Political Pundit Takes to the Airwaves to Discuss Agriculture

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This week was a first for John McHenry, the well-known political pollster for North Star Opinion Research, who is in high demand during election season.

McHenry has worked with countless national campaigns and has appeared on Fox News, CNN, NBC Nightly News, BBC, NPR and many others to share research analysis and commentary. But he’s never been on farm radio…until Thursday.

North Star Opinion Research conducted a national public opinion poll to determine voters’ views of farmers, farm policy and crop insurance, and the results have been of great interest to rural America. So the National Association of Farm Broadcasting interviewed McHenry and distributed his remarks to every farm radio broadcaster in the country yesterday.

And McHenry didn’t disappoint, adding valuable context to the survey’s findings.

For example, the fact that farmers’ favorability ratings are higher than what is usually seen for the military, and the fact that there was no deviation from this popularity between political parties, was significant in McHenry’s eyes.

Since voters are generally unhappy with the country’s direction and are inundated with polarizing political rhetoric, agriculture’s bipartisan public support becomes all the more remarkable, according to McHenry.

“This is one of the rare highlights where you can say that Congress found a solution here that voters are happy with,” he concluded.

If you’re interested in hearing the interview in its entirety, click here.

More information about the poll can he found here.

New Poll: Americans Overwhelmingly Support Farmers, Farm Policy, Crop Insurance

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(OVERLAND PARK, Kan.)- Nearly 90 percent of Americans have a favorable view of farmers, and 92 percent said it was important to provide them with federal funding, according to a new national poll released today. Furthermore, positive marks cut across party lines, showing that a strong farm policy is a bipartisan issue.

“Americans overwhelmingly like farmers and support the programs that protect them,” explained Jon McHenry, vice president of North Star Opinion Research, the polling firm that explored the general public’s views on farmers, farm policy and crop insurance. “This response is not surprising when you consider that eight in 10 voters believe a vibrant agricultural industry was critical to the country’s national security.”

More than 70 percent of voters also said they believed that farmers should help fund part of their own safety net. This cost-sharing structure is at the heart of America’s crop insurance policy, with farmers paying a portion of their insurance premiums and shouldering, on average, 25 percent of crop losses through deductibles.

Those polled were impressed. Nearly 80 percent said they supported giving farmers discounts on insurance premiums and the vast majority agreed that the current premium and deductible amounts absorbed by farmers were appropriate.

Americans also weighed in on the delivery of crop insurance. When asked who should implement the system, voters agreed by a 20-point margin that farmers and taxpayers were better served by private companies delivering crop insurance instead of the government.

Support for farm policy and crop insurance even remained high when poll respondents were read a misleading statement often used by farm policy’s critics.

“In a question providing both sides, the security argument in favor of protecting farms wins by a two-to-one margin over the argument used by farm policy opponents,” McHenry said.

The public opinion poll, which was commissioned by the National Crop Insurance Services, is available at www.ncis.staging.wpengine.com. The phone survey of 1,000 registered voters was conducted April 3-7 and has a margin of error of 3.1 percent.

New Poll: Americans Overwhelmingly Support Farmers, Farm Policy, Crop Insurance

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(OVERLAND PARK, Kan.) – Nearly 90 percent of Americans have a favorable view of farmers, and 92 percent said it was important to provide them with federal funding, according to a new national poll released today.  Furthermore, positive marks cut across party lines, showing that a strong farm policy is a bipartisan issue.

“Americans overwhelmingly like farmers and support the programs that protect them,” explained Jon McHenry, vice president of North Star Opinion Research, the polling firm that explored the general public’s views on farmers, farm policy and crop insurance.  “This response is not surprising when you consider that eight in 10 voters believe a vibrant agricultural industry was critical to the country’s national security.”

More than 70 percent of voters also said they believed that farmers should help fund part of their own safety net.  This cost-sharing structure is at the heart of America’s crop insurance policy, with farmers paying a portion of their insurance premiums and shouldering, on average, 25 percent of crop losses through deductibles.

Those polled were impressed.  Nearly 80 percent said they supported giving farmers discounts on insurance premiums and the vast majority agreed that the current premium and deductible amounts absorbed by farmers were appropriate.

Americans also weighed in on the delivery of crop insurance.  When asked who should implement the system, voters agreed by a 20-point margin that farmers and taxpayers were better served by private companies delivering crop insurance instead of the government.

Support for farm policy and crop insurance even remained high when poll respondents were read a misleading statement often used by farm policy’s critics.

“In a question providing both sides, the security argument in favor of protecting farms wins by a two-to-one margin over the argument used by farm policy opponents,” McHenry said.

The public opinion poll, which was commissioned by the National Crop Insurance Services, is available at www.ncis.staging.wpengine.com.  The phone survey of 1,000 registered voters was conducted April 3-7 and has a margin of error of 3.1 percent.

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Professional Critics Are Never Happy

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Critics of farm policy are impossible to please and are adept at arguing out of both sides of their mouths.

For example, when crop prices around the world are low, they often blame U.S. farm policy for the falling prices and criticize it for harming farmers in poor developing countries. Then, when crop prices rebound, they often blame farm policy for higher prices and criticize it for harming poor consumers.

In other words, U.S. farmers are in a lose-lose proposition – blamed when prices are up and blamed when prices are down. The same is true when it comes to critics’ views of crop insurance.

When crop prices are up, the cost of crop insurance is usually higher and other components of the Farm Bill are lower. That’s because insurance premiums are pegged to the value of the insured crop, while other Farm Bill policies are specifically designed to kick in if prices fall.

So, critics complain about the cost of crop insurance when crop prices are up and conveniently ignore the fact that other Farm Bill costs are lower and balance out the equation.

Then, when crop prices fall, farm policy critics do an abrupt about-face. They refuse to acknowledge that crop insurance costs are down because of lower premiums and instead focus their criticisms on the rest of the Farm Bill, which kicked in as designed.

This same yo-yo style of debating is seen when we have agricultural disasters in this country, too. When farmers are lucky enough to avoid widespread loss due to drought, floods, or freezing, insurance companies write fewer indemnity checks to cover losses.

That means lower taxpayer costs, which critics overlook. It also means that insurers and the federal government, which helps reinsure the program, see underwriting gains. To agriculture’s opponents, private-sector companies seeing profit is a point of criticism.

When farmers are unlucky and meet Mother Nature’s wrath, there are more insurance indemnity checks written. That means that crop insurers and the federal government see losses. To agriculture’s opponents, the added costs associated with losses is a point of criticism.

Of course, there’s not even a mention of the fact that private companies helped cover part of the losses with private assets so that taxpayer weren’t on the hook for the whole bill.

In this impossible “head I win, tails you lose” set-up, it’s probably best for everyone to just tune out the professional critics. Instead, let’s focus on what really matters: Protecting farmers and the country’s food, feed and fiber supply with a cost effective, common-sense policy.

And that’s exactly what crop insurance is.

Insurance Basics: Value Matters

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Here’s a hypothetical situation to ponder:

In 2010, you purchased a brand-new car for $30,000. Since then, you’ve driven 100,000 miles, worn out a couple of sets of tires, and accumulated an impressive collection of dents, scrapes, and pings. Now, that five-year-old vehicle is worth $10,000. Unfortunately, you’re in a wreck and total the car. Does your insurance provider send you a check for $30,000 or $10,000?

Obviously, your auto insurance covers the value of the property at the time of the accident, not the time of purchase. Otherwise, there would be a whole lot of folks wrecking old cars to recoup the value of a depreciating asset.

Of course, the flip side is true, too. Here’s another hypothetical:

In 1975 you purchase a nice home for $50,000. Throughout the years, the surrounding area is developed. You remodel your kitchen and bathrooms and even finish out the basement with an extra bedroom, an entertainment area, and a full bath. Today, the building alone is worth $300,000. Unfortunately, it burns to the ground. Does your homeowner’s policy just cover the original purchase price of $50,000 or the full market value of $300,000?

Luckily for the homeowner, it’s the latter. And it makes sense. You will have to replace the appreciating asset at today’s market value.

Not to mention, the insurance premiums you paid throughout the years reflected the changing value of the home – premiums for a home worth $300,000 are more expensive than premiums on a $50,000 home.

These same common-sense principles apply to crop insurance, and are too often overlooked when discussing the Harvest Price Option available to farmers. Let’s consider one more hypothetical:

A farmer plants a corn crop in May that is valued at $250,000. The farmer forward contracts to sell his crop at that amount – in other words, he agrees to sell it at a locked-in price to a buyer after harvest in October. But a drought strikes that summer and most of the corn withers, leaving the farmer with little to harvest. Since this farmer isn’t the only one experiencing drought, overall corn supplies fall driving up prices nationally. Now, the value of the crop that the farmer lost is worth $350,000. What does the insurance pay?

In the hypothetical above, if the farmer paid an extra premium for Harvest Price Option coverage, the insurance would pay the value of the crop at the time of loss, or $350,000, minus the farmer’s deductible.

The farmer paid more to get that extra protection because under the forward contract, the farmer is obligated to deliver corn to the buyer at the set price, even if the farmer’s crop fails. That means the farmer must purchase enough corn on the open market at the current market rate, to satisfy the contractual obligation. In other words, the farmer must pay $350,000 to buy corn that will then be resold for $250,000.

That’s not a great deal for the farmer. Yet, agriculture’s political opponents try to spin the Harvest Price Option as some free giveaway. Such critics are being intentionally misleading.

Harvest Price Option is a policy that farmers pay more for out of their own pockets, while still absorbing the deductible. And, it’s the only meaningful risk management tool farmers have to replace the lost bushels needed to fulfill their forward marketing obligations or to feed their livestock in the event of wide-spread crop failure.

ICYMI: Farm policy is essential to maintaining ag production in the U.S.

