, the cooperative agreement between KAWG and the Kansas Wheat Commission.

In 1998, he was elected to the Kansas Farm Bureau Board of Directors representing the sixth district in the area.

But for all his years in the business, McReynolds says he has never encountered a litany of problems quite like those in 2012.

“All spring planted crops really suffered. Germination was a problem. The weather was extremely hot for a very long period of time, without moisture. We encountered temps to 115 degrees,” he said.

“We cut half of our corn acres for silage. I chose not to plant soybeans this spring because of the extreme dryness. Our grain sorghum and forage sorghum really suffered. Yields will be less than half of last year,” he said, adding however, that “wheat yields were surprisingly good, considering the hot, dry weather.”

Crop insurance has been vital for the continued operation of the farm, especially in the midst of the worst drought this nation has seen in a quarter century.

“Crop insurance is critical to our operation. I had a 70 percent level of coverage. However, that only provides around 60 to 65 percent coverage,” he explained.

McReynolds said he has already turned in the papers for “losses on the corn that was cut for silage,” a process of fodder being compacted and stored without being dried so it can be used as animal feed in the winter.

Other losses will be determined after the fall harvest by the insurance companies, but there’s no doubt the impact of the drought on his farm has been severe.

The fallout will extend into 2013 as farmers approach the fall planting season for winter wheat.

“Moisture is critical to get wheat up this fall, as well as germination of any volunteer wheat that must be destroyed before wheat planting,” he said. “Recovery after a drought is very slow. It takes years to get things back to normal. Drought causes revenue losses, emotional issues, cowherd reductions and a lot of uncertainty.”

Without crop insurance it would have been tough to stay in business, the long-time Kansas wheat farmer said. The way the system works, crop insurance payments are paid close to the time frame when loss occurs — before harvest time in case of prevented planting and replant payments, or shortly after harvest in case of yield or revenue shortfall. Most crop insurance claims are paid within 30 days after settlement – a vast improvement from the days of big, ad hoc disaster bills.

Crop insurance is not a government handout that depends on the taxpayers to pay when disaster strikes. Farmers must contribute financially in order to receive crop insurance and will invest more than $4 billion in 1.2 million crop insurance policies this year. These contributions help hold down the cost to the taxpayer and encourage people taking part to exercise financial discipline going forward.

Still another outstanding feature of the U.S. crop insurance program is that it allows farmers to customize their plans and coverage to accurately reflect individual losses and unique yields or risk.

“The input costs are so great, and our margins are so close, that without crop insurance many growers would be out of business,” McReynolds said.

Like everyone else, he is hopeful 2013 will bring better conditions. “Hardship causes us to improve our management practices, but it is a lot more fun when we get rain,” he added.

Video Shows Adjuster Training Ensures Consistency, Accuracy and Efficiency of Procedures

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Support for crop insurance is especially strong in rural America after this historic drought. A new NCIS video focuses on the overall training, continuing education and primary role adjusters play in getting crop insurance claims processed efficiently and accurately. More than 146,000 policies have been indemnified so far this year, resulting in more than $2.2 billion worth of indemnity payments reaching farmers in need.

The video highlights the fact that claims adjusters must undergo 60 hours of training before they adjust their first claim, and then must earn 16 hours of continuing education every year thereafter to ensure that their procedures are consistent, accurate and efficient.

After spending time in the classroom reviewing data capturing procedures, students go into the field to examine damaged crops with experts on-hand. During a recent school in Lubbock Texas, Jim Allison, a claims supervisor from Shallowater, Texas, pointed out recent hail damage on grain sorghum and explained what it meant to the overall productivity of the plant in the long-term. “A more mature grain sorghum plant that loses all of its leaves is going to be affected much more severely from the hail and the impact to the yield will be greater,” he explained.

“We have a lot of losses due to hail every year,” explained Gary Smith, a claims supervisor from Idalou, Texas. “When we get any hail of any size with significant winds, it can be like a lawnmower or a shredder,” he explained.

Many claims adjusters currently farm, or have farmed in their recent past. And because of that experience, they understand the important role crop insurance plays in helping farmers manage risk. “Crop insurance has become an integral part of farming, period,” noted Ben Hanawa, a claims adjuster from San Benito, Texas. “Everything has gotten expensive, and without that form of backup from a disaster, it would be hard for anybody to survive.”

