Affordability of Crop insurance Policies Focus of New Video

Crop insurance policies must remain affordable for farmers and ranchers or the entire farm safety net will fail, crop insurance providers said today in a new educational video.

Farmers help fund current farm policy by spending approximately $4 billion a year out of their own pockets on crop insurance policies and by shouldering a portion of losses in the form of deductibles before receiving assistance.

“But if insurance bills get too big, or deductible losses get too high, fewer farmers will sign up for policies, and the whole system will collapse,” noted the video.  “If that happens, not only will it be harder for farm families to bounce back after disaster, but costs that are currently being borne by farmers and private insurance providers will shift back to taxpayers.”

Congress took steps in the 2014 Farm Bill to keep crop insurance affordable.  Among the steps spotlighted in the video:

  • Farmers receive discounts on the premiums they pay for coverage, including discounts for new and beginning farmers looking to start a career in agriculture.
  • Supplemental coverage is made available to help counterbalance a portion of deductible losses.
  • And Congress defeated attempts by some opponents of agriculture to cap crop insurance benefits and make policies more expensive for everyone.

This is the second in a series of educational videos meant to highlight three policy attributes that are essential to maintaining a strong crop insurance system.  The first three-minute segment examined the importance of making crop insurance, widely available, and a future piece will look at maintaining the viability of private-sector delivery.

“Congress cemented crop insurance’s role as the centerpiece of the farm safety net during the 2014 Farm Bill,” explained Tom Zacharias, president of National Crop Insurance Services (NCIS), the trade group that sponsored the video series.  “However, that safety net will breakdown if crop insurance policies aren’t widely available, aren’t affordable to producers, and aren’t economically viable to be administered by efficient private insurance providers.”

The affordability video can be viewed here.  Other videos are available on NCIS’ YouTube channel.

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Production agriculture is constantly changing. Crop insurance is right there, making sure farmers have a modern and affordable risk management tool at their disposal.

Convo 48

Production agriculture is constantly changing. Crop insurance is right there, making sure farmers have a modern and affordable risk management tool at their disposal.

USDA Unveils New Crop Insurance Product: Whole-Farm Protection Insurance

Specialty crop farmers, organic farmers and diversified producers will now be able to purchase the protection of crop insurance as part of a Whole-Farm Revenue Protection insurance policy.  “Crop insurance options continue to adapt to meet the farm safety net needs of today’s farmers,” said Risk Management Agency (RMA) Administrator Brandon Willis.

Whole-Farm Revenue Protection, passed as part of the 2014 Farm Bill, will offer fruit and vegetable growers and producers with diversified farms selling commodities to wholesale markets, local and regional markets, farm identity preserved markets, or direct markets, more flexible, affordable risk management coverage options.  “Whole-Farm Protection insurance will expand options for specialty crop, organic and diversified crop producers, allowing them to insure all the crops at once instead of one commodity at a time,” noted Willis.

The new policy will offer a whole-farm premium discount to farms with two or more commodities as long as minimum diversification requirements are met.  This will provide diversified farms a higher premium discount that previously available.  The policies will also allow farmers to insure all crops and livestock under one insurance policy in lieu of insuring each commodity separately.

Willis noted that the new policy, as part of the overall 2014 Farm Bill, will build on historic economic gains in rural America over the next five years while also achieving billions of dollars of savings for taxpayers.

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As a crop insurance agent, I can tell you firsthand that crop insurance is no small expense for most of the state’s farmers, who spend north of $20,000 a year purchasing policies that they pray they will not need.

“Eating Local” Made Possible With Strong Crop Insurance Policies

One side benefit of the popular “eating local” movement is a growing recognition by urbanites and suburbanites of the importance of agriculture and the need to ensure that farmers are able to withstand the many challenges presented by Mother Nature. While farmers manage their many risks using a wide variety of tactics, there is one tool in most farmers’ risk management portfolio, which they consider indispensable: crop insurance.

The value of crop insurance to New England’s farmers was made crystal clear in 2012 by Tropical Storm Irene, which brought heavy winds and even heavier rains just as crops were nearing harvest. While 2011 saw record losses across the U.S. with freezes in Florida, drought in the Southwest and floods in the Midwest, it was farmers in Vermont who sustained the highest loss ratios in the country. As a crop insurance agent, I can attest that many of our farmers saw their entire crops devoured in one day as floodwaters, sometimes six feet high, swallowed their fields.

After the waters finally receded and the extent of the damage to their farms was assessed, it quickly became clear that Irene’s wallop had the potential of being a “game changer” for many New England farmers. And crop insurance was the only thing that saved many of them from losing their farms to bankruptcy and instead allowed them to return to their fields this spring and plant.

View the entire story here.

Crop Insurance Primer Available Online

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

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

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

CROP INSURANCE IN ACTION: Shawn Holladay, Lamesa, Texas

shawn holladay photoShawn Holladay, a fourth-generation cotton farmer from Dawson County, Texas, looks to agriculture as his sole source of income. It’s not a bad argument for wanting the status quo to continue.

Ask one who’s been in farming for decades for his proverbial ‘staying power’ and he will likely tell you farming is a beloved legacy, he has a passion for growing crops that ensure the well-being of Americans, and throw in a bit of spiel about how crop insurance has made it possible for him to survive against nature’s odds.

For 25 years, Holladay has used crop insurance to protect his 6,500-acre farmland in Lamesa—devoted to cotton, some grains and peanuts—and ensure its stability in the face of prolonged drought. Especially vulnerable are farms like his that have been in families for three or four generations.

“My operation could not begin to stand the losses associated with drought and the severe weather without it,” said Holladay, an industry leader and cotton grower who has won the Farm Press/Cotton Foundation High Cotton Award for his conservation and sustainable farming practices. “The current drought would have taken out most, if not all, farms in the area where my operation is located.”

For Holladay, crop insurance has been mostly a budgetary expense. But he religiously takes out a policy year after year to keep his operation viable, especially with the current drought in Texas that has lasted three years and incurred losses for many Texas farmers.

“When our production is up to par we pay premiums and there have been many years when I have received no indemnity,” he said.

But he is also realistic about attitude toward his insurance.

“Crop insurance is established on production levels that are averaged over 10 years. The only cost effective purchase of insurance comes with a deductible of 20-40 percent. When considering the huge increase in input costs the U.S. farmer still has to be able to stand a significant amount of the loss between the actual production and the break-even on the farm. To be able to do this requires an efficient operation,” Holladay explained.