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Agri-Pulse
March 23, 2016

If there is one place that, in recent years, overwhelmingly demonstrates the need and importance of U.S. farm policy, it is California. For the past four years, this top agricultural producing state has experienced record drought conditions and for farmers like my husband and me, it has taken a toll on our operation.

We have been growing rice in the Sacramento Valley for 30 years and we have never seen a weather event this relentless. Although the arrival of El Nino has provided much needed rain, the effects are marginal because of the intensity of the drought.

Operating loans are essential for every farmer because of the cost of producing crops, but for my family they have enabled us to keep going to the next year despite depressed yields and prices, and in some cases the inability to plant a crop at all.

We would not be able to receive this crucial financing without crop insurance and farm policy in place. Farming is an inherently risky business and bankers want assurances that we will be able to pay back the loan if disaster strikes. We were not born into farming – we built our operation from the ground up – so we still have land and equipment payments to make regardless of whether we have a good or bad growing season, or whether a natural disaster wipes out our crops altogether.

Crop insurance is something we purchase each year to manage this risk and we only receive an indemnity when we suffer a verifiable loss. Even then, it doesn’t make us whole, but it does soften the blow from a bad year.

It’s important to have this kind of safety net in place for all farmers, all across the country. And, I am always alarmed by the calls in Washington to cut what remains of the farm safety net, especially from those who have no idea what it takes to grow food and fiber. We need risk management tools now more than ever to help us overcome unpredictable weather events.

Additionally, we need policy in place to combat unfair practices with our foreign competitors like China and Thailand whose support for their rice growers far exceeds that of the United States and actually violates agreements under the World Trade Organization (WTO). While the U.S. was reforming its policy in the 2014 Farm Bill, other countries were ramping up support for their farmers, in some cases by more than a 100 percent. Their policies are trade distorting and leave American growers at a competitive disadvantage.

American farmers can and do manage extraordinary risks, year in and year out, but we cannot manage the challenges associated with unpredictable and sustained natural disasters, volatile markets, and trade distorting policies of our foreign counterparts without risk management tools like crop insurance and farm policy.

Lawmakers in Washington should consider this reality. If they want to continue to have agricultural production in this country, and in California in particular, they need to invest in it.

Lorraine Greco serves on the California Board for the U.S. Rice Producers Association. She grows organic rice with her husband in northern California.

Crop Insurance is a ‘Well-Run’ Public-Private Partnership

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The role of federal crop insurance has grown significantly through the years and it is now the key risk management tool for farmers all across the country. With this greater role comes a greater responsibility to ensure the program is working as efficiently and effectively as possible.

Part of this responsibility includes making certain that when a farmer does suffer a verifiable loss and files a claim, the indemnity payment is processed quickly and sent to the right recipient with the correct amount. In other words, making certain that there are no improper payments. This is important for the farmer who is counting on timely assistance after a catastrophic event and it’s important for taxpayers who demand program integrity.

And, new data from the U.S. Department of Agriculture’s (USDA) Risk Management Agency (RMA) reveals that crop insurance stands as an example of a successful, properly-managed public-private partnership.

During the recent annual meeting of crop insurers, RMA administrator Brandon Willis announced that the error payment rate has improved by more than 50 percent from 5.5 percent in 2014 to 2.2 percent in 2015. By way of comparison, the average error rate government-wide was 4 percent.

“This demonstrates that the crop insurance program can withstand the scrutiny,” Willis said. “It’s a good story. It tells the story that crop insurance is a well-run program with an error rate far below the government average.”

An improper payment occurs when funds go to the wrong recipient, the right recipient receives the incorrect amount of funds, including being paid too much or too little, or the recipient uses funds in an improper manner. And, as Willis noted, many errors are simply rooted in data entry and reporting mistakes.

Perennial critics of farm policy have often cast crop insurance in a negative light pointing to any error payment rate as an excuse to cut, or even, gut the program. As a result, RMA, crop insurers, and even Congress have worked together to improve the error payment rate through the years.

In fact, as former RMA administrator, Kenneth D. Ackerman recently wrote in a blog post, “RMA’s eye-catching new 2.2 percent ‘improper payment’ rate for 2015 was no fluke. Rather, it was the product of a long-term commitment and years of work by a wide range of people who deserve credit for sticking to it.”

Going forward, the crop insurance industry will continue to work with stakeholders to ensure the accountability and integrity of this critical risk management tool that farmers and consumers rely upon to maintain a steady and affordable food and fiber supply.

Convo 70

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I use crop insurance as a safety net to protect my assets in case of a fallout disaster. Younger producers use it to go to the bank to borrow for operating loans and tell them, ‘I’m protected.’

Convo 70

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I use crop insurance as a safety net to protect my assets in case of a fallout disaster. Younger producers use it to go to the bank to borrow for operating loans and tell them, ‘I’m protected.’

Insurance Basics: The Risk Pool

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All insurance, from auto to life, health, and crop insurance, works best when it expands the number of people it covers. That’s because the broader the participation, the more widely risk can be spread. And by spreading the chance of loss among a diverse group of insureds, premiums become more affordable for everyone involved.

This concept is known as the “risk pool.”

Think of it like this: Car insurance would not work if only a handful of drivers participated – especially if those drivers were accident-prone or heavily ticketed. Insurance companies would be hesitant to offer coverage and premiums would be astronomically high. A deep bench of experienced drivers with safe driving records is needed in the risk pool to balance out the equation and help offset losses.

The same can be said for health insurance. Why else do you think there was so much discussion on enrolling young, healthy people during the Affordable Care Act debate?

Crop insurance is no different, except crop insurance is about acres covered, not the number of farmers participating. If 1,000 acres is farmed by one farmer or three smaller operations is of little to no consequence. Getting the 1,000 acres covered is the key to expanding the size of the risk pool.

Widening the risk pool is so important that many forms of insurance encourage participation through incentives or mandates. If you have a mortgage, for example, you are obligated to carry insurance. State laws require auto coverage. Health insurance is aided when employers and the government help cover a portion of the premium.

In the case of crop insurance, these incentives didn’t always exist. As a result, coverage was expensive, policies were unavailable for many crops, and few people were insured. And when disaster struck, farmers looked to Congress to help them rebound through expensive, unbudgeted disaster legislation.

In fact, in the early 1990s, less than 30% of farm acreage was insured and farmers were vulnerable to risk. Having been stung by $70 billion worth of disaster bills since 1989, lawmakers needed to find a way to boost crop insurance participation.

Congress expanded the size of the risk pool through a three-pronged strategy.

First, it said crop insurance must be available to all – farmers couldn’t be excluded because they grew canola instead of corn or because they farmed in California instead of Connecticut. Then, the government invested in the development of new policies for crops, regions, and farmers that were traditionally underserved. Finally, it incentivized participation by discounting farmers’ premiums.

And the results speak for themselves. Today, 90% of acres are covered, taxpayer-funded bailout packages are a thing of the past, and farmers get assistance quickly when they need it thanks to private-sector efficiency.

Yet, despite these advances in modern risk management, some of agriculture’s political opponents have demanded that these investments be unraveled and that we return to the old inefficient and expensive model.

These farm policy critics want to exclude farmers with large operations from the system and cap benefits for all growers. Doing so would remove large swaths of acres from the risk pool, alienate experienced farmers with lower risk profiles, and ultimately make it harder for smaller, beginning farmers to get insurance coverage.

Just like removing all the safe drivers from auto insurance, that would be a wreck for everyone involved – including taxpayers.

Convo 69

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Insurance not only allows farmers to face natural disasters and damaging production years without losing everything, but it provides assurance that we can make payments to our banks. The same way any person in this country cannot get a house loan or a car loan without proof of insurance, agricultural banks want the guarantee that farmers can make their payments.

Convo 68

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Farmers buy crop insurance for the same reason drivers purchase auto insurance: it offers some degree of stability in times of disaster. Crop insurance has become, in essence, the nation’s insurance policy for the food supply. When Mother Nature strikes and farmers lose their crops, those with crop insurance policies in hand can bounce back and plant again the next year.

Convo 68

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Farmers buy crop insurance for the same reason drivers purchase auto insurance: it offers some degree of stability in times of disaster. Crop insurance has become, in essence, the nation’s insurance policy for the food supply. When Mother Nature strikes and farmers lose their crops, those with crop insurance policies in hand can bounce back and plant again the next year.

Convo 65

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

CROP INSURANCE IN ACTION: Greg Wegis, Bakersfield, California

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Greg Wegis’ great-grandfather established their multi-generational farm in the early 1900s and the have been farming in Bakersfield, California ever since. Wegis grows almonds, pistachios, tomatoes, corn, wheat, alfalfa and cherries and he plans to start growing table grapes in the near future.

“I have a passion for what I do,” Wegis said. “Being raised around my grandfather and my dad, just talking about it. It’s a lifestyle; producing food for people to eat and nourish their bodies. It’s a good feeling and an occupation I think that’s very noble.”

Today Wegis’ farm employs 80 people full-time to keep everything running smoothly. Wegis said he prides himself on being a family-oriented business, knowing each one of his employees and their family.

“We take care of our people, because they take care of us,” Wegis said. “They take care of our land and we treat them as an extension of our family. I think that is unique in the multi-generational family farming business; you don’t find that in a lot of other industries.”

Not only does Wegis feel his employees deserve credit for the hard work they provide, but he further recognized that his farming operation wouldn’t be possible without all of the supporting companies that aid them in their day-to-day operations. This includes companies that help with tractor and machinery parts, processing and manufacturing, sales, bankers, insurance agents, fuel, transportation companies and “the list goes on and on.”

According to Wegis, farm income in California is a $47 billion industry. The county he resides in, Kern County, is responsible for providing a little over $6 billion. Translating that into the amount of jobs agriculture provides within Kern County, Wegis said it’s “somewhere around 70,000 jobs.”

“Just the almond industry alone, employs about 110,000 individuals in the Central Valley,” Wegis explained. “And we’re connected. So whatever happens to us, in turn affects them, either in food prices or food availability.”