Crop Insurance Helpful for Ohio Farmers

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The National Climatic Data Center reported that as the 2012 drought deepened and expanded this summer, it became one of the six largest droughts in modern record keeping. Here in Ohio, you really didn’t need a weather expert to tell you just how bad it was. And before the rains finally came – which were too late for many of crop – the fields were so dry they had cracked, there was only stubble left for cattle to feed on, and creeks and wells were drying up. This has been one of those years that can be full of disappointment for a farmer like me.

Planting this spring the soil looked great, crop prices were high, and there was every indication that a bountiful harvest was a strong possibility. But the rains left and did not return for months, leaving 53 percent of the corn crop in poor or very poor condition, roughly one-third of the soybean crop in poor or very poor condition and almost 70 percent of our pastures the same.

Thankfully, I purchase crop insurance for situations just like this. Crop insurance is a public-private partnership that limits taxpayer exposure to risk – and saving them billions of dollars – and helps farmers get back on our feet when disaster strikes. A crop insurance check does not make a farmer “whole” anymore than an insurance check replaces the home you lost in a fire, but it at least puts us on first base.

Crop insurance has become the key risk management tool for farmers, and the only risk management for some, that last year protected 84 percent of eligible farmland, or roughly 266 million acres. In years past, natural disasters like the drought we are enduring right now, regularly triggered very costly, un-budgeted ad hoc disaster bill from Congress, costing taxpayers $45 billion from FY1989 to FY2001. By comparison, the fact that most farmers purchase crop insurance has negated the need for large disaster bills for crops. Because of the way crop insurance works, when disaster does strike, the cost is partially shouldered by private sector insurance companies. This is a good, fiscally responsible move for farm policy. That’s because the move from ad hoc disaster bills to private crop insurance policies has saved billions of taxpayer dollars. In fact, taxpayer spending for farm safety net programs as a whole has dropped from $19.2 billion in 2002 to an estimated $12.3 billion in 2011, a 36 percent decline.

Many Ohio farmers who are collecting crop insurance checks this year have never filed a claim. Those profits, in addition to the $3.5 billion the federal government has made in underwriting gains, will help pay for these and similar big losses. Last year, there was a string of natural disasters, including drought, wildfires, floods, freezes, hurricanes and tropical storms, which allowed crop insurance to show its steel.

Despite farm disasters from coast to coast, there wasn’t a single call for a disaster bill from Washington. Why? Because farmers had spent $4.5 billion of their own money to purchase crop insurance. Insurance dollars are already flowing into the state to help farmers meet their cash flow demands. In fact, more than $16 million in indemnities have already landed in the hands of Ohio farmers, which will help them make it through an otherwise lean year. It took months, or years, for cash from government programs of the past to find their way to farmers.

But there are those who are making uninformed and uneducated criticisms about crop insurance – and America’s farmers – in the midst of this national tragedy. According to the Washington-based Environmental Working Group, farmers have been “praying for drought, not rain.” Really? I’ve seen a lot of looks on the faces of my fellow farmers this past summer, as their crops and have withered despite their best efforts and their hopes for a great harvest have been dashed. And for the record, none of those looks have been smiles of greed about a check for an insurance policy they bought. Nor have I heard much laughter. Tears of frustration, maybe. Laughter, not so much.

The rains have returned to the Buckeye state but for the most part, it’s too little, too late for the corn crop. Thankfully most of us have purchased crop insurance policies, and will bounce back and be planting again next year.

This op-ed, written by Custar, Ohio farmer, Mark Drewes, appeared in the Bowling Green Sentinel-Tribune on September 18, 2012.

CROP INSURANCE IN ACTION: Todd & Ty Williams

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Todd and Ty Williams grew up on their family’s farm near Gruver, Texas, a town of about 1,100 people in the panhandle region. Todd Williams says he’s been driving a tractor since he was about seven years old, so it was just the natural course of events that he and his brother Ty would end up on the farm together as adults.

The brothers have been farming together since 1984. Williams notes that the main driver behind his desire to farm is his love for the work and the land, “because the money certainly isn’t in there,” he says. But above all else, he adds “there’s no better place on earth to raise your kids.”

