Living through the drought of 2012 as an Illinois farmer gave me a whole new appreciation for risk management tools.\u00a0 There are things that farmers can do to try and deal with the curve balls served up by Mother Nature and with the ups and downs of market swings, but many things \u2013 like a massive drought or a heat wave \u2013 are completely out of our control.<\/p>\n
If this drought would have happened a decade before, it would have left many farmers completely devastated and on the verge of bankruptcy, with nowhere to turn but to Congress for an expensive, taxpayer-funded bailout package.\u00a0\u00a0 In fact, past disasters have cost taxpayers tens of billions of dollars since 1979.<\/p>\n
What was different about the drought of 2012, which was the worst natural disaster to hit this state in my lifetime, is that the vast majority of the state\u2019s farmers had purchased the best risk management tool around:\u00a0 crop insurance.\u00a0 In fact, farmers spent well over $4 billion out of their own back pockets in 2012 purchasing the protection and peace of mind of crop insurance, which meant when disaster struck, they had a backup plan in hand.<\/p>\n
The recent Farm Bill took three long years to pass and cut $23 billion out of farm programs.\u00a0\u00a0 But for those who for whatever reason are always looking to criticize farm policy that still wasn\u2019t enough.\u00a0 \u00a0Now they have their sights set again on crop insurance, and are pushing forth ideas to make it more expensive for farmers to purchase.<\/p>\n
What these misguided groups and members of congress seem to miss is that the reason why crop insurance has become the best risk management tool for farmers is that it\u2019s affordable and reliable.\u00a0 In fact, 90 percent of planted cropland was protected by crop insurance in 2014.\u00a0 It\u2019s this level of protection \u2013 made possible by crop insurance\u2019s affordability \u2013 that keeps expensive disaster bills from hitting taxpayers when Mother Nature strikes.<\/p>\n
Unlike direct payments in the past, crop insurance is not a handout. In fact, when farmers purchase crop insurance, they receive a bill, not a check, and only receive a payment if they incur a loss, and only after paying a deductible Just like homeowners insurance, when farmers buy crop insurance, they do so hoping that they will never have to use it.\u00a0 And many of them rarely do.\u00a0 In fact, since 2000, farmers have paid out more than $38 billion purchasing the protection of crop insurance, and in most years, they don\u2019t collect a dime.<\/p>\n
If crop insurance becomes more costly, then farmers simply won\u2019t be able to afford it, and they will have nowhere to turn but the Federal government when disaster strikes.\u00a0 This is a lesson we learned over and over again before crop insurance became widely available and affordable.<\/p>\n
Crop insurance works so well and has been embraced so readily by farmers across the country because it\u2019s a public private partnership that combines the best of the public and private sectors.\u00a0 Crop insurance premiums are partially discounted by the government to ensure affordability and the policies are sold and serviced by the private sector.\u00a0 And when disaster strikes, an indemnity check arrives in weeks, not years.<\/p>\n
Like any other public policy, crop insurance isn\u2019t perfect, and I\u2019m sure Congress will do some fine-tuning to the program in the next Farm Bill just like they did in this one.\u00a0 But the most important thing to keep in mind is that farmers are not only enormous producers, they are enormous consumers as well.\u00a0 And with crop insurance policies in hand, they can bounce back from natural disaster or huge market fluctuations and continue to be the engines that drive the economy of rural America.<\/p>\n