One of the most important things to consider when developing a safety net is the farms that are producing the lion’s share of the goods. “Penalizing your most efficient operations through payment limits and AGI (Adjustment Gross Income) determinations is self-defeating,” he argued.

The safety net aspect of crop insurance is vital for the United States farm industries to compete globally in the face of a volatile world economy.

“Our ability as a country to be self-sufficient in food and fiber is imperative,” he maintained. “The day we are not able to sustain a profitable ag industry will be a shift in our very identity as a country.”

A well-crafted farm bill that provides a cost-effective safety net is essential if the U.S. is serious about keeping its edge in the market.

“Our ability to keep producing the abundant, safe, supply of farm goods is in jeopardy if we don’t consider other countries and what they are doing when it comes to subsidies,” he theorized. “U.S. farmers have increased efficiency and for the most part increased in size to achieve economies of scale.”

For the most part, increased acreage and efficiency are essential to combat slim margins, Holladay said. And such can only be possible in an operation that is secure and thriving.

CROP INSURANCE IN ACTION: Art Wiebelhaus, Fordyce, Nebraska

People hear a lot about crop insurance and the fact that U.S. farmers spend $4 billion out of their own pockets to purchase it every year.   One of the greatest praises of our modern crop insurance system is the customer service that farmers receive before, but perhaps more importantly after, they have a loss.   For some farmers, the hours after a major farm disaster can seem like the lowest point in their lives, when their careers seem to be upended and their hopes for a big harvest dashed.

But quickly after a major loss occurs, crop insurance adjusters are on the scene to meet with the farmers assess the damage.  The crop insurance adjusters are one of the unsung heroes of the farm safety net, since they help ensure that when disaster strikes that help – in the form of a crop insurance indemnity check – is on the way.

Before ever climbing in the truck, crop adjusters are already on the phone making business calls, watching the weather forecast, reading the rain gauge, and checking in with their clients. They spend long days in the office and even longer days out on the road. Right beside the farmer as they walk through their fields, these men and women are at the very heart of why crop insurance is successful.

Art Wiebelhaus is one person in particular who exemplifies just what it takes to be a crop adjuster. He recognizes the commitment crop production takes, the need crop insurance fulfills, and the lifestyle agriculture holds. From his understandings, Art utilizes a dynamic relationship between crop insurance, farming, community, and family.

While he has been a crop adjuster for just six years, Art has been a farmer his whole life. As a third generation farmer, “I know what they are going through and what their worries are. I’m a farmer too,” commiserates Art. Imagine waking up one day to your life’s work destroyed by events beyond your control–producers must carry around this possibility (and lump in their throat) every day. It is an adjuster’s job to provide farmers with the aid they seek from crop insurance.

As producers dread the day when they must make a claim, Art is still able to make light of the situation. He laughs, “It seems that when it rains, it just keeps raining, and when it’s dry, it just stays dry.”

Growing up on the same place he now farms, Art has seen crop insurance grow around his own sleepy little town of Fordyce, Nebraska, “A while back I remember meeting one gentleman who didn’t have crop insurance, and that’s because there wasn’t a policy that really worked for his operation. Of course now, with improvements and changes to crop insurance, he has coverage. And today, I can’t name one person who doesn’t have crop insurance.”

“With current prices, farmers have to have crop insurance to stay in business,” points out Art. The loss of just one year can be so catastrophic that an operation cannot financially come back from it. Keeping a farmer’s “head above water” means another year that he is able to meet the demands of food production.

This is where the importance of an adjuster comes into play. They make the loss calculations for every insured field based upon scientific procedures. From these adjustments, it is determined how crop insurance policies can pay.  Creating a tie to the producer, adjusters work with their clients to provide assessments that will have a positive impact on the operation’s future.

Along with this, crop adjusters must be conscientious of their actions in order for this process to be successful. For the best results Art says that, “Every time I visit a field, I have two goals in mind: make the most accurate adjustment; and make sure the farmer feels that he can rely on my judgment.”

To reach this goal, “It’s very important that you clearly explain the procedures and how you came up with the loss adjustment total,” describes Art. Presenting these steps provides the farmer with an understanding as to how the loss was determined. Art’s appreciation for the producer is repaid with equal gratitude when he takes the extra time to help his clients.

From each visit, Art is one-step closer to a stronger relationship with the farmer. This is important to Art, because it is the reason he started adjusting in the first place.

“I always enjoyed visiting with my crop adjuster when he came out to my farm. He kept bringing up how he thought I would make a great adjuster,” tells Art, “I knew how much he had helped my farm operation, and I wanted to be able to do the same for others. I finally made the call and have loved my job ever since.”

It is not uncommon to find an adjuster like Art—one who has a passion for helping his community. But what is exceptional about him is that despite the fact that he must cover at least three different states at a time, being able to serve and contribute to agriculture is all Art asks for in return.

“Just like any job, there are trying times. But overall I enjoy my job, because I know that I am able to help the farmer,” explains Art.

Adjusters are the face of crop insurance, and make a direct impact on the perception of the industry. Besides their agent, a client will spend most of their time working with an adjuster when unfortunate weather strikes. It is important to remember that, “This is not only a business, but a livelihood; they [farmers] need to be reassured that they won’t lose what is very close and personal to them,” notes Art. How an adjuster interacts with a client will not go unnoticed or forgotten; a crucial point as to why crop insurance will always need adjusters like Art.

From developing a dedicated relationship, to mentoring farmers about procedures, Art brings a positive impact on crop insurance every day.

USDA Announces Progress In Implementing Crop Insurance Provisions

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

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

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

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

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

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

CROP INSURANCE IN ACTION: Art Wiebelhaus, Fordyce, Nebraska

People hear a lot about crop insurance and the fact that U.S. farmers spend $4 billion out of their own pockets to purchase it every year.   One of the greatest praises of our modern crop insurance system is the customer service that farmers receive before, but perhaps more importantly after, they have a loss.   For some farmers, the hours after a major farm disaster can seem like the lowest point in their lives, when their careers seem to be upended and their hopes for a big harvest dashed.

NCIS_carousel_image_108_300x135

But quickly after a major loss occurs, crop insurance adjusters are on the scene to meet with the farmers assess the damage.  The crop insurance adjusters are one of the unsung heroes of the farm safety net, since they help ensure that when disaster strikes that help – in the form of a crop insurance indemnity check – is on the way.