Minus a great winter in 2002 and 2011, the area Wegis resides in has been in a drought for over four years. To combat this issue, Wegis said their farming operations rely on two separate solutions to stay sustainable and in business.

“With our farm, we have around 10,000 acre-feet of water that we’ve contracted for. My grandfather and his generation helped build the Central Valley Project and the State Water Project, (bringing) us water from Northern California to help us be more sustainable south of the Delta Area.”

In order to take part in the Central Valley Project and the State Water Project, farmers in the California region must pay a set amount of money regardless if they receive the designated amount of water or not (water supply levels rely on what is available each year in the area’s designated reservoir, which could lead to the possible shortages). By doing this, Wegis said it has helped “replenish the aquifers” that were once depleted and helps keep farms in the region sustainable.

“We’re the breadbasket of the world here in Central Valley, as far as fruits, vegetables, nuts and milk,” Wegis concluded. “The United States relies heavily on us to produce that food. If we have to reduce our footprint, we cannot farm the acres we used to, and that’s definitely going to affect everyone. And that’s the message we’re trying to [get] everybody [to] understand.”

Wegis said he insures their crops to protect them against natural disasters, diseases or insects that they have little control over. “Without crop insurance it would not allow us to farm.” In the end, Wegis attributes crop insurance as a vital tool in agricultural risk management. “It’s just a crucial tool to circumvent the ups and downs of Mother Nature and agriculture,” Wegis expressed.

Economists Discuss Farm Policy Amid Falling Crop Prices

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(INDIAN WELLS, Calif.)—The U.S. Department of Agriculture, last week, warned that farm incomes would again fall in 2016 because of low commodity prices, continuing a troubling trend in recent years. Top agricultural economists echoed that sentiment yesterday and explained how this reality underscores the importance of farm policy.

“It’s pretty tough sledding out there right now for grain producers,” Washington State University economist Randy Fortenbery said during a panel discussion at an annual meeting hosted by National Crop Insurance Services and the American Association of Crop Insurers. “If you look forward, I think the tough times will extend beyond 2016.”

Fortenbery explained that the high value of the dollar and commodity surpluses around the globe are making things particularly difficult for U.S. agriculture. He also encouraged farmers to “think about risk management” as a way to weather these tough times.

Joe Outlaw with Texas A&M University agreed. “Producers need to spend their money wisely and fine tune their crop insurance protection as much as possible,” he said.

“We are fortunate in this country to have crop insurance and a farm safety net,” Outlaw continued, adding that such policies are essential right now since “prices are below the cost of production for everybody.”

And while low commodity prices harm farmers and rural economies, there are some silver linings when it comes to crop insurance. Because the value of the insured crop is falling, that means insurance premiums are falling as well, which could help lower farmers’ bills and reduce government cost.

Mechel Paggi with California State University, Fresno, explained that this has implications on the international front, too. The 2014 Farm Bill made crop insurance the centerpiece of U.S. farm policy, he said, and as such it will be scrutinized by the World Trade Organization to ensure compliance with international rules.

“U.S. farm policy is coming in well under the support caps agreed to by the WTO,” he said. “With crop insurance costs going down, it would be harder to argue that current policy is a hindrance to foreign trade.”

Furthermore, Paggi noted that existing research shows very weak linkage between crop insurance and producer planting decisions – a key indicator used by WTO when examining countries’ farm policies.

ICYMI: Insure our food supply and our economy

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The Desert Sun
February 14, 2016

If you have a car, you have auto insurance to protect against property and bodily harm. If you own a house, regardless of its size, you have insurance to guard against costly damage. Chances are good you have policies on your health and even your life, too.

These forms of insurance are common, and as such, people have a high degree of familiarity with them. However, few people realize that the food on their table remains affordable thanks, in part, to insurance protection. Or that America’s food security is improved by insurance because it helps U.S. farmers manage risk.

Crop insurance, which underpins the nation’s agricultural bounty, works like other kinds of insurance, and it is particularly important in a state like California that has such a diverse and thriving agricultural sector. In fact, for most fruit and vegetable growers it is the only safety net available.

This insurance is what helped many California farmers bounce back after the recent drought and plant another year, just as it does following freezes and other natural disasters.

The 2014 Farm Bill made big investments in making the system work better for specialty crop growers in states like California. For example, the new Whole Farm Revenue Protection policy enables a grower to insure his or her entire farm instead of having to buy individual policies for each and every fruit and vegetable planted. This new policy is not crop specific, and now crops like dates, spinach, melons, and other specialty crops may be insured if the producer has at least five years of history growing that commodity.

Thanks to these investments, Californians now have $8.7 billion worth of crops protected on more than 6.8 million acres – including almonds, grapes, pistachios, walnuts, rice, and tomatoes to name a few. It’s no wonder then that the crop insurance industry chose the state as the site of its annual convention.

This week, hundreds of agricultural and insurance industry leaders will be in Riverside County to discuss new developments in crop insurance protection and challenges agriculture will face in years to come. Chief among those challenges will be constant political attacks against farmers.

Despite crop insurance’s risk-sharing structure that minimizes taxpayer cost, there are critics who want to undermine it and are floating proposals to cap coverage and publicly shame farmers, which would disproportionately hit specialty crop growers. But like other USDA programs, crop insurance needs to be widely available to protect all farmers, big or small, no matter what they produce.

These attempts are particularly appalling in a region like the Coachella Valley, where agriculture is such an important economic driver and where the community does so much to aid the underprivileged through farm-to-table programs like Hidden Harvest.

Agriculture’s opponents can be rebuffed if all of agriculture will pull together to defend its way of life. Coordination and communication will be key to confronting our critics, and ideas for working together and delivering a unified message to lawmakers will be our top priority at the annual meeting this week.

About the author: Thomas P. Zacharias, Ph.D., is president of National Crop Insurance Services, the Kansas-based trade association hosting this week’s convention.

Crop Insurers Celebrate Past Success, Set Sights on Future

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Crop insurers and farmers have shouldered their share of challenges in recent years, ranging from an historic drought to lower-than-expected financial returns, legislative debates, and implementing a new Farm Bill.

But Tim Weber, chairman of the American Association of Crop Insurers and National Crop Insurance Services, said today that those challenges have only strengthened crop insurance providers and better equipped them for the future.

“I believe crop insurance is stronger today for the obstacles it has faced in recent years and most importantly, it is ready to meet tomorrow’s challenges,” he told colleagues at the industry’s annual conference.

Weber, who is coming to the end of his term as chairman, used his remarks to reflect back on lessons learned during pivotal years within the industry – a time, he said, when teamwork and building alliances was emphasized.

“Overall, I am very proud of what we have accomplished,” he said. “These accomplishments were the result of a hard-working, talented workforce that was willing to work together as [insurance providers], agents, adjusters, and industry allies to overcome attempts to weaken our farmers’ and ranchers’ most important risk management tool.”

Weber noted that, despite crop insurance’s past successes and its popularity with farmers, agriculture’s opponents will continue to criticize the farm safety net. He pointed to the recent Bipartisan Budget Act of 2015, which sought to cut $300 million a year from crop insurance, as proof of that criticism and how rural America must counter it.

“Farmers from across the country came to our defense…as did the agent force, the lending community, input providers, Main Street businesses, the conservation world, and leading voices from academia,” he explained. “Notwithstanding this level of support…we would never have won this battle if not for the leadership of key lawmakers who were not bashful about standing up for agriculture.”

Weber urged the group to remain vigilant moving forward by focusing on industry cooperation and collaboration with third-party allies. He also urged insurers to invest time and resources in the political process as a way to blunt future critiques.

“We need all Members of Congress to hear directly from their constituents regarding the importance of maintaining an effective crop insurance program,” he concluded. “After all, every person in this country benefits from a dynamic, financially healthy agricultural industry. Not only does it provide a dependable supply of domestically grown food, fuel, and fiber, but it also supports economic and job growth.”

USDA: Public-Private Partnership has Strengthened Crop Insurance and Reduced Waste

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(INDIAN WELLS, Calif.)—The current crop insurance system, which depends on cooperation and coordination between private-sector insurers and the U.S. Department of Agriculture (USDA), is working well and serves as an example of how effective such partnerships can be.

That was the message delivered yesterday by Brandon Willis, administrator of the USDA’s Risk Management Agency, at the crop insurance industry’s annual meeting. Willis pointed to the partnership’s track record for eliminating waste, fraud, and abuse as proof of its success.

Occurrences of improper indemnity payments to farmers, which can result from data entry and reporting mistakes, fell to 2.2 percent in 2015, Willis told the group. That’s compared to a 5.5 percent improper payment average for other USDA programs in 2014 and a 4 percent average for programs across all government agencies.

“This demonstrates that the crop insurance program can withstand the scrutiny [from its critics],” Willis explained. “It’s a good story. It tells the story that crop insurance is a well-run program with an error rate far below the government average.”

He added that the USDA and private insurers will continue to identify and address the causes of errors and constantly make improvements to the system.

In addition to efficient and accurate program management, Willis said that the partnership excelled in implementing a complicated farm bill in 2014. In particular, he noted how hard work by both the public and private sectors made it possible to expand coverage options to beginning farmers and ranchers, organic production, and specialty crops.

This expanded coverage has helped crop insurance find new supporters, noted Willis, which will be essential to defending farm policy in the future.

“It’s important that we have a safety net that works for everybody,” he concluded. “Crop insurance has worked…and it is my hope that we can work together…to have a program that we are proud of and that farmers are proud of.”

Senate Ag Chair Encourages Greater Outreach, Education to Counter Attacks on Crop Insurance

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(INDIAN WELLS, Calif.) — The Chairman of the Senate Committee on Agriculture, Forestry and Nutrition addressed crop insurers during the annual meeting of the American Association of Crop Insurers and the National Crop Insurance Services and pledged to “preserve, protect, and defend” this public-private partnership against the challenges ahead.