The Williams brothers farm about 1,800 acres of wheat, corn, cotton and milo. Todd says that when he looks back at 2011, he remembers a year of unbelievable extremes. “Some people were flooded out in other parts of the country while we couldn’t buy a drop of water to save our lives.”

But farming and risk go hand in hand, and that’s why Williams purchases a crop insurance policy every year. “Wheat farming is so risky that using forward contracting as your only risk management tool is nearly impossible,” he says. That’s because if Mother Nature strikes and a crop is forward contracted without crop insurance, a farmer can end up owing a huge sum of money to fulfill the contract, on top of not having anything to harvest to provide income for the rest of the year.

Williams says he learned that lesson the hard way. He explained that a few years ago, he had a bumper wheat crop that was ready to harvest, so he worked through the day and on into the night, harvesting as much wheat as he could. He finally quit around 10 pm, with lots of wheat left standing in the field but exhausted from the long day’s work. Later that night, a large hailstorm blew through, crushing the remaining wheat. “One day it was ready to harvest, the next morning there was nothing taller that two inches in the whole field,” he said.

“Playing futures is risky, but contracting your wheat is an even bigger risk,” he notes.

Texas is a state that is not unfamiliar with droughts, heat waves, tornadoes and other weather anomalies. And because of that kind of weather, many Texas farmers are prepared to lose some of their crop on most years; but never all of it.

The drought of 2011 was so widespread and so extreme that even irrigated crops could hardly be saved. “It was so hot and dry, our irrigation pumps just wouldn’t cut it and our crops dried up,” Williams said.

Williams explained that he and other farmers were pulling so much water out of the local aquifer that they had to continually lower their pumps to keep the water coming.

The Williams brothers were running five irrigation wells and still couldn’t keep up with the heat and the lack of rain. “The crops just withered despite the irrigation,” Williams noted. “It was 110-112 degrees, the wind was blowing and the rain was nowhere to be found.”

Average rainfall for that part of the Texas panhandle is usually about 18-20 inches annually. In 2011, they received less than six inches for the whole year. Williams explained that when all was said and done, they were able to save a tiny portion of their crop by focusing irrigation on certain areas, but for the most part, “almost the entire crop was lost.”

Luckily his crop insurance agent, who Williams describes as “a super guy,” had touched base with the brothers throughout the year and knew that some degree of loss was inevitable. After months of fighting the drought and watching their crops wither despite their efforts, the Williams brothers came to the difficult decision that their fields were simply lost.

“The loss of a crop is crushing, even when you have crop insurance, because the insurance doesn’t really make you whole, it only helps you to recover to a small degree,” said Williams. He explained that like other farmers, he always looks forward to harvest, because it not only means the infusion of money, it’s the accomplishment of a year’s work. “I’d much rather have a harvest than an indemnity check,” he said.

But when disaster strikes and you lose some – or all – of your crop, farmers hope that the indemnity payment from their crop insurance policy is quick to arrive. Williams said that for him, that has always been the case. “Usually, the indemnity arrives in a week to 10 days,” he noted.

“If we didn’t have federal crop insurance last year, I’d be working at Wal-Mart or somewhere else today,” Williams said. “There is not a chance in the world I’d be farming today.” Williams said that because of his crop insurance policy, he and his brother are back farming today, and although it’s a bit dry, it’s a huge improvement over last year.

“Without federal crop insurance we’d be toast.”

 

CROP INSURANCE IN ACTION: Whitney Blodgett, Shoreham, Vermont

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Whitney Blodgett has been farming in the family’s Vermont apple orchard, commercially known as “Sentinel Pine Orchard,” his whole life. Blodgett says that the family purchased the orchard in 1964, and have since grown, adding the abandoned dairy farm next door.

Sentinel Pine Orchard, is comprised of 220 acres of apple trees, mostly planted in the Macintosh variety. When harvest time comes, Blodgett along with his wife and farm hands, store, pack and ship fresh fruit to market. “That is our niche market because we can grow those apples very well in this climate,” he says.

Blodgett explains that because of the nature of the business – there aren’t a lot of ways to protect an orchard from the whims of Mother Nature – his chief risk management tool is crop insurance. “We had crop insurance claims in 2004, 2007 and 2011,” he explains. “And all of them were because of hail.”