Before ever climbing in the truck, crop adjusters are already on the phone making business calls, watching the weather forecast, reading the rain gauge, and checking in with their clients. They spend long days in the office and even longer days out on the road. Right beside the farmer as they walk through their fields, these men and women are at the very heart of why crop insurance is successful.

Art Wiebelhaus is one person in particular who exemplifies just what it takes to be a crop adjuster. He recognizes the commitment crop production takes, the need crop insurance fulfills, and the lifestyle agriculture holds. From his understandings, Art utilizes a dynamic relationship between crop insurance, farming, community, and family.

While he has been a crop adjuster for just six years, Art has been a farmer his whole life. As a third generation farmer, “I know what they are going through and what their worries are. I’m a farmer too,” commiserates Art. Imagine waking up one day to your life’s work destroyed by events beyond your control–producers must carry around this possibility (and lump in their throat) every day. It is an adjuster’s job to provide farmers with the aid they seek from crop insurance.

As producers dread the day when they must make a claim, Art is still able to make light of the situation. He laughs, “It seems that when it rains, it just keeps raining, and when it’s dry, it just stays dry.”

Growing up on the same place he now farms, Art has seen crop insurance grow around his own sleepy little town of Fordyce, Nebraska, “A while back I remember meeting one gentleman who didn’t have crop insurance, and that’s because there wasn’t a policy that really worked for his operation. Of course now, with improvements and changes to crop insurance, he has coverage. And today, I can’t name one person who doesn’t have crop insurance.”

“With current prices, farmers have to have crop insurance to stay in business,” points out Art. The loss of just one year can be so catastrophic that an operation cannot financially come back from it. Keeping a farmer’s “head above water” means another year that he is able to meet the demands of food production.

This is where the importance of an adjuster comes into play. They make the loss calculations for every insured field based upon scientific procedures. From these adjustments, it is determined how crop insurance policies can pay.  Creating a tie to the producer, adjusters work with their clients to provide assessments that will have a positive impact on the operation’s future.

Along with this, crop adjusters must be conscientious of their actions in order for this process to be successful. For the best results Art says that, “Every time I visit a field, I have two goals in mind: make the most accurate adjustment; and make sure the farmer feels that he can rely on my judgment.”

To reach this goal, “It’s very important that you clearly explain the procedures and how you came up with the loss adjustment total,” describes Art. Presenting these steps provides the farmer with an understanding as to how the loss was determined. Art’s appreciation for the producer is repaid with equal gratitude when he takes the extra time to help his clients.

From each visit, Art is one-step closer to a stronger relationship with the farmer. This is important to Art, because it is the reason he started adjusting in the first place.

“I always enjoyed visiting with my crop adjuster when he came out to my farm. He kept bringing up how he thought I would make a great adjuster,” tells Art, “I knew how much he had helped my farm operation, and I wanted to be able to do the same for others. I finally made the call and have loved my job ever since.”

It is not uncommon to find an adjuster like Art—one who has a passion for helping his community. But what is exceptional about him is that despite the fact that he must cover at least three different states at a time, being able to serve and contribute to agriculture is all Art asks for in return.

“Just like any job, there are trying times. But overall I enjoy my job, because I know that I am able to help the farmer,” explains Art.

Adjusters are the face of crop insurance, and make a direct impact on the perception of the industry. Besides their agent, a client will spend most of their time working with an adjuster when unfortunate weather strikes. It is important to remember that, “This is not only a business, but a livelihood; they [farmers] need to be reassured that they won’t lose what is very close and personal to them,” notes Art. How an adjuster interacts with a client will not go unnoticed or forgotten; a crucial point as to why crop insurance will always need adjusters like Art.

From developing a dedicated relationship, to mentoring farmers about procedures, Art brings a positive impact on crop insurance every day.

Convo 45

Their policy, most people forget, will have a 20 percent deductible to it.  How would you like to have a homeowner’s policy with a 20 percent deductible?

CROP INSURANCE IN ACTION: Andy Bell, Climax, Georgia

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

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

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

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

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

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

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

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

The average yield for peanut farms would run around 1 to 3 tons per acre. But just as Bell suspected, this year yields will be at record highs. USDA forecasts it at a record 3,714 pounds per acre, which would be 400 + pounds higher than last year.

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

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

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

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

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

2013 Year in Review: New Policy and Coverage

Crop insurance reached significant and historic milestones in 2013 — both in its formal recognition by Congress as the primary risk management tool for farmers and the volume of protection it offered — according to an article released in the May 2014 edition of Crop Insurance TODAY.

“Again in 2013, crop insurance helped farmers deal with the year’s weather and market risks,” noted authors Keith Collins and Harun Bulut. “Crop insurance was singled out by legislators during the development of the new Farm Bill as the primary program supporting production agriculture and was heralded as indispensable for successful farming today,” they added.

The ability of farmers to rely on the crop insurance policies they had purchased gave them confidence to plant yet another year of near record total production, the authors explain. “Farmers were able to plant 325 million acres in the spring of 2013, down slightly from a year earlier but four million [acres] above the previous five year average.”

The article points out that looking to the future, the public can rest assured that crop insurance will be in place to provide financial stability for the many small, family farms that comprise the core of U.S. farm production. “Crop insurance will ensure that when the repeated disasters of recent years strike again, as they most assuredly will, U.S. farmers will be able to bounce back to produce again at high levels the food, feed, fiber and energy crops which the U.S. and world populations have come to expect and depend [upon],” they said.

 

This Drought Is Awful, But with the Right Tools, Farmers Will Bounce Back

In many parts of Oklahoma, it seems like wheat farmers just can’t catch a break.

A late spring freeze, combined with excessively dry or extreme drought conditions throughout the winter and into spring have left many of the state’s wheat fields badly stressed or a complete bust.  I’d say this is the worst I’ve ever seen, and I started farming in the mid 1950s.

With the wheat harvest set to begin in about a month, farmers are expected to harvest about 40 percent less wheat this year than they did in 2013.   The low soil moisture has left many farmers wondering what they are about to go through.

For the state’s farmers who purchased crop insurance – and nowadays that’s nearly all of them – that will be their only saving grace.   I don’t know of a farmer anywhere in Oklahoma who doesn’t buy crop insurance.  It’s just like buying diesel fuel today…you don’t farm without it.