During his keynote speech, Sen. Pat Roberts praised the ability of the industry to work together to stave off cuts to crop insurance that were included in last year’s budget deal noting that agriculture can be a powerful force when it is united.

“I’m proud of the way we all stood up and found a solution,” said Roberts. “Working with Chairman Conaway in the House and what was nearly the entire agriculture industry, we were able to fix a shortsighted legislative cut to crop insurance.”

He also warned that more teamwork would be needed in the days ahead as critics continue to attack this important risk management tool. Additionally, he encouraged crop insurers to double their outreach and education efforts stating that not all lawmakers in Washington understand farm policy.

“My challenge to you today is to find more allies, leave no stone unturned,” said Roberts. “We have to increase the number of voices defending crop insurance both inside the Congress and out in the countryside.”

Roberts explained that he has spent his career working to improve the reach and mechanics of crop insurance while helping to move farm policy away from unbudgeted ad hoc disaster assistance. The 2014 Farm Bill made the most significant changes to reach more producers and commodities than ever before.

“We should all be proud that crop insurance has grown into the number one risk management tool for the majority of farmers and ranchers across this great country,” added Roberts. “Let’s keep their tool box full so they can manage risks on their own operation, stay in business, and pass the farm onto the next generation.”

Crop Insurers Celebrate Past Success, Set Sights on Future

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Crop insurers and farmers have shouldered their share of challenges in recent years, ranging from an historic drought to lower-than-expected financial returns, legislative debates, and implementing a new Farm Bill.

But Tim Weber, chairman of the American Association of Crop Insurers and National Crop Insurance Services, said today that those challenges have only strengthened crop insurance providers and better equipped them for the future.

“I believe crop insurance is stronger today for the obstacles it has faced in recent years and most importantly, it is ready to meet tomorrow’s challenges,” he told colleagues at the industry’s annual conference.

Weber, who is coming to the end of his term as chairman, used his remarks to reflect back on lessons learned during pivotal years within the industry – a time, he said, when teamwork and building alliances was emphasized.

“Overall, I am very proud of what we have accomplished,” he said. “These accomplishments were the result of a hard-working, talented workforce that was willing to work together as [insurance providers], agents, adjusters, and industry allies to overcome attempts to weaken our farmers’ and ranchers’ most important risk management tool.”

Weber noted that, despite crop insurance’s past successes and its popularity with farmers, agriculture’s opponents will continue to criticize the farm safety net. He pointed to the recent Bipartisan Budget Act of 2015, which sought to cut $300 million a year from crop insurance, as proof of that criticism and how rural America must counter it.

“Farmers from across the country came to our defense…as did the agent force, the lending community, input providers, Main Street businesses, the conservation world, and leading voices from academia,” he explained. “Notwithstanding this level of support…we would never have won this battle if not for the leadership of key lawmakers who were not bashful about standing up for agriculture.”

Weber urged the group to remain vigilant moving forward by focusing on industry cooperation and collaboration with third-party allies. He also urged insurers to invest time and resources in the political process as a way to blunt future critiques.

“We need all Members of Congress to hear directly from their constituents regarding the importance of maintaining an effective crop insurance program,” he concluded. “After all, every person in this country benefits from a dynamic, financially healthy agricultural industry. Not only does it provide a dependable supply of domestically grown food, fuel, and fiber, but it also supports economic and job growth.”

Crop Insurance is Money Well Spent by Farmers

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Many folks might not realize this, but the passage of the 2014 Farm Bill was a turning point in American history, from an agricultural perspective. Largely gone are the days of government support programs like direct payments. In their place, and at the center stage of farm risk management tools, is crop insurance.

I had a chance to learn the value of crop insurance first-hand when my cousin and I rented our first farm together in 2012. We’ve been farming with our family for many years, but felt it was time to expand out and grab some of our own. Of course, little did we know that the year we kicked off our farming careers would soon become the driest year in decades. We lost all of our dryland crops, roughly forty percent of our acres that year. Thankfully, we had purchased crop insurance.

Unlike days of old, crop insurance is not a federal handout. In fact, if farmers want to enjoy the protection provided by crop insurance, they must purchase it. And they do so willingly, spending roughly $4 billion per year out of their own back pockets on crop insurance premiums alone.

For most beginning farmers, crop insurance is nearly a necessity, since banks are hesitant to make loans to farmers who lack sufficient collateral. Crop insurance allows banks the opportunity to increase lending capabilities with the security of crop insurance. That’s because with a crop insurance policy in hand, banks feel more secure making those loans to farmers, since there’s a guarantee of revenue even if the crop fails.

Crop insurance is a public-private partnership whereby individual farmers like me can buy policies for insurance that is specifically tailored for our tolerance to risk and the profile of our farm. Crop insurance is affordable to farmers, thankfully, because the federal government provides a discount, ensuring that all farmers, young and old, big and small, can purchase policies if they choose to.

Farmers buy crop insurance for the same reason drivers purchase auto insurance: it offers some degree of stability in times of disaster. Crop insurance has become, in essence, the nation’s insurance policy for the food supply. When Mother Nature strikes and farmers lose their crops, those with crop insurance policies in hand can bounce back and plant again the next year.

Crop insurance has also removed some of the financial risk from taxpayers. Prior to the rise of modern day crop insurance, the wide-scale disaster that we experienced with the great drought of 2012 would have necessitated a very expensive, ad hoc disaster bill from Congress. Those bills are big and are fully funded by taxpayers.

And while anything is better than nothing when you literally lose the farm, those disaster funds usually took a year or more to arrive in the hands of farmers who needed them. In my case when I lost forty percent of my crop in 2012, a year would have been much too late.

Crop insurance, on the other hand, is administered by private insurance companies and the indemnity arrives in weeks or a month or two, not years later. The crop insurance policy I purchased not only allowed me and my cousin to pay back our production loan, but also meet our forward contracting obligations. And we were able to bounce back and plant the next year. That’s a smart public policy because it ensures food security for our nation.

Of course crop insurance has its critics, and their sights are squarely on crop insurance, since it’s really the only game in town. And that’s why it’s important for farmers to speak up and let their elected officials know how much they value this risk management tool.

Needless to say, if we hadn’t purchased crop insurance our first year of farming, my cousin and I would be spending years paying off that production loan. And without this valuable risk management tool available, I’d venture to say many more of America’s farmers would have been joining us.

Scott Reilly is a farmer and crop insurance agent who lives in Spalding, Nebraska. This op-ed appeared in the Albion News on February 3, 2016.

Insurance Basics: How Crop Insurance Stacks Up to Other Insurance Products

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The concept of minimizing risk and financial loss by purchasing insurance is not a new or radical one. People have been doing it for centuries to guard against the financial pain that results from an accident or loss.

Americans are most familiar with health, auto, home, and life insurance, because most Americans have experience with these policies.

And most Americans understand basic insurance concepts and terms. For example, working through an agent to purchase a policy that is backed, or underwritten, by a private company; paying a bill, or premium, for that protection that is calculated based on your unique condition; shouldering some form of a loss, or deductible, before insurance kicks in; and receiving reimbursement, or an indemnity, only after the loss is verified by a trained claims adjuster.

Despite what the critics would have you believe, crop insurance operates similarly to these other types of insurance, and it is based on the the same philosophies and business principles.

  • Agents help customers choose the appropriate policy for their needs, and then a company underwrites it. There are 12,000 crop insurance agents who helped farmers purchase 1.2 million policies from 18 insurance companies in 2015.
  • Premiums are paid every year for coverage. For farmers, that means cumulatively paying more than $4 billion out of pocket each year.
  • A deductible must be met before an indemnity is paid to help restore the condition that existed prior to the loss. On average, farmers must lose roughly 30 percent of the value of their crop before their insurance takes over.
  • Claims must be verified and adjusted before they are paid out. With crop insurance, that job falls to roughly 5,000 claims adjusters tasked with understanding crop conditions on more than 298 million acres nationally.

Of course, the parallels are not perfect because agriculture is a unique kind of business that suffers unique kinds of losses. Unlike other insurance lines, agricultural losses tend to be geographically targeted and severe.

There is no chance that every car in a city will be simultaneously totaled, or that every person in a state will need medical help at the same time, or that every home in town will need a new foundation on the same day. But a single flood, storm, or drought can cause a catastrophic loss for every farming operation in a county or region, and that makes it much harder to insure.

In addition, the likelihood of a hurricane hitting Florida farmland or a drought wilting Texas crops is statistically much greater than triggering a disability or life insurance claim.

Because of this higher risk, the concentration of losses, and the likelihood for wide-scale disaster, crop insurance policies would be cost prohibitive and very limited without some government incentive.

Thus, America has a crop insurance system based on a public-private partnership between private insurance providers and the U.S. Department of Agriculture – a system that after decades of refinements and investments has ascended to become the cornerstone of modern-day farm policy.

Steve Murray, Arvin, California

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Frozen Cherries

Steve Murray is a fifth generation farmer in California’s Central Valley, located in Arvin, just east of Bakersfield. Murray explained that this portion of the United States is the most productive fruit and vegetable farmland in the world, as well as one of the earliest farming districts. These factors help his business, Murray Family Farms, thrive, selling over 200 varieties of fruit.

“Half of that fruit is cherries,” Murray explained. “So cherries are a commercial crop for us that we grow for wholesale business and then all of the other crops we grow for direct market. We have two roadside stands and we go to 25 different farmers markets.”

Due to the large amounts of cherries his operation produces, Murray expressed he is comforted by the fact his business is protected with the number one farm safety net, crop insurance. Having had personal experience with unexpected disasters affecting his farm, he said he understands the benefits of crop insurance first-hand.