Hail has always been dreaded in the orchard industry because it hits later in the summer, with the coming of the severe summer thunderstorms, and can damage the apples to the point that they’re no longer marketable as fresh fruit. But 2011 was a very different story.

The hail hit in the early spring, just as the blossoms had fallen from the fruit and the small apples were beginning to form. “There’s nothing we can do against hail because we can’t build a roof over the whole orchard,” he said.

“It was very odd in 2011, the hail hit early in the development of the apples and deformed them,” said Blodgett. “We had to wait and see how they developed and then decided if they would be able to be sold as fresh fruit,” he explains. The other option, if the fruit formed but wasn’t marketable as fresh, was to sell the apples for cider.

Blodgett says they held their breath and said their prayers for months as the apples slowly developed, keeping their fingers crossed that the hailstorm didn’t alter the apples beyond the point of marketability. But in the end, with the apples looking dented and battered, they were forced into the cider market.

“So we reluctantly decided to put the apples into cider,” he explained, which in financial terms, is a six-fold reduction in the value of the year’s harvest.

Luckily for Blodgett, he had purchased a “fresh apple” crop insurance policy that had a 50 percent coverage level. Blodgett explains that immediately after the hail incident, he had contacted his crop insurance agent who sent an adjuster out to the orchard within days. “The adjuster did a preliminary determination, but there would not be a final determination until final harvest,” he explained. “It’s a nail biter right to the very end, since you don’t know how bad things are going to be right away.”

But this wasn’t the first time he had looked to his crop insurance policy for a lifeline.

Blodgett explained that he took over the business from his father shortly after they had a large fire in their storage facility, which was full of apples. “The facility burned down, and that was the start of some very lean years,” he said. And although his father had always shied away from crop insurance, Blodgett decided that he needed the risk protection it afforded.

“I purchased a crop insurance policy in 2004, when things were pretty lean and we couldn’t withstand a lot of loss,” he said. “We were stretched very thin at that time.”

Coincidentally, that also happened to be the first year they experienced a large hailstorm, which stole their harvest and would have left them in very desperate times. “Without a doubt, when that first hail storm hit in 2004, we would have been knocked out of business for good,” he said.

“My father had never purchased crop insurance but thankfully I had decided to,” he said.

“Without crop insurance, I wouldn’t own an apple orchard right now,” he says. Blodgett explains that while crop insurance has kept his family in business, it has also had a positive “trickle down” effect on many of the areas businesses, where he buys his crop protectants, fertilizers and equipment. “If we went out of business, it would impact a lot of people,” he said.

Blodgett notes that crop insurance is essential for his business because even if you get a damaging storm at the beginning of a season – and your lose your entire crop – you still have to spend the money to take care of the trees and manage the orchard in preparation of next spring’s crop. “Even when we lose the crop early in the year, as we have done in the past, we still have to maintain the orchard for the rest of the year,” he said. “Otherwise, your orchard will be a mess the following year.”

And despite the disappointment of sending his whole 2011 crop into the cider market, Blodgett is still farming this year, hoping that what started off as an “iffy” year with a late freeze will still produce a respectable, and marketable, crop.

“Things are looking up, although we have some damage and loss, “ he says. “But this year, we will have a fresh crop of apples to sell.”

“It could be better, it could be worse.”

Crop Insurance Adjusters Work Over-Time to Expedite Claims

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Crop insurance adjusters in the Corn Belt and in other drought-stricken areas have been working long hours to ensure that farmers who have crop damage can get their claims process started. With 5,000 adjusters working in all 50 states, the industry has been forced to move adjusters from regions spared from the drought to regions that have been hardest hit.

Tim Totheroh, a crop insurance adjuster from Wellington, Illinois, says that his workload this year has grown exponentially. “I have two to three times the number of claims I usually have this time of year,” he said.

Totheroh explained that in mid-summer, the majority of claims he’s dispatched to adjust are based on requests by farmers who have such low corn yields that they want to chop their corn as silage. “We have to verify what the farmer’s production will be to calculate what their final loss is, and then they are free to chop the corn,” he said. “That way, at least some good comes from a crop that is otherwise nearly useless.”

The claims he reviews in late summer or early fall are generally to determine the final yield per acre that farmers are making so that their loss can be calculated before harvest.