With the passage of the new Farm Bill, largely gone are the days of the Federal government stepping after a calamity.  Today, when a farm crisis hits, farmers turn to their crop insurance policy, not the Federal government, for help.  The public-private partnership that is today’s crop insurance ensures that farmers get the financial help they need in weeks, not years.

As a crop insurance agent, I can tell you firsthand that crop insurance is no small expense for most of the state’s farmers, who spend north of $20,000 a year purchasing policies that they pray they will not need.

Farmers buy crop insurance today just like they buy homeowners insurance.  And when a good year turns into a bust, the only thing standing between some farmers and bankruptcy is their crop insurance policies.

Last year, Oklahoma farmers spent more than $93 million to purchase the peace of mind of crop insurance.  Crop insurance allows individual farmers to purchase the coverage they need, tailored to their farms, financial standing and tolerance to risk.

For farmers who rely on loans to operate – and that’s a lot of farmers – crop insurance has become a bank’s best friend.  In fact, the best collateral you can take to a bank when you are seeking a loan is your crop insurance policy.

Crop insurance is not only smart farm policy, but smart consumer policy as well.  American consumers have come to see our affordable, abundant food supply as a birthright.  In fact, most of us alive today have never seen wide-scale hunger in this country.  But much of what we take for granted could quickly disappear if we allow our farmers to fail and were forced to import our food, fiber and fuel.

While this might be the worst drought I’ve ever seen, I have to say that my faith in the resilience and work ethic of Oklahoma’s farmers is undying, and I know that with their crop insurance policies as a backstop, our farmers will bounce back from this.

Max Claybaker is a farmer and a crop insurance insurance agent from Blackwell, Oklahoma.  This op-ed appeared in The Oklahoman on June 1, 2014.

This Drought Is Awful, But with the Right Tools, Farmers Will Bounce Back

In many parts of Oklahoma, it seems like wheat farmers just can’t catch a break.

Not a one.

A late spring freeze, combined with excessively dry or extreme drought conditions throughout the winter and into spring have left many of the state’s wheat fields badly stressed or a complete bust. In fact, I’d say this is the worst I’ve ever seen, and I started farming here in the mid 1950s.

With the wheat harvest set to begin in about a month, farmers are expected to harvest about 40 percent less wheat this year than they did in 2013. The low soil moisture as we head into the hottest and driest months of the year has left many farmers wondering what they are about to go through.

For the state’s farmers who purchased crop insurance – and nowadays that’s nearly all of them – that will be their only saving grace. I don’t know of a farmer anywhere in Oklahoma who doesn’t buy crop insurance. It’s just like buying diesel fuel today…you don’t farm without it.

With the passage of the new Farm Bill, largely gone are the days of the Federal government stepping in and helping farmers who have been hit by a calamity.

Such bills cost taxpayers tens of billions of dollars in the past, and were not only expensive but also slow to deliver the help to the farmers who needed it. Today, when a farm crisis hits, farmers turn to their crop insurance policy, not the Federal government, for help. The public-private partnership that is today’s crop insurance ensures that farmers get the financial help they need in weeks, not years.

As a crop insurance agent, I can tell you firsthand that crop insurance is no small expense for most of the state’s farmers, who spend north of $20,000 a year purchasing policies that they pray they will not need. Of course there are smaller farmers and larger farmers, whose premiums exceed $70,000, but the point is that it isn’t cheap.

Farmers buy crop insurance today just like they buy homeowners and car insurance. And when what looks like a promising year turns into a bust, the only thing standing between some farmers and bankruptcy is their crop insurance policies.

Last year, Oklahoma farmers spent more than $91 million out of their own pockets to purchase the peace of mind and protection of crop insurance.

Crop insurance allows individual farmers to purchase the coverage they need, tailored to their farms, their financial standing and their tolerance to risk.

For farmers who rely on loans to operate – and that’s a lot of farmers – crop insurance has become a bank’s best friend. In fact, the best collateral you can take to a bank when you are seeking a loan is your crop insurance policy. The bank will often co-sign the policy with the farmer, and in doing so, they are assured that part of their loan is covered, regardless of weather or price swings.

Crop insurance is not only smart farm policy, but smart consumer policy as well. American consumers have come to see our affordable, abundant food supply as a birthright. In fact, most of us alive today have never seen wide-scale hunger in this country. But much of what we take for granted could quickly disappear if we allow our farmers to fail and were forced to import our food, fiber and fuel. That is not a position many of us would choose to be in and it underscores the fact that having a strong farm sector is a national security issue.

While this might be the worst drought I’ve ever seen, I have to say that my faith in the resilience and work ethic of Oklahoma’s farmers is undying, and I know that with their crop insurance policies as a backstop, our farmers will bounce back from this. When Congress addresses crop insurance in the next Farm Bill five years down the road, I hope it is to protect the public-private partnership that has made it successful and to further improve and expand its protection.

Max Claybaker is a farmer and a crop insurance insurance agent from Blackwell, Oklahoma.  This op-ed appeared in The Oklahoman on June 1, 2014.

 

This Drought Is Awful, But with the Right Tools, Farmers Will Bounce Back

In many parts of Oklahoma, it seems like wheat farmers just can’t catch a break.

Not a one.

A late spring freeze, combined with excessively dry or extreme drought conditions throughout the winter and into spring have left many of the state’s wheat fields badly stressed or a complete bust. In fact, I’d say this is the worst I’ve ever seen, and I started farming here in the mid 1950s.

With the wheat harvest set to begin in about a month, farmers are expected to harvest about 40 percent less wheat this year than they did in 2013. The low soil moisture as we head into the hottest and driest months of the year has left many farmers wondering what they are about to go through.

For the state’s farmers who purchased crop insurance – and nowadays that’s nearly all of them – that will be their only saving grace. I don’t know of a farmer anywhere in Oklahoma who doesn’t buy crop insurance. It’s just like buying diesel fuel today…you don’t farm without it.

With the passage of the new Farm Bill, largely gone are the days of the Federal government stepping in and helping farmers who have been hit by a calamity.

Such bills cost taxpayers tens of billions of dollars in the past, and were not only expensive but also slow to deliver the help to the farmers who needed it. Today, when a farm crisis hits, farmers turn to their crop insurance policy, not the Federal government, for help. The public-private partnership that is today’s crop insurance ensures that farmers get the financial help they need in weeks, not years.