“The crop insurance we have on our cherries has really been critical for our survival and our ability to operate,” Murray stated. “We started growing cherries back in 1989 and in 2006 we had a statewide freeze. I went to a cherry meeting up in Stockton and it was a 4 ½ hour drive. The thermometer was at 19 degrees the whole way. Normally in February, you think the buds would close and be protected. But the 19 degrees froze the flowers and the buds and there was a statewide disaster. We had a block of cherries that historically has produced about $1.5 million and that year it dropped down to $90,000.”

steve murray 2At that given time crop insurance for cherries was not offered in the area where Murray Family Farms is located. Murray said he lost a bank in the process, received a loan from another bank and relied on help from the FSA to barely stay afloat.

“Once I was able to get crop insurance, I was able to get financing,” Murray said. “We went six years without any agricultural loans, which is hard to cash flow a crop that comes in once a year and be able to survive. So with crop insurance, it has allowed us to be able to have a floor. Whereas before, we had no floor.”

Murray expressed that a second freeze without crop insurance would ultimately put him and his farms out of business.

“With crop insurance it’s a decision that you have to make, that anybody in business, they know that most good businesses make maybe a 10 percent net margin off of their gross and, for us and our cherry crop insurance it costs us about eight percent of our gross,” Murray added. “But it is the thing that allows us to survive.”

Putting the importance of crop insurance in perspective, Murray explained that food is an important commodity to the United States and that one farm affects more than just one business owner.

“Farmers are one of the few producers,” Murray said. “Food is one of the only exports this country has where we export more than we import. And if you take a look at this valley we’re in, half of all of the fruits and vegetables grown in the United States are grown in this valley. In our operation, when we had the disaster, we diversified after that. And part of that diversification was going into direct market with the roadside stands and the fruit stands. If we were just growing mono crops, we would have maybe six employees working on the farm, but because of our diversification we have 80 employees today. So there’s 80 families that are getting the subsistence.”

According to Murray, half of all the jobs in his county are “interrelated in agriculture.” This translates into 175,000 jobs in one county alone. Murray stated that these positions are directly affected by natural disasters and economic hardships, such as the current California drought which is why crop insurance is of great importance to the agricultural industry.

“We’re coming off probably the worst production year we’ve had,” Murray concluded. “We had a 90 percent crop loss this year. It is my crop insurance this year that is going to allow me to survive. Without it, I’d just be done. The diversity of the farming operation we have would be converted to almonds and there would be six employees instead of 80.”

Crop Insurance in Action: Kenneth Kirschenmann, Shafter, California

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GrapesShafter, California is home to 17,197 people and Shafter native, Kenneth Kirschenmann, said that farming is what keeps his community economically sound. Listing just a few ways farming helps his community, Kirschenmann said, “We affect chemical companies that employ a lot of people. We affect the railroad who hauls our products to the East Coast (and the) trucking companies that handle our grapes.”

Originally established in 1919 by his grandfather, Kenneth’s family farm has since grown into what is now known as the Kirschenmann Brothers Farming Company. He said the company has expanded to cover almost 1,000 acres and now produces table grapes, potatoes, cotton, almonds and alfalfa. As Kirschenmann gave National Crop Insurance Services (NCIS) a tour of his grape vineyard, he reflected on the importance of Mother Nature, as well as crop insurance to keep his harvests growing.

“This is a Mother Nature crop,” Kirschenmann stated. “The good Lord gives us everything we’ve got to do to make the grapes. But we also have some untimely storms, rains, freezes and frost that can destroy these crops. Crop insurance gives us a little safety net. It doesn’t solve all the problems if we had a 100 percent wipeout, but it does keep us in business.”

Kirschenmann’s company employs over 250 individuals throughout the year. All of which take pride in providing consumers with a quality product at the prices they can afford.

“We take endless amounts of joy in our work and day-to-day things to give consumers that table grape, or that cotton plant, or that potato, or that almond,” Kirschenmann said. “All the right things that it takes to get to the consumers’ shelves, wherever the end product is; and the least expensive for them also.”

Ken KirschenmannWhile Kirschenmann enjoys providing consumers with the food and materials he produces, he said that his farming operation, like other farms all over the country, has experienced some untimely weather events.

“Our input costs are high because of the drought in California,” Kirschenmann said. “Labor is getting to be an issue we are dealing with. So we’re trying to fight all the costs and crop insurance is a very economical thing that we look at on a monthly or yearly basis when we do our crop plans and our financial plans.”

Whether the community is experiencing a drought or a frost, crop insurance helps keep the Kirschenmann Brothers Farming Company and other farming operations in the community up and running. Kirschenmann restated that in the end, in order to keep Shafter farming, crop insurance is a must.

“We’ve got to keep a good, strong crop insurance program going,” Kirschenmann concluded. “We need it. We have a great relationship with our crop insurance people. We’ve been through some disasters and the system has worked. I know insurance can’t handle every issue and I’m not asking it to. But rain and frost, those are the things that I buy the insurance for.”

Crop Insurance in Action: Greg Wegis, Bakersfield, California

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Greg Wegis edited 2Greg Wegis’ great-grandfather established their multi-generational farm in the early 1900s and the have been farming in Bakersfield, California ever since. Wegis grows almonds, pistachios, tomatoes, corn, wheat, alfalfa and cherries and he plans to start growing table grapes in the near future.

“I have a passion for what I do,” Wegis said. “Being raised around my grandfather and my dad, just talking about it. It’s a lifestyle; producing food for people to eat and nourish their bodies. It’s a good feeling and an occupation I think that’s very noble.”

Today Wegis’ farm employs 80 people full-time to keep everything running smoothly. Wegis said he prides himself on being a family-oriented business, knowing each one of his employees and their family.

“We take care of our people, because they take care of us,” Wegis said. “They take care of our land and we treat them as an extension of our family. I think that is unique in the multi-generational family farming business; you don’t find that in a lot of other industries.”

Not only does Wegis feel his employees deserve credit for the hard work they provide, but he further recognized that his farming operation wouldn’t be possible without all of the supporting companies that aid them in their day-to-day operations. This includes companies who help with tractor and machinery parts, processing and manufacturing, sales, bankers, insurance agents, fuel, transportation companies and “the list goes on and on.”

According to Wegis, farm income in California is a $47 billion industry. The county he resides in, Kern County, is responsible for providing a little over $6 billion.  Translating that into the amount of jobs agriculture provides within Kern County, Wegis said it’s “somewhere around 70,000 jobs.”

“Just the almond industry alone, employs about 110,000 individuals in the Central Valley,” Wegis explained. “And we’re connected. So whatever happens to us, in turn affects them, either in food prices or food availability.”

Minus a great winter in 2002 and 2011, the area Wegis resides in has been in a drought for over four years. To combat this issue, Wegis said their farming operations rely on two separate solutions to stay sustainable and in business.

“With our farm, we have around 10,000 acre-feet of water that we’ve contracted for. My grandfather and his generation helped build the Central Valley Project and the State Water Project, (bringing) us water from Northern California to help us be more sustainable south of the Delta Area.”

In order to take part in the Central Valley Project and the State Water Project, farmers in the California region must pay a set amount of money regardless if they receive the designated amount of water or not (water supply levels rely on what is available each year in the area’s designated reservoir, which could lead to the possible shortages). By doing this, Wegis said it has helped “replenish the aquifers” that were once depleted and helps keep farms in the region sustainable.

“We’re the breadbasket of the world here in Central Valley, as far as fruits, vegetables, nuts and milk,” Wegis concluded. “The United States relies heavily on us to produce that food. If we have to reduce our footprint, we cannot farm the acres we used to, and that’s definitely going to affect everyone. And that’s the message we’re trying to [get] everybody [to] understand.”

Wegis said he insures their crops to protect them against natural disasters, diseases or insects that they have little control over. “Without crop insurance it would not allow us to farm.” In the end, Wegis attributes crop insurance as a vital tool in agricultural risk management. “It’s just a crucial tool to circumvent the ups and downs of Mother Nature and agriculture,” Wegis expressed.

Crop Insurance in Action: Stanley Wilson, Shafter, California

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stanley wilsonAlmost 100 years ago Stanley Wilson’s ancestors settled in Shafter, California to start their family farm. Since then, the farm has been passed down to Wilson who continues to farm to this very day with the help of his two sons, a son-in-law and several grandchildren. Their operation produces cotton, potatoes, carrots, beans, alfalfa, almonds and raisin grapes.

Knowing the ins and outs of farming, like the back of his hand, Wilson said he chooses to purchase crop insurance so he can properly protect his crops and operation from unexpected perils.

“Crop insurance gives us a bottom line protection, in the case of various farm disasters,” Wilson said. “Anyone who has been in farming knows production is not consistent. Many times we have problems caused by climate, insects or diseases, and we need protection against those things to (prevent) a complete wipeout. Just something to give us a bottom line so we can go another year.”

Due to the protection crop insurance can provide, Wilson can sleep easier knowing if a disaster hits, he’ll be able to farm the following year. With the expense that farming can cost producers, Wilson said he is grateful crop insurance can help in times of need.

“Farming is a very expensive operation compared to what it was when I first started farming,” Wilson explained. “We’re looking at costs 10 times what they were 50 years ago… And so the protection we get from crop insurance is very important.”

Another point Wilson made was that crop insurance can be timelier than governmental alternatives and this aspect is what keeps farming operations, including his own, in business after a natural disaster or economic hardship.

“You don’t wait for Congress to enact legislation when you have an emergency because it takes them years (to act),” Wilson stated. “A good example of that is they have done nothing with passing any legislation to help the California drought and we’re in our fourth year of that. Maybe four years down the road, after we get flooded, they’ll think about actually enacting something. So you have to have something in place if you’re trying to protect from disasters.”

Wilson concluded that in his case there are “not any more crop subsidy payments” through the Federal government so crop insurance is the only way the government is really helping his farm. And as long as Wilson can keep his operation protected and in business, he said he is happy.

“Even though I am of retirement age, farmers never seem to be able to quit farming because they love doing it,” Wilson expressed. “And I want to see my kids continue doing what I have enjoyed all these years.”