Totheroh notes that he’s been shocked on several occasions this year as he’s walked through once productive cornfields to see nearly complete devastation. “I did a silage appraisal on a field recently, and after walking a half mile through the field in one direction and then exiting the field in another direction, we failed to see a single ear of corn,” he said. “That’s a real jaw dropper, given the usual productivity of this part of the state.”

Totheroh estimates that actual production in his area will range from zero bushels to 130 or 140 bushels per acre, in a part of the state that had an initial potential for 200 bushels per acre if the rain had come.

“The 100 degree heat we had the first week of July just burnt us up.”

Depending on the claim, the adjuster examines the corn itself as well as the overall yield before filling out the final report, which is signed by the farmer before being sent in to complete the crop insurance claim.

 

Hurricane Isaac Brings Mixed Blessings to Central U.S.

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The arrival of heavy rains from Hurricane Isaac made some farmers happy and others worried to death, depending on where they were located and what they were growing.

In Louisiana and Mississippi, most of the cotton crop was two to four weeks from harvest when Isaac made landfall. That was the same situation as 2008 when Hurricane Gustav ruined that crop. Louisiana corn harvest had been delayed as well, leaving much of that crop in the field and farmers scrambling when the winds and torrential rains came.

Kyle McCann with the Louisiana Farm Bureau said that some of the state’s soybeans were damaged by the heavy wind and rain but were still salvageable. “We hope to see the damage in some of the later soybean varieties dissipate overtime as they recover.” The cotton crop suffered some losses as well, particularly the varieties that had opened early and were ready to pick. “Unfortunately, the heavy winds did some of the picking for us and it’s scattered across the ground,” he said. “But luckily, I haven’t heard of any dramatic losses to far.”

As Tropical Storm Isaac reached the parched earth of the Midwest and the cracked soils finally dampened, farmers growing soybeans breathed a sigh of relief while corn farmers lamented the fact that it had arrived too late to help many of them. Despite helpful rains over the eastern portion of the Corn Belt – which saw exceptional improvements for three hard-hit states:

– In Missouri, the area experiencing “severe” or “exceptional” drought was reduced from 97 percent to 32 percent.

– In Illinois, the reduction in these two categories dropped from roughly 70 percent to just under 7 percent.

– In Indiana, “severe” drought or worse is completely gone from the state for the first time since June 12.

Unfortunately, despite those localized gains, the overall drought numbers remained virtually unchanged from the previous week with 63 percent of the lower 48 states experiencing moderate to exceptional drought.

The September 4 crop progress reports bears that out. The portion of corn that is in poor or very poor condition remained at 52 percent, unchanged from the previous week. Soybean conditions remained roughly the same as well, with 58 percent of the crop in fair or good shape. Also, unfortunately for the livestock industry, nearly 60 percent of the country’s pastures remained in poor or very poor condition as well.

Without crop insurance in place, this unfolding natural calamity would surely have spurred a new ad hoc disaster bill in Congress. Thankfully, most farmers have crop insurance. They’ve invested more than $4 billion to purchase 1.2 million policies, thus far this year. For those who have suffered losses already, more than $1.3 billion in indemnity payments have been made.

The Risk Management Agency has provided a 2012 Drought “Frequently Asked Questions” factsheet for farmers or anyone else who has questions about crop insurance policies or how they should proceed if crops are damaged. Additionally, a statement was sent to the national media by National Crop Insurance Services detailing the steps farmers should take if crop damage is detected.

 

No, Virginia, this is not West Texas

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Northeast Indiana looks more like West Texas this summer than America’s heartland. According to the U.S. Drought Monitor, nearly 70 percent of the state, including a wide swath from around the Kentucky border in the south, north through Fort Wayne and all the way to the Michigan border is in an “extreme or exceptional” drought. Sadly, there is not a county in the state where some degree of drought does not exist.

73 percent of the state’s corn crop, the nation’s most valuable commodity, is in poor or very poor condition. 53 percent of our soybean crop, the second biggest revenue-generating commodity in the state, is in poor or very poor condition as well. Ranchers in the state are quickly running out of options to feed their livestock, as 89 percent of the state’s pastures are in poor or very poor condition as well.

While we’ve been blessed with adequate rainfall for the past month, for the corn crop it’s a case of “too little and too late.” We’re also still at a level of sub-soil moisture that, if it doesn’t improve, will potentially make it difficult to produce a crop in 2013…

Rob Schuman is a corn, soybean and cattle farmer from Churubusco and is the vice president of the Whitley County Farm Bureau.