As a crop insurance agent, I can tell you firsthand that crop insurance is no small expense for most of the state’s farmers, who spend north of $20,000 a year purchasing policies that they pray they will not need. Of course there are smaller farmers and larger farmers, whose premiums exceed $70,000, but the point is that it isn’t cheap.

Farmers buy crop insurance today just like they buy homeowners and car insurance. And when what looks like a promising year turns into a bust, the only thing standing between some farmers and bankruptcy is their crop insurance policies.

Last year, Oklahoma farmers spent more than $91 million out of their own pockets to purchase the peace of mind and protection of crop insurance.

Crop insurance allows individual farmers to purchase the coverage they need, tailored to their farms, their financial standing and their tolerance to risk.

For farmers who rely on loans to operate – and that’s a lot of farmers – crop insurance has become a bank’s best friend. In fact, the best collateral you can take to a bank when you are seeking a loan is your crop insurance policy. The bank will often co-sign the policy with the farmer, and in doing so, they are assured that part of their loan is covered, regardless of weather or price swings.

Crop insurance is not only smart farm policy, but smart consumer policy as well. American consumers have come to see our affordable, abundant food supply as a birthright. In fact, most of us alive today have never seen wide-scale hunger in this country. But much of what we take for granted could quickly disappear if we allow our farmers to fail and were forced to import our food, fiber and fuel. That is not a position many of us would choose to be in and it underscores the fact that having a strong farm sector is a national security issue.

While this might be the worst drought I’ve ever seen, I have to say that my faith in the resilience and work ethic of Oklahoma’s farmers is undying, and I know that with their crop insurance policies as a backstop, our farmers will bounce back from this. When Congress addresses crop insurance in the next Farm Bill five years down the road, I hope it is to protect the public-private partnership that has made it successful and to further improve and expand its protection.

Max Claybaker is a farmer and a crop insurance insurance agent from Blackwell, Oklahoma.  This op-ed appeared in The Oklahoman on June 1, 2014.

 

2013 Year in Review: New Policy and Coverage Milestones for Crop Insurance

(OVERLAND PARK, Kan.) — Crop insurance reached significant and historic milestones in 2013 — both in its formal recognition by Congress as the primary risk management tool for farmers and the volume of protection it offered — according to an article released in the May 2014 edition of Crop Insurance TODAY.

“Again in 2013, crop insurance helped farmers deal with the year’s weather and market risks,” noted authors Keith Collins and Harun Bulut. “Crop insurance was singled out by legislators during the development of the new Farm Bill as the primary program supporting production agriculture and was heralded as indispensable for successful farming today,” they added.

The ability of farmers to rely on the crop insurance policies they had purchased gave them confidence to plant yet another year of near record total production, the authors explain. “Farmers were able to plant 325 million acres in the spring of 2013, down slightly from a year earlier but four million [acres] above the previous five year average.”

The article points out that looking to the future, the public can rest assured that crop insurance will be in place to provide financial stability for the many small, family farms that comprise the core of U.S. farm production. “Crop insurance will ensure that when the repeated disasters of recent years strike again, as they most assuredly will, U.S. farmers will be able to bounce back to produce again at high levels the food, feed, fiber and energy crops which the U.S. and world populations have come to expect and depend,” they said.

-#-

California Drought Worsens as Rainy Season Ends, Growers Fret

“California’s reservoirs obviously will not be significantly replenished by a melting snowpack this spring and summer,” concluded the year-end snow survey by the California Department of Water Resources.

The mountain snowpack is critical to the state’s water needs and provides roughly one-third of the water for California’s farms and cities. “Today’s final snow survey of the year found more bare ground than snow as California faces another long, hot summer after a near-record dry winter,” the report said.

The May 1 survey found the state’s snowpack at a mere 18 percent of average for the date. “With most of the wet season behind us, it is highly unlikely late-season storms will significantly dampen the effects of the three-year drought on parched farms or communities…” the report noted.

According to the May 13, 2014 U.S. Drought Monitor the entire state of California is experiencing severe drought conditions. More than three-quarters of the state is suffering a state of “extreme drought,” a seventeen percent increase from three months earlier this year, with nearly 25 percent of the state experiencing “exceptional” drought, a fifteen percent increase from three months earlier.

The ongoing drought is hitting the state’s farmers and growers hard. California is the nation’s top agricultural state, with farming generating approximately $37.5 billion a year, growing roughly half of the nation’s fruits, nuts and vegetables.

California farmers purchased more than 25,000 crop insurance policies in 2013, protecting more than 5 million acres. Those policies protect crops ranging from almonds, apples and avacadoes to sugarbeets, Valenicia oranges and walnuts. To purchase those policies, California farmers paid more than $95 million out of their pockets and protected more than $6 billion in liability.

Convo 43

Losing a crop is very disappointing, especially when you are at the very end, you are close to harvest, you put all of this time and money into it, and then you lose it. That is when it is nice to have crop insurance.

North Dakota Farmers Know First Hand Why Crop Insurance is Money Well Spent

I’ve spent the last 17 years of my life farming in North Dakota and I’ve loved every minute of it. But it can be a very risky business. There are many steps that farmers can take to manage risk, like growing a wide variety of crops, rotating crops and growing cover crops to prevent erosion. And we do all of that.

But let’s face it, when we get an early August freeze, or a spring flood, or a drought, just about all of the best farming practices in the world will fail to protect us. And that is why I, like most farmers across the state, always purchase crop insurance. In fact, last year North Dakota farmers spent more than $38 million out of their own pockets purchasing crop insurance policies.

It’s just a smart business decision. There has never been a year when we didn’t have crop insurance. Sure, it costs a lot of money, and that money could be spent elsewhere. But that would be a penny wise and pound foolish, since going through a natural disaster can cost you the farm.

This isn’t a hypothetical argument. In fact, last spring during planting, we had 18 inches of rain in 21 days. In between downpours we planted what we could, but by the time the rain was finished, we couldn’t get back into the fields to finish planting. In other words, we started off our growing season with only half a crop. Thankfully, our crop insurance policy covered that kind of loss. We certainly didn’t make a dime from the policy, but the indemnity check helped cover the rent on the land and the lost fertilizer that had been laid on a field that couldn’t be planted.