NCIS President: “Opponents of Farm Policy Have Bad Memories, Bad Metrics and Misleading Messages”

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NCIS President Tom Zacharias took on opponents of farm policy during more than a dozen live interviews at the National Association of Farm Broadcasters Convention in mid-November.

“The opponents of farm policy have bad memories, bad metrics and misleading messages,” noted Zacharias, who was referring to the 11th hour budget deal cut in late October that would have crippled agriculture’s safety net. “This destructive proposal would have forced a new SRA renegotiation before the end of next year around an arbitrary rate-of-return target so low that it would have effectively ended private-sector delivery.”

Zacharias reminded radio hosts that the private sector delivery of crop insurance — which ensures farmers receive their indemnity check for verified losses in weeks not years — was one of the chief reasons why farmers have adopted crop insurance as their primary risk management tool.

“Farmers have embraced both the personalized risk management plans that they work out with the crop insurance agents and the speed at which help arrives after they experience a loss,” Zacharias added.

Zacharias explained that before the advent of the premium subsidy and private sector delivery; only about 30 percent of cropland was protected by crop insurance.

“Those who would cut crop insurance further would literally turn the clock backward by decades, removing private-sector delivery and driving down enrollment in the program,” he said. “Today, that number is easily more than 90 percent.”

Farmers are the engines that drive the rural economy, and when it became clear that the farm safety net was under attack, rural America rallied. Zacharias noted, “Farmers from across the country called on their congressional delegations demanding that the cuts be stopped. Commodity organizations pulled out all the stops to educate lawmakers about the need for effective and affordable risk management tools, while input providers and agricultural lenders also weighed in.”

When looking towards the opposing side, he explained that opponents of agriculture have purposely confused the public about gross revenue versus net profit to spread misinformation about crop insurers’ returns. But when the facts are laid out and terms are clearly defined, it is clear that business returns have fallen well short of the levels necessary to preserve private-sector delivery of crop insurance.

“The actual bottom line return for crop insurance companies has fallen well below other lines of insurance, with crop insurers are losing 1.4 percent under the 2011 SRA,” Zacharias explained.

Despite the misleading rhetoric, rural America rose to the occasion and fought hard for the crop insurance industry. “All of that effort paid off in the end, with farmers and their allies in rural America securing a promise from Senate and House leaders to restore the full funding of the program in the omnibus budget deal at the end of the year,” Zacharias concluded.

Although it made for many sleepless nights, the harmful proposals were neutralized – for the time being – by passage of the highway bill that will restore $3 billion worth of cuts to the nation’s crop insurance program.

Crop Insurance Helps Farmers and Ag Lenders Manage Risk

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Weather anomalies have challenged farmers since the earliest days of agriculture. A flood, hail storm or drought can leave a farmer without a harvestable crop at the end of the season. In Central Kansas, producers have been fortunate in the fact that they have not had to endure multiple years of drought or poor production. However, neighboring areas such as Southwest Kansas, Oklahoma and Texas and areas further west have not been so lucky. There is no doubt that crop insurance has helped some farmers stay in business through the tough times.

The United States has learned in hindsight that providing retroactive disaster relief is not only destabilizing for farmers but expensive for taxpayers. Prior to our current crop insurance system, it could have taken months if not years for farmers to receive relief payments following a disaster. While the support did not go unnoticed, there were many instances when the payments came too late to save a farmer from insolvency.

It is a fact that strong farm policy and support for crop insurance goes beyond the farmer, not only benefitting rural America but consumers as well. In the 2014 Farm Bill, crop insurance was recognized as the primary risk management tool for farmers, shifting a good share of the risks associated with farming away from the American taxpayer.

The key to a viable crop insurance system is the public-private partnership that makes it the success it has been. The private sector sells and services crop insurance policies and farmers pay premiums and have deductibles, just like other insurance policies. To incentivize farmers to buy crop insurance, the government partially discounts premiums to ensure that coverage is affordable, available to everyone, and economically viable.

Lenders also play a role in encouraging farmers to make informed decisions about managing their operating risk. At Central National Bank, we are agriculture lenders as well as licensed crop insurance agents. We encourage all of our farmer customers to protect their investment with crop insurance and as a financial institution, we may even be able to offer better loan terms to a producer that implements a solid risk management program.

It is important to keep in mind that crop insurance is a risk management tool, not a profit center. Some have charged that farmers would rather collect a crop insurance check than a good harvest.  Nothing is further from the truth.  Simple math suggests that “playing the crop insurance game” is not a sustainable business plan. In 10 years of working with producers, I’ve yet to meet anyone who would rather collect a crop insurance check than harvest a good crop.  

 As we enter into a period of declining margins, it will be important for producers to review all aspects of their operation, including risk management programs.  Recently, the farm economy has seen double-digit declines in net farm income as well as increases in the number of short-term operating loans. Having access to viable risk management tools will not necessarily add to the bottom line, but it is important for producers to utilize tools such as crop insurance to protect revenue streams through a possible prolonged downturn in the farm economy.

Not only does a well thought-out crop insurance plan speak to a producer’s management skills, but crop insurance also provides a backstop so producers are able to meet their financial obligations. Ensuring farmers have access to affordable, viable crop insurance options is not only critical for the farm business, but it will certainly impact future ag lending decisions in terms of assessing operating risk for loans.

Aaron Gasper is an agriculture and commercial lender at Central National Bank in Salina, Kansas.

Crop Insurance Helps Farmers and Ag Lenders Manage Risk

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Weather anomalies have challenged farmers since the earliest days of agriculture. A flood, hail storm or drought can leave a farmer without a harvestable crop at the end of the season. In Central Kansas, producers have been fortunate in the fact that they have not had to endure multiple years of drought or poor production. However, neighboring areas such as Southwest Kansas, Oklahoma and Texas and areas further west have not been so lucky. There is no doubt that crop insurance has helped some farmers stay in business through the tough times.

The United States has learned in hindsight that providing retroactive disaster relief is not only destabilizing for farmers but expensive for taxpayers. Prior to our current crop insurance system, it could have taken months if not years for farmers to receive relief payments following a disaster. While the support did not go unnoticed, there were many instances when the payments came too late to save a farmer from insolvency.

It is a fact that strong farm policy and support for crop insurance goes beyond the farmer, not only benefitting rural America but consumers as well. In the 2014 Farm Bill, crop insurance was recognized as the primary risk management tool for farmers, shifting a good share of the risks associated with farming away from the American taxpayer.

The key to a viable crop insurance system is the public-private partnership that makes it the success it has been. The private sector sells and services crop insurance policies and farmers pay premiums and have deductibles, just like other insurance policies. To incentivize farmers to buy crop insurance, the government partially discounts premiums to ensure that coverage is affordable, available to everyone, and economically viable.

Lenders also play a role in encouraging farmers to make informed decisions about managing their operating risk. At Central National Bank, we are agriculture lenders as well as licensed crop insurance agents. We encourage all of our farmer customers to protect their investment with crop insurance and as a financial institution, we may even be able to offer better loan terms to a producer that implements a solid risk management program.

It is important to keep in mind that crop insurance is a risk management tool, not a profit center. Some have charged that farmers would rather collect a crop insurance check than a good harvest.  Nothing is further from the truth.  Simple math suggests that “playing the crop insurance game” is not a sustainable business plan. In 10 years of working with producers, I’ve yet to meet anyone who would rather collect a crop insurance check than harvest a good crop.  

 As we enter into a period of declining margins, it will be important for producers to review all aspects of their operation, including risk management programs.  Recently, the farm economy has seen double-digit declines in net farm income as well as increases in the number of short-term operating loans. Having access to viable risk management tools will not necessarily add to the bottom line, but it is important for producers to utilize tools such as crop insurance to protect revenue streams through a possible prolonged downturn in the farm economy.

Not only does a well thought-out crop insurance plan speak to a producer’s management skills, but crop insurance also provides a backstop so producers are able to meet their financial obligations. Ensuring farmers have access to affordable, viable crop insurance options is not only critical for the farm business, but it will certainly impact future ag lending decisions in terms of assessing operating risk for loans.

Aaron Gasper is an agriculture and commercial lender at Central National Bank in Salina, Kansas.

CROP INSURANCE IN ACTION: Mike Quinn, Garner, North Carolina

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If there’s anything the droughts of 2011 and 2012 taught American farmers, it’s the importance of being prepared for anything.

That includes occasional years of dealing with dry conditions trying to grow the Carolinas’ homegrown cotton crop.

Michael Quinn, the president and CEO of Carolinas Cotton Growers Cooperative, Inc., has witnessed how both droughts and hurricanes can wreak havoc on farms and cause lost income for farmers.

What is important is how such risks are mitigated now that farmer-members have turned to crop insurance coverage for protection.

“Crop losses will occur from time to time,” he noted, adding “these losses would be devastating to private underwriting and cost prohibitive without a public/private partnership to underwrite and deliver the appropriate protection.”

Read Mike’s entire story here.

Convo 63

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The United States learned through experience that handling natural disasters after the fact is not only destabilizing for farmers but expensive for taxpayers.  To encourage more farmers to purchase crop insurance – thus laying their personal risk management groundwork before a possible disaster – the government began helping discount premiums to ensure that coverage is affordable, available to everyone, and economically viable.

Convo 63

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The United States learned through experience that handling natural disasters after the fact is not only destabilizing for farmers but expensive for taxpayers.  To encourage more farmers to purchase crop insurance – thus laying their personal risk management groundwork before a possible disaster – the government began helping discount premiums to ensure that coverage is affordable, available to everyone, and economically viable.

Higginsville, S.C. Farmer: Crop insurance policies are crucial for farmers

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As someone who has spent more than four decades managing a fourth-generation farm and the past 10 years building my family’s crop insurance agency, I believe I have valuable perspective worth sharing regarding how essential today’s Federal crop insurance policies are to America’s farmers and consumers.