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CROP INSURANCE IN ACTION: Mike Garavaglia, Vero Beach, Florida

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Florida accounts for roughly 70 percent of the U.S. annual production of citrus, of which the vast majority goes into processing, mostly for orange juice. Citrus is big business in the Sunshine State, and Mike Garavaglia is one of Florida’s many citrus growers who make their living putting fresh citrus on the tables of America’s families.

Mike and his family own and operate 4,000 acres of citrus groves, which have been in the Rogers family for four generations. The family’s business, known as “The Packers of Indian River,” specializes primarily in fresh citrus for consumption – producing oranges, tangerines and grapefruit.

The family’s groves are geographically diverse, spanning three counties on both the east and west coasts of the state, but geographic diversity doesn’t always protect you from the whims of Mother Nature. “We have manageable and unmanageable risks,” says Garavaglia. “We try to eliminate as many of the preventable issues as possible, which include insect damage, bacterial and fungal diseases that attack the tree and crops.”

But what they can’t manage are large weather events like hard freezes, hurricanes and floods. Garavaglia has seen his share of natural disasters, with three hurricanes hitting the groves in 2004 and 2005 — at a time when the groves are especially vulnerable. “By the time August rolls around, you’ve invested about 90 percent of your care taking in the crop, and you are keeping your fingers crossed and hoping for a good harvest,” he said.

But nothing can really protect a grove, or the fruit on the trees, from a hurricane. “The fruit is too immature to harvest, and it’s very susceptible to high winds,” he adds. That’s where crop insurance comes into play. Garavaglia purchases the maximum buy-up of multi-peril insurance, “because over the years, that’s what has proven to work the best for us,” he says.

When a hurricane blows a good portion of the ripening crop onto the ground, “the fruit is shot,” he says. “And if the winds are high enough, it can take the trees years to recover from the damage.”

Another major threat to Florida’s premier citrus industry, and one that made its presence known in 2011, is a “hard freeze” – periods when temperatures go below 28 degrees for four or more hours. This can not only rob a grower of their harvest – which is their income for the year – but can kill the grove as well, if the freeze is long and hard enough.

 

“You can do everything humanly possible to mitigate the damage during a freeze, but you certainly can’t stop it,” he said. Garavaglia says that in the winter of 2010 and 2011, his groves endured three nights of temperatures that were as low as 22 degrees.

“When a freeze is on the way, growers spend a significant amount of money to prevent damage by flooding their groves and installing micro-jet irrigation to mist the trees,” he says. “But when it gets so cold for so long, as it did in 2011, you just know that there is going to be some major damage to the crop, or the trees, or both,” he said.

Unlike other weather events, it’s really impossible to assess the extent of the damage of a hard freeze for weeks, or even months. That’s because when those long, cold nights are finally over, it can take several weeks before the fruit starts to drop. “Initially, we lost about 20 percent of the crop on the ground,” he said. “Done.”

And then over the rest of the season, every box that is brought in has to be specially inspected with samples removed to ensure that parts of the fruit were not dried out from the freeze. ”Even if it stays on the tree, half of what’s remaining can be completely dried out and not marketable,” he notes.

Garavaglia explained that crop insurance is different with citrus than with row crops in the Midwest because it can take months to fully assess the damage.

“Within several weeks of a deep freeze, an adjuster will visit the grove, and he can spend weeks there going through the damage,” said Garavaglia.

“Fruit can continue to drop for two to three months, which means the adjusting can take months before it is complete,” he explains. But even then, the adjuster is often tasked with checking back after harvest to see if any more fruit was lost during inspection. “Because of the length of time it takes to assess the damage, claims can take months to finalize,” he said.

Garavaglia recounted a crop insurance vignette from a decade ago that demonstrated the critical role crop insurance plays in helping growers bounce back from adversity. The family had purchased another grove and had closed on the deal in August. In late December/early January, they were hit with a hard freeze and lost nearly 60 percent of the crop immediately. “You put your whole life savings into a crop every year, and to completely lose a return on an investment, it could wipe you out,” he said.

“If we didn’t have crop insurance, we would have lost the grove.”