The passage of the new Farm Bill this year marks a pivotal stage in U.S. farm policy. Gone are the days of direct payments and large disaster bills aimed at helping farmers after natural disasters. In its place is crop insurance, which has been embraced by farmers, farm groups and lenders alike. Farmers who don’t purchase crop insurance need to realize that the federal government is no longer going to come along with an ad hoc disaster bill and bail us out.

The centerpiece of the new risk management strategy on the farm is crop insurance, which is sold and serviced by private insurance companies and partially discounted by the federal government. The government’s role – helping to ensure that crop insurance is affordable to farmers – has remade the face of crop insurance from a policy that for many years was largely unknown and underused to a risk management tool that last year protected 90 percent of planted cropland.

Crop insurance is not only popular with farmers, but with bankers as well. In fact, most farmers need to show proof of a crop insurance policy when they meet with bankers to secure production loans. The banks realize what a risky loan they are making, and are more likely to take that risk if they have the relative protection of crop insurance.

Crop insurance is good public policy for farmers, bankers, and taxpayers alike. In the past, extensive droughts like what much of the nation experienced in 2012 would have triggered an enormous ad hoc disaster bill in Congress. But since the vast majority of the cropland was protected by crop insurance during the worst drought to hit the nation since the Dust Bowl days, farmers sought assistance from their crop insurance policies, not the federal government.

Crop insurance, like all public policies, has its detractors, however. And before the ink is even dry on the new Farm Bill, these groups are plotting their assault on crop insurance. They have their sights set on the premium discount, the very thing that makes crop insurance affordable to farmers. Without the discount, farmers like me couldn’t afford to purchase crop insurance. And if a large-scale natural disaster hits and farms across the country fail, where is our food going to come from? I don’t think most Americans would want to be in a position of relying on other nations for our food in addition to our fuel.

Crop insurance is good public policy because it helps underpin farmers, who are enormous consumers and literally drive the rural economy. Americans spend about10 percent of their incomes on food, among the lowest of any country. With the proper risk management tools in hand for farmers, the promise of a safe and affordable food supply will not only be a legacy for our children, but for the world’s growing population as well.

Diane McDonald, from Inkster, North Dakota, is the national media chairperson for Women Involved in Farm Economics (WIFE).

This op-ed appeared in Agri-Pulse on April 8, 2014.

Convo 42

Today, crop insurance is the foundation of this Farm Bill and the farm safety net. The farmer gets a bill, not a check with crop insurance…and they don’t get help unless they really need it.

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

Mike Quinn.jpgIf there’s anything the droughts of 2011 and 2012 have 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.

J. 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.”

He maintained the widespread crop losses of 2011 and 2012 due to drought are a “clear reminder of the need for crop insurance protection.”

The farmers who are members of the cooperative have also had to deal with the terrible destruction of hurricanes, which seem to strike the Carolinas like clockwork.

In 1999, Hurricane Floyd dumped so much rain and caused such heavy destruction and flooding in the Carolinas — which had suffered from Hurricane Dennis just weeks before — that the World Meteorological Organization has retired the name.

In all this devastation, which could very well have bankrupted many farmers, those who had purchased crop insurance were able to roll with the punches and come back the following year.

“Crop insurance is very vital in a farmer’s overall risk management strategy,” said Quinn.

Crop insurance and the marketing loans are major provisions in the Farm Bill, and play an important role in cooperative marketing. He said the marketing loan program has allowed cooperatives like Carolinas Cotton Growers Cooperative “to facilitate loans on behalf of the producer while the crop is being marketed.” Crop insurance is a risk management tool the growers can customize to their individual needs, he added.

The 91-year-old cooperative, headquartered in Garner, North Carolina, provides marketing services by connecting members to textile customers around the world. The cooperative manages the logistics of moving the members’ cotton in the world supply chain in an efficient manner and provides the latest tools for members to hedge risks inherent in production agriculture.

“The nature and volatility of agricultural production necessitates the need for an adequate safety net for producers who take substantial risk in producing crops,” said Quinn.

A solid Farm Bill, he said, gives agricultural lenders a “certain degree of confidence in terms of multi-year lending of agricultural production and ensures a certain measure of food and fiber security.” A well-crafted farm bill is as important to American farmers as it is to American citizens, he said.

Crop insurance is a program that ensures that farmers who suffer possibly catastrophic losses from droughts and floods can survive and stay in business. The risk management tool provides coverage to over one hundred crops, and offers producers a variety of options to choose from depending on how much they are willing to spend and their tolerance for risk.

CROP INSURANCE IN ACTION: Matt Huie, Beeville, Texas

Matt HuieBee County in the coastal bend of Texas near the Gulf of Mexico was not spared the crippling drought which struck the state with the worst dry spell in almost a century in 2011 and continued for several years.

Matt Huie works on 5,000 acres of row crops plus a cow-calf operation there, and the headquarters of his operation is near Beeville, Texas. He has been farming the last 15 years since graduating from college.

For him, crop insurance has been invaluable. Huie calls it “the most vital risk management tool” in his quiver. “We always buy it, and have since we started,” said Huie.

“It’s required to secure loans in our area. Because of the severe drought in Texas, we have used it two of the last three years. Without it we would be out of business, along with two-thirds of the farmers in our area,” he said.

Huie explained that crop insurance enables farmers to survive disasters like searing drought or devastating floods so they can farm again the following year. The farmers pay premiums into the program so they can recoup some of their losses, which is a better alternative than ad hoc disaster aid that would have to pass through a Congress that is often stalemated by partisan debate.

Huie said crop insurance is “even more important to young farmers like us who are more leveraged” in providing collateral to keep their operations running.

He also disputed claims by some critics that farmers care more about collecting an insurance check than raising a crop. “If you have ever had an insurance claim on anything, be it a homeowners claim or an automobile, you know that it helps shield you from a catastrophic loss. But in reality, it’s (just) making the best of a bad situation,” he said.

Like other insurance policies, there is a deductible involved which is “usually 30 percent in our area,” he added.

Huie said he hopes people will understand the importance of the work farmers do, even in a society where most take for granted that safe, affordable food is readily available in their supermarkets.

“In a global market where competing nations recognize the strategic importance of maintaining a domestic agriculture industry, subsidies will continue to exist because there is no greater threat to a government than to have people that are hungry,” he said.

When farmers like Huie file a crop insurance claim, they only do so after suffering a loss.

“A common misconception people have is that crop insurance guarantees a profit. Wrong!” he declared.