Specifically, I would like to explain how essential the harvest price option has become to the modern agricultural producer. The harvest price option insures a crop at its actual harvest-time value.

Think of it like a homeowner’s insurance policy: If your home appreciates in value after you purchase it, you are protected at the home’s current value if it burns down and you have to rebuild.

Unfortunately for agriculture, this policy that makes rebuilding possible has come under fire from those who misunderstand the unique risks for farmers who are constantly exposed to the ravages of Mother Nature.

It is important to note that farmers pay an additional premium for this type of protection, and it supports their risk management in two distinct ways. First, a farmer often prices a large percentage of his anticipated — or before-harvest — crop using forward price contracts with a local elevator.

If a natural disaster strikes and causes production to fall short of the quantity sold, the farmer would need to purchase enough of the crop to fulfill his contractual obligation. In the meantime, the price of the commodity likely will have increased because of the overall drop in production after the disaster.

Consequently, the remaining crop available to purchase is priced much higher than what was covered under the spring contract.

By purchasing the harvest price option as part of his crop insurance policy, the farmer is able to meet his contractual obligations either by buying grain to deliver under the contract or by making a financial settlement with the purchaser.

A second way the harvest price option becomes essential to producers is if the grain being produced is intended to support the farm’s future animal feed needs. If a natural disaster destroys the grain that is to be harvested, then the producer will be forced to purchase feed instead. If there is a widespread short crop, the feed costs will be much higher.

With the harvest price option on the producer’s crop insurance policy, the farmer will be paid the actual harvest price on his lost production. This, in turn, allows him to purchase the feed needs for his livestock operation and still maintain a viable business.

In fact, allowing farmers to maintain a viable business when the unexpected happens is what crop insurance is all about. The beneficiary is not just the farmer, but also the American consumer.

Crop insurance enables farm families such as mine to pick up the pieces after a disaster and continue to produce food and fiber without significant price increases or supply shortages for consumers.

The fact that Americans spend less of their disposable income on food than any other country speaks volumes as to how critical it is that farmers have risk-management tools such as crop insurance.

The critics would do well to try to understand the link between a viable crop insurance program and an affordable, stable food supply before proposing measures that would destroy it — in other words, before biting the hand that feeds them.

Gary Riekhof is a farmer and crop insurance agent from Higginsville.  This op-ed appeared in The Columbia Tribune Saturday, June 6, 2015. 

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In the wake of a devastating disaster, crop insurance offers a lifeline. It is one of the most important, reliable, and cost-effective parts of the safety net here in the United States.

Library of Congress Adds Crop Insurance Website to its Historical Collection

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National Crop Insurance Services (NCIS) announced today that its website has been selected by the United States Library of Congress (LOC) to be part of America’s historic collection of Internet materials.

For nearly two decades, the LOC has catalogued digital materials spanning a variety themes, events, and issue areas with the purpose of capturing records of historic significance that would otherwise be lost because they were never printed on paper.

The NCIS website, www.CropInsuranceInAmerica.org, will be a part of the archived public policy records.

“It is an honor that the crop insurance industry was chosen to be part of this esteemed collection,” said NCIS President Tom Zacharias.“Crop insurance has certainly made history in recent years by emerging as the cornerstone of U.S. farm policy and protecting the country’s farmers from historic floods and droughts.”

NCIS launched the website in 2008 to better explain the benefits of crop insurance to farmers, taxpayers, and consumers, and to demonstrate how the program helps drive the nation’s rural economy.

The site contains videos and testimonials from farmers following disasters; a section called “Just the Facts” that is devoted to answering policy questions with academic research and public data; an electronic version of the industry’s quarterly magazine Crop Insurance TODAY®, which dissects the issues facing crop insurance; and links to numerous press reports and quotes about the public-private partnership that has made the system such a success.

NCIS announced its selection to the LOC collection during a conference hosted by the International Association of Agricultural Production Insurers (AIAG). Agricultural leaders from more than 30 countries belong to AIAG and are visiting the United States for the first time to learn about U.S. farm policy and to discuss how insurance can help meet tomorrow’s global food challenges.

Technology, Sustainability, and Insurance Essential to Agriculture’s Future

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Farmers and ranchers are tasked with producing more food and fiber than ever to meet the world’s growing appetite, and they have to do it while preserving scarce natural resources and dealing with extreme weather and volatile markets.

A combination of new technology, smarter farming practices, and government policies will be required to succeed, according to experts at an international agriculture summit here this week.

Don Preusser, executive vice president and chief marketing officer of Farmers Mutual Hail Insurance Company of Iowa, explained that the global agricultural sector is already evolving and altering the way the world farms.

“Agriculture is rapidly changing as operations become larger, more commercialized, technologically advanced, and vertically integrated,” he told attendees of the International Association of Agricultural Production Insurers (AIAG) biennial conference.

“Precision agriculture is driving significant productivity and efficiencies gains, helping to grow and secure global food needs,” Preusser concluded. “And granular field level data combined with predicative analytics will soon create new insights and innovative risk management solutions.”

When it comes to risk management, no tool is as important for U.S. farmers as crop insurance.  And AIAG traveled to America for its meeting so leaders from more than 30 countries could learn more about how the dynamic U.S. system operates.

Tom Zacharias, an AIAG board member and president of the Kansas-based National Crop Insurance Services, explained that the U.S. model is characterized by its unique private-public partnership and cost sharing.

“U.S. crop insurance benefits from the efficiency of the private sector, comprised of companies, agents, claims adjusters, and reinsurers” he said.  “Meanwhile, the government has made smart investments to keep policies affordable for farmers and widely available across a spectrum of crops and geographic locations.”

Zacharias also said that farmers bear a significant portion of the cost, which has had the desired effect of reducing taxpayer exposure to agricultural risk.  “U.S. producers collectively spend $4 billion from their own pockets each year for crop insurance, and they shoulder losses through deductibles before receiving an indemnity,” he noted.

But none of it would have been possible, Zacharias said, without a commitment from U.S. policymakers in recent years.  He hopes strong support will continue in the years to come and that America’s successes can provide a roadmap for insurers and farmers world-wide.

USDA Under Secretary Scuse on Crop Insurance: “I wouldn’t dream of farming without it.”

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scusemichaelUSDA’s under secretary for Farm and Foreign Ag Services, Michael Scuse, openly admits he didn’t always buy crop insurance on his Delaware farm back in the 1980s and 90s.   But today, he wouldn’t consider farming without it.

“Back in the 1980s and 90s, you couldn’t give me crop insurance. It didn’t work on my farm,” said Scuse during a recent meeting with participants of the Illinois Farm Bureau Marketers trip to Washington that appeared in Farm Week Now.

Scuse noted that “since (USDA) changed the program and developed revenue (protection) products, I wouldn’t dream of farming without it.”

Of course, in response to producer demands and the 2014 Farm Bill, new crop insurance products are being tested to come on the market nearly every year and USDA continues to refine crop insurance programs through the Risk Management Agency (RMA).  ”We continue to get requests to include more crops and to make it more user-friendly,” he said.

Given the increased volatility of the weather that we’ve seen over the last decade, those new products will be critical for farmers and ranchers alike.  With input costs rising, crop prices falling and the elimination of direct payments to farmers, crop insurance is by far the most important risk management tool in virtually any farmers’ tool belt.

RMA Associate Administrator Tim Gannon told the group that the crop insurance program has come under public scrutiny in recent years as the Federal government looks to control spending.  That is why farmers need to defend the program and ensure that consumers and members of Congress understand why crop insurance is critical to the overall well being of America’s rural sector.  “Your ability to tell the story of what crop insurance represents will be critical,” he said.

Gannon pointed out that crop insurance saved many farmers after the drought of 2012. “It’s not just a handout,” he noted.

Illinois farmer Martin Andris explained in a 2012 interview during the heart of the historic drought that in the past when drought stuck the area, he wasn’t protected by crop insurance.  “Those recoveries were tough.  When you struggle to have a crop in a given year, then you’re taking two to three years to recover…” he said.  “My goodness, it is so much easier to sleep at night when you have the protection of insurance,” he added.

Hollis, Oklahoma farmer: Affordable crop insurance is critical

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I started farming and ranching with my father and grandfather in southwest Oklahoma and the Texas panhandle 40 years ago, and I am the fourth generation to farm cotton, peanuts, wheat, corn, milo and cattle on our family’s land.

I was 17 when I started farming on my own, and although I have four decades of experience under my belt, the many issues we face today on the family farm — worked by me, my son, my brother-in-law and my son-in-law — are no less challenging than they were when I began. In most careers, things get easier as you move along. In farming, since the weather and prices are so unpredictable, it really never gets easier.

With few risk management tools available in the early days, it could take years to recover from a hailstorm, an early freeze or any of the many other natural perils that could be thrown at you. When I first learned of crop insurance, I didn’t purchase it because premiums were unaffordable and margins were too slim to afford it. Thankfully, Congress made crop insurance more available and affordable — by partially discounting the premium — and now I wouldn’t farm without it.

Since the passage of the 2014 Farm Bill, crop insurance is the best tool farmers have to manage risks and revenue. It’s not cheap, but it is something that we budget for annually and can’t imagine not having.

The key to crop insurance’s success has been its affordability, its availability and its viability. Last year, farmers spent nearly $4 billion on crop insurance policies that protected 90 percent of planted cropland in the United States. I’d bet that many of the farmers in our area wouldn’t be surviving the current drought — which started in 2011 — if it wasn’t for crop insurance.

Despite the fact that agriculture’s safety net programs took a huge cut in the last farm bill, some in Congress seem to think we need to give more. I wonder if some of those people have any idea where their food and clothes come from or what it takes to get it from the farm to their plate or closet.

It seems almost daily that someone in Congress is proposing a bill to cut the premium support on crop insurance. It would not serve anyone to cut these risk management tools to farmers, as they allow farmers to concentrate on producing higher-yielding, better-quality crops that reduce the costs to the consumer.