Garavaglia says that while crop insurance doesn’t replace a harvest, it’s a critical tool for growers to mitigate some of their biggest risks. “Crop insurance pays for about 65 percent of what it takes to get a crop to market,” he says. “Nobody is making a profit on crop insurance, but it’s a great way to provide some risk mitigation on things we can’t control,” he added.

CROP INSURANCE IN ACTION: Cash Ruane, North Clarendon, Vermont

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It’s perhaps no great coincidence that Ben and Jerry’s Ice Cream was founded in Burlington, Vermont, given that dairy is the Green Mountain State’s largest agriculture industry. Cash Ruane, from North Clarendon, Vermont, is one of those Vermont dairy farmers.

Cash has been farming his whole life, starting his own farming business with his beloved wife and business partner Karen in 1992. Together, the Ruanes milk a herd of 75 dairy cows with an additional 90 calves and breeding stock. In addition, and primarily to keep the cattle fed, the Ruanes raise about 160 acres of corn, used mostly for silage, as well as hay, used for feed.

On a good year, the Ruanes can raise enough corn to make all of the silage they will need for the year, plus sell some to neighbors. Ruane says that 2011 was looking like a great year. “My corn crop was doing super, and I already had two cuttings of hay,” he explains, adding that he usually gets four. The promising corn crop and adequate hay supply would mean that the Ruanes would not only have enough feed for their farm for the year, but some to sell to the neighbors as well.

The Ruanes had never experienced any major natural disasters. The main source of adversity and risk on their farm was milk prices, which “fluctuated too much and too often” for most farmers’ taste.

But 2011 was going to prove to be quite the unusual year for the duo, when the arrival of Tropical Storm Irene, turned Otter Creek, which runs right through their farm, into a destructive and wild torrent.

When Hurricane Irene was downgraded to a tropical storm, many in New England thought they had dodged a bullet and would get by with some wind and a few showers. But Irene was big a storm that moved very slowly, dumping record amounts of rainfall in a very short period of time on a very rugged part of the country.

Hours after the rain began, Ruane looked out the window of his house to check his cornfields. “All I could see were the tassels of the corn,” he said, as a wall of water rushing down the mountains had swallowed the entire field.

Sometimes flashfloods do not spell doom for corn crops, if they are short in duration and not too deep. But in this case, water came, it came deep and then it refused to leave. “The water did not recede for four and ahalf days,” said Ruane. At one point, the rising water was approaching a barn full of cows, which required immediate rescue. “Luckily, we got the cows out in time,” he said.

When the water finally left, the couple realized that in addition to losing their entire corn crop for the year, they probably would not be able to cut hay for quite some time, due to the silt and debris left in their hayfields. “We lost about 35 to 40 percent of both our third and fourth cutting of hay,” said Ruane. “Which we knew was going to leave us short on feed for the dairy cows for the approaching winter.”

And while there was actually corn left standing despite the rapids that cut through the field, it was soaked to the point that it was ruined. “As time went on, some of the corn just molded and rotted right on the stalk,” he said. Adding, “surprisingly, some of the corn was so waterlogged that it actually sprouted, right on the cob, standing there in the field.” The crop was a complete loss.

Thankfully, Ruane had purchased crop insurance, as he always does, and immediately called his agent when the angry waters left his property. The crop insurance adjuster quickly assessed the damage and the payment soon followed. “I had my indemnity payment within 10 days to two weeks,” he said. “I was impressed, because I was expecting two to three months,” he said.

Unfortunately for the Ruanes, while a crop insurance indemnity can help a farmer get back on his or her feet, it doesn’t replace the income that you would have gained had you sold a bountiful harvest in a good market. “I lost so much feed, I had to borrow money and corn throughout the winter to feed the dairy cows,” he said.

“This was the first time I ever had a claim,” he said. Ruane used his crop insurance indemnity to pay off his 2011 lines of credit, which allowed him to borrow for his next year’s input costsand plant again in 2012. The indemnity, along with help from local charities for farmers and townsfolk who had lost so much in the flooding, helped the Ruanes weather the storm and come back again this year to farm.

“I was really impressed with the generosity of the public, even people I didn’t know and will likely never meet, who extended us a helping hand,” he said. “And my crop insurance indemnity, which allowed us to keep our dairy running for yet another year.”