“There are a few groups out there that would like to paint a different view of farmers, fat cats that live on handouts. There may be some of those out there, but I don’t know them,” Huie stated.

“The farmers I know study the most efficient, economical way to grow a crop,” Huie added. “They rush to fertilize and plant with faith that Mother Nature will bring rain and crops will grow to sell at harvest. They agonize over the weather, insects, decisions, and generally sleep very poorly during the growing season. Those are not the traits of a fat cat.”

2014 Farm Bill Changes to Crop Insurance Detailed in Newly Released “Crop Insurance: Just the Facts”

Since the new 2014 Farm Bill was signed into law, questions have arisen about how this new legislation affects crop insurance and the farmers who rely on it. Detailed answers to questions, ranging from major and minor policy changes, the introduction of new products including SCO and STAX and the link between the premium discount and conservation are all detailed in the newly released version of Crop Insurance: Just the Facts.

“The 2014 Farm Bill is a turning point in federal policy towards agriculture, pivoting away from the traditional support mechanism paradigm of the past and into a risk management model that features crop insurance as farmers’ primary — or only — risk management tool,” noted Tom Zacharias, president of National Crop Insurance Services.

Crop Insurance: Just the Facts, a popular online resource that provides the A to Z overview of Federal crop insurance resides here, on the Crop Insurance Keeps America Growing website page “About Crop Insurance” where it is continuously updated.

“This resource has proved invaluable to farmers, students and policy experts who need to better understand the nuts and bolts of crop insurance,” said Zacharias.

In addition to addressing the various aspects of the new Farm Bill, the online series covers important topics such as how crop insurance benefits the public, economics of the industry, risk management in global terms, how crop insurance benefits producers and many other important issues.

Zacharias noted that crop insurance discussions are replete with exaggerations and misrepresentations about this important risk management tool. “Crop Insurance: Just the Facts, provides the details in an easy to read, reasoned and balanced perspective,” he said.

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

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

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

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

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

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

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

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

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

CROP INSURANCE IN ACTION: Tom March, Bethlehem, Connecticut

March Farm View2In 1915, Thomas and Rose Marchukaitis, two Lithuanian immigrants who had been in the country for only a few years, purchased a farm in Bethlehem, Connecticut, which consisted of 114 acres and supported 15 cows and two horses. There, they raised their nine children and worked hard for their American dream.

Three generations later, their grandson, Tom March, is still farming that parcel of land, which has grown to 150 acres, along with his brother-in-law and their two sons. “We’re a diversified farm, because you have to be,” said March, whose farm consists of about 75 acres of sweet corn, 30 acres of apples, 4 acres of peaches, along with some strawberries and blueberries.

March took over the farm from his father in 1976 and has been at it ever since. Most farmers are quick to recount their “really bad year,” but Mother Nature has been unusually cruel to the March Farms with a long string of natural disasters.

“Having just one bad year would have actually been good news for us,” said March. Six out the last seven years, March Farms has had hail damage on their apple crop, one of their largest sources of revenue. “In 2012, I lost 90 percent of my apple crop on that late frost and then the other 10 percent was demolished by hail,” said March. “For my peaches, another big crop on my farm, I’ve also had major losses six out of the last seven years,” he noted.

“Needless to say, if I hadn’t purchased crop insurance, I would have had many lean years in a row.” March has been purchasing crop insurance for more than a decade, and said that he can’t imagine farming without it.

March said that he had high hopes for this year, thinking that he might be able to break the bad streak and post a big bumper crop across the board. And then, it started raining. And it rained, and rained, and rained. “This year, it’s been so wet, I haven’t been able to get any corn in the ground, and it’s already July,” he noted. “The tractors just couldn’t get through that mess.” Soon, it will be too late to plant corn altogether, as days shorten and nights get cooler.

March explained that crop insurance allows farmers to pick up the pieces when a disaster, or a string of disasters, hit. “In farming, you only get one shot at this. If you lose a crop, you’re generally done for the season,” he said.

March explained that while a late spring frost can completely destroy an orchard’s earning potential for the year, it doesn’t remove its ongoing costs.

“Farmers need access to crop insurance to stay in business, it’s as simple as that,” he said.

“If your apples freeze off at the beginning of the year, what are you going to do for income?” he asked. “You not only lost a crop, but you also have the long-term maintenance cost on the trees, weed control, pruning, pest control and then getting the trees ready for next year. So you have lots of cost and little income,” he explained.

That’s when purchasing crop insurance turns into a saving grace. The crop insurance indemnity offers both peace of mind, and financial backing to pay off production loans or to buy inputs for the next year.

March noted that generally, people don’t go into farming to make a lot of money, but because it’s a passion and a good, healthy way of life. “The only time you make any money in farming is when you grow something out of season, or when there’s a major disaster elsewhere and your crops are in good shape,” he said.

Like many other farmers both large and small, March is incensed by crop insurance opponents who malign farmers by claiming that crop insurance only helps a handful of rich farmers get richer. March said the statement itself shows how little these critics know about farming, or farmers. “You try growing this stuff and try raising a farm and see how much money you make,” he said. “Don’t give us this nonsense about how much money we make, because it’s not true,” he said. “They see the income numbers, but they have no idea of the costs.”

March explained that every year, March Farms gets through it one way or the other. “What are you going to do, cry over spilled milk or pick up the pieces and move forward?” he asked.

“We always manage to pull through,” he said.

Convo 40

“In addition to covering a host of other crop insurance-related issues, the newly released online resource also addresses major and minor policy changes in the 2014 Farm Bill, including the introduction of new products including SCO and STAX, new products available for beginning farmers, the link between the premium discount and conservation and newly authorized pilot programs.” Dr. Keith Collins, economic consultant to National Crop Insurance Services

Convo 40

“In addition to covering a host of other crop insurance-related issues, the newly released online resource also addresses major and minor policy changes in the 2014 Farm Bill, including the introduction of new products including SCO and STAX, new products available for beginning farmers, the link between the premium discount and conservation and newly authorized pilot programs.” Dr. Keith Collins, economic consultant to National Crop Insurance Services

2014 Farm Bill Changes to Crop Insurance Detailed in Newly Released “Crop Insurance: Just the Facts”

(OVERLAND PARK, Kan.) — As the 2014 Farm Bill was signed into law, questions have arisen about how this new legislation affects crop insurance and the farmers who rely on it. A detailed analysis that will answer those questions, including major and minor policy changes, the introduction of new products including SCO and STAX and the link between the premium discount and conservation are all detailed in the newly released version of Crop Insurance: Just the Facts.