Crop insurance is not a gift but insurance, just like homeowner’s insurance, that farmers buy. And like homeowner’s insurance, we don’t collect a dime without a verifiable loss and paying a deductible. Without crop insurance, many farmers couldn’t get financed and it would be almost impossible for a beginning farmer to get started.

Crop insurance is critical in meeting these challenges, and guarantees the American consumer a safe, affordable supply of quality food and fiber that is unsurpassed anywhere in the world.

Kelly Horton lives in Hollis, Oklahoma.  This op-ed appeared in The Oklahoman on May 17, 2015.

USDA Secretary Kicks Off International Crop Insurance Conference

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Agricultural leaders from more than 30 nations are in America this week to discuss the challenge of feeding a growing world population and how crop insurance can help farmers rise to the task. U.S. Department of Agriculture (USDA) Secretary Tom Vilsack was on hand to welcome the international delegation and provide his perspective.

“There are few people in the world today who can say that their work touches every single person on the planet, every single day. But farmers can say that,” the secretary observed today during his speech. “Farmers are powerful, but their charge is not without its challenges.”

Today’s farmer must deal with resource concerns and extreme weather, Vilsack explained, and crop insurance will be key to a farmer’s ability to do so in the future.

“In the wake of a devastating disaster, crop insurance offers a lifeline,” he said. “It is one of the most important, reliable, and cost-effective parts of the safety net here in the United States.”

Crop insurance gives farmers “hope during tough times” and “the gift of peace of mind,” according to Vilsack, who also detailed policy advancements made to the U.S. crop insurance system in recent years to improve its availability and affordability.

“Crop insurance has expanded because it works for farmers and it works for our taxpayers,” the secretary said of the public-private partnership, which is overseen by the USDA, serviced by private-sector insurance companies, and partially funded by farmers.

The success of the U.S. system is one reason the International Association of Agricultural Production Insurers (AIAG) chose America as the site for its conference, marking the first time that the group has met outside of Europe.

“We are here because the U.S. crop and revenue insurance program is the most developed and the most efficient system for farmers in the world,” AIAG President Kurt Weinberger said during his opening remarks.

Weinberger also noted that participants in this week’s summit will be busy discussing how farmers can use new technologies, new insurance products, new government policies, and new farming practices to deal with climate change and market volatility. The outcome of those discussions will be vitally important.

“Agriculture was, agriculture is, and agriculture will be the most important sector in the world because farmers are feeding the world’s population,” he concluded. “It is the future for all of us.”

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As a crop insurance agent who was on more than a few farms the day after Hurricane Katrina struck, I can tell you first hand that crop insurance was a financial lifeline for many farmers.  Katrina hit so many farmers who had never before gone through a large-scale natural disaster that wiped out their entire crop at harvest time.

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As a crop insurance agent who was on more than a few farms the day after Hurricane Katrina struck, I can tell you first hand that crop insurance was a financial lifeline for many farmers.  Katrina hit so many farmers who had never before gone through a large-scale natural disaster that wiped out their entire crop at harvest time.

National Peach Council President Says Young Farmers Need Viable Crop Insurance

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chalmers-cropped-297x300National Peach Council President Chalmers Carr said that he wouldn’t be in business today if it wasn’t for crop insurance.  “I do not believe that you would find very many willing lenders to participate in loaning to farming operations without crop insurance being a part of it,” said Carr in a nationally distributed National Association of Farm Broadcasters interview.

Carr hailed the changes in the 2014 Farm Bill that made crop insurance the centerpiece of the farm safety net.  “Mother Nature comes in and deals you a blow that doesn’t happen but every so often, and then you do need insurance to protect yourself,” he said.  “It’s no different than why you carry insurance on your automobile and homeowners insurance and everything else.”

Carr noted that the more farmers who purchase crop insurance the better, since it is less likely that a disaster in one area will affect the overall health and financial viability of the program.  He says that by expanding the program’s reach, crop insurance becomes more sustainable and viable.  “The problem is that young people simply don’t have the money and banks won’t lend money without crop insurance or some kind of support behind them,” he said.  “We have to have a viable crop insurance program to help these young farmers get in and get started in business,” he said.

Carr said that looking ahead, one of the biggest challenges facing farmers are discussions about capping the premium discount crop insurance.  “I would be out of business tomorrow, my 600 employees would be out of business and my bankers would run away from the industry,” he said. “You would see a major change in the Ag lending institutions if somebody started messing with crop insurance.”

Why Farmers Need Crop Insurance

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Matt HuieI always knew I was going to be a farmer. I grew up learning from my grandfather who turned me loose and gave me a lot of responsibility on his farm from a young age. I was driving machinery by the time I was 10-years-old and running my own harvest crew by the time I was 14.

When I was in school, I entertained being a veterinarian and farming on the side mainly because people told me it was a tough life and I wouldn’t be able to make a living.

That kind of talk only made me more determined, so when I came home from college I started farming full-time despite the fact that I barely had a dollar to my name and farming is a capital-intensive business.

I remember the first time I went to borrow money, my banker asked me right off if

I had crop insurance and how much was the coverage. I was prepared to answer those questions as crop insurance was then, and remains today, my primary risk management tool. I wouldn’t think of trying to grow a crop without it.

It’s essential — especially for young farmers, like I was at the time, just starting an operation.

It enables farmers to get financing and also enables them to survive a major catastrophic weather event.

Young farmers are particularly vulnerable to such risks because they are more leveraged than more established farmers. They can’t afford a major hit in their finances or a year without any income.

Just look at my state of Texas where we have suffered a historic drought for the last five years. 2012 and 2013 were particularly bad.

Without crop insurance, this sustained drought would have wiped out an entire generation of farmers. They would not have had the means to make it to another year without something to at least help cover part of the losses. That’s why it is critical that crop insurance remain affordable and widely available.

Thankfully the 2014 Farm Bill strengthened crop insurance and added provisions to help beginning farmers. But, the critics of farm policy, including some lawmakers in Congress, never seem to rest and are already clamoring once again for cuts.

They would be wise to take note of an alarming trend that puts the average age of a U.S. farmer at 58. Moreover, in 2012, the number of beginning farmers – those operating fewer than 10 years – was down 20 percent from 2007.

My desire to farm at such a young age is the exception, not the rule. Many young people can’t stomach the risk that is involved and have no desire to try.

Cuts to the farm safety net only make an inherently risky business, riskier. The expense of raising crops, the perils of weather-related disasters, and the low returns on investment, are enough to make anyone run in the other, more secure direction.

Now is not the time to create barriers at the starting point of farming and ranching. Now is the time to give certainty to young people with farm policy they can afford and count on.

Matt Huie farms cotton, corn, sorghum, and livestock in Southeast Texas near Corpus Christi.  This op-ed appeared in the Corpus Christi Caller-Times on May 17, 2015. 

CROP INSURANCE IN ACTION: John Michael Pillow, Yazoo City, Mississippi

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John Michael Pillow.jpgJohn Michael Pillow is a fourth generation Mississippi farmer and spent the first part of his career managing his family’s farm.  In 2011, Pillow decided to strike out on his own and become a full-time farmer.

“Most of the 3,500 acres I planted that year were in corn, which is a crop whereby most of the cost is right up front,” he says.  By the time the entire field was planted, Pillow estimates he had not only his family’s future invested in the crop, but also  $2.5 million that he had borrowed from the bank to put the crop in.

“2011 started out exceptionally dry for us, and by mid-summer, the crop was already starting to show the signs of drought stress,” said Pillow.  But then Pillow’s luck changed drastically as the drought was broken by rain.  And then more rain, and then some more rain.

And although Pillow’s farm and homestead are protected by a sophisticated levee system, the levees simply weren’t high enough to accommodate the unending downpours.   “Before I knew it, the Yazoo River was knocking on my front door.”

At that point, Pillow suddenly realized the value of crop insurance, and why it was worth buying every year.  “Crop insurance, for me, not only proved to be essential, it’s the reason I’m in business today,” he said.

Just as luck would have it, Pillow’s crop insurance agent had approached him at the beginning of the crop year prior to discuss various high-loss scenarios with him.  “Out of the blue, my crop insurance agent floated the worst-case scenario by me about how well I’d handle a crop loss of 80 to 85 percent,” recalls Pillow.  “I told him that a loss that high was simply inconceivable, that it would never happen.”

But Pillow notes that, given the fact that this was his first year of farming on his own, and that he would require a $2.5 million operating loan from the local bank to put his crop in the ground, he decided the prudent thing to do would be to plan for the worst.

“I had to cut a check in excess of $60,000 in February to purchase the level of coverage the agent suggested for a level of loss that I didn’t really believe was possible,” he recalls.

And then it happened.  Roughly three months after writing that check, the Yazoo River had spilled over its banks and most of Pillow’s farm was underwater.

“I lost 80 to 85 percent of my crop that year,” said Pillow.  “And to add insult to injury, after the waters receded, although most of the corn was completely washed away, the corn that was left had been severely damaged by drought,” he said.

Pillow said that just like car insurance, crop insurance gives you a degree of stability in times of disaster.  “If you wreck your car, the insurance will replace it and you can still go to work the next day,” he says.  “Why would you not have insurance on your food source, since it’s the most important thing we have?”

Pillow notes that through the whole process, his crop insurance agent and company were by his side.  “When I found out that we were going to flood, the first call I made was to my crop insurance agent,” said Pillow.  “He was very reassuring that it would be ok.”

Pillow said that when the flood was at its height, his agent, the adjuster and the supervisor were all on his farm surveying the damage and assuring him that his indemnity check would be on the way so he could bounce back from this.

“Needless to say, I would be doing something else other than what I love besides farming, and I would be repaying the bank for the $2.5 million I borrowed to put the crop in for the rest of my life,” said Pillow.  “In fact, me, my wife and my kids would have been paying the bank back for a generation or more,” he added.