“The 2014 Farm Bill is a turning point in federal policy towards agriculture, pivoting away from the traditional support mechanism paradigm of the past and into a risk management model that features crop insurance as farmers’ primary — or only — risk management tool,” noted Tom Zacharias, President of National Crop Insurance Services.

Crop Insurance: Just the Facts, a popular online resource that provides the A to Z overview of federal crop insurance resides here, on the Crop Insurance Keeps America Growing website page “About Crop Insurance” where it is continuously updated.

“This resource has proved invaluable to farmers, students and policy experts who need to better understand the nuts and bolts of crop insurance,” said Zacharias.

In addition to addressing the various aspects of the new Farm Bill, the online series covers important topics such as how crop insurance benefits the public, economics of the industry, risk management in global terms, how crop insurance benefits producers and many other important issues.

Zacharias noted that when it comes to the important details of crop insurance, the reason why farmers, farm groups, the financial community and lenders have thrown their strong support behind crop insurance, and why it has evolved into the main risk management tool for American agriculture, discussions are replete with exaggerations and misrepresentations about crop insurance. “Crop Insurance: Just the Facts, provides the details in an easy to read, reasoned and balanced perspective,” he said.

 

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Four Crop Insurance Industry Stalwarts Presented with Lifetime Achievement Awards

(SCOTTSDALE, ARIZ.) – Kent Petersen, Hudson Crop Insurance, Robert Parkerson, ProAg Insurance, Russell Slade, Diversified Crop Insurance Services, and Charles “Chuck” Lassey, retired, were presented with a Crop Insurance Industry Lifetime Achievement Award at the 2014 Crop Insurance Industry Annual Convention. Tim Weber, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the awards.

 

KENT PETERSEN

Dan GasserKent Petersen began his career in the crop insurance industry almost 40 years ago. From 1973 to 1990, Kent worked for Crop Hail Management, starting as a crop insurance adjuster and working up through the ranks to become the chief operations officer. From 1990 to 1992, Kent assisted with the transition and in 1992 was named manager of underwriting and reinsurance for Rural Community Insurance Services. He served in that position until 1997.

After a brief retirement from the industry, Kent returned to the industry as president of CropUSA in January of 2003. In 2008, Hudson Insurance Company purchased the assets of CropUSA and the employment contracts of many employees. Kent supported that transition and was named senior vice president of Hudson Insurance Company and President of Hudson Crop. He remained in that position until his retirement in September 2013.

Kent was a member of many industry organizations including serving on the NCIS Board of Directors from 1992-1997. He was also an active member of the American Association of Crop Insurers, serving as a strong advocate for the crop insurance industry.

Mr. Petersen was unable to attend the convention so accepting the award on his behalf was Dan Gasser, Hudson Crop Insurance.

ROBERT PARKERSON

Bob ParkersonRobert “Bob” Parkerson has been dedicated to the crop insurance industry for many years, and in a leadership position since the early 1990s. Bob worked with Old Republic in the 1980s, at a time when they were the largest industry company in the MPCI program. He became president of National Crop Insurance Services (NCIS) at a time when the industry was in need of a true leader, which Bob filled with class and dignity.

As president of NCIS for 17 years, Bob was instrumental in the industry growing from a group that was struggling to reach $1 billion in premium to a powerhouse industry that exceeds $12 billion in premiums. Each step forward along this path included Bob representing the industry with patient guidance, leadership and respect from other crop insurance stakeholders. Bob was more often than not the first person reached out to on critical issues with USDA, Congress, reinsurance companies and the press.

Thanks to Bob’s leadership there is utmost respect for NCIS as an educational resource, providing detailed analytical input when change inevitably occurs in this industry. Bob is also recognized in the international crop insurance arena, due to his long time and positive profile in the U.S. crop insurance program. Many foreign operations seeking to learn from the best have consulted with Bob through the years.

 

RUSSELL SLADE

Russell SladeRussell Slade has spent the better part of the last three decades making his mark on the crop insurance industry landscape. Prior to starting in crop insurance, he farmed in Georgia and also sidelined as a crop duster. In 1983, Russell began his career with the Cotton States crop division as a claim and marketing manager and was later promoted to vice president of the crop insurance operation. Subsequently, Russell joined Blakley Crop Insurance as vice president of their south/east region. In 2005, Russell joined Diversified Crop Insurance Services as general manager and played an instrumental role as DCIS transitioned to a full service crop insurance company.

Russell’s efforts and passion for the industry could be found on both the crop-hail and MPCI programs and he has gained the respect and goodwill from all those who worked with him, not only in the field but as a member of many of the NCIS standing committees. Russell’s leadership, knowledge, influence, values and people skills made a mark on all those within Diversified Crop Insurance Services but also those in the crop insurance industry who have had the privilege of working with him.

A long-time advocate of NCIS and its committees, Russell has spent a significant amount of time championing the importance of a unified industry. His expertise on such crops as cotton, peanuts and tobacco proved to be invaluable to the industry in both the MPCI and crop-hail programs. He has served on many NCIS committees over the years including, but not limited to: the MPCI Policies and Forms Committee; Loss Adjustment and Insurance Products Committee; Crop-Hail Policy, Procedure and Loss Adjustment Committee; the NCIS Board of Directors; and, the NCIS South/East, Gulf States and Kentucky/Tennessee Regional/State Committees.

 

CHARLES “CHUCK” LASSEY

Chuck LasseyCharles “Chuck” Lassey began his crop insurance career working for Rain and Hail in North Dakota. In the mid 1960’s, he went to work for the Insurance Company of America. Later, Chuck joined American Ag, and later worked for Agro National. Chuck spent most of his career as a field representative, a supervisor and a branch manager in the Northwestern states of Idaho, Montana, Oregon and Washington, with some duties in North Dakota. Chuck earned the respect and admiration of his agents and his fellow competitors for his honesty and work ethic.

Chuck was always active in the industry, serving on many of the committees – from the old loss adjusting committees to more recent when he served on the NCIS Northwest Regional/State Committee.

Still today when speaking with the many of the agents he worked with over his tenure, he is well respected and thought of often. Through the years Chuck recruited a large number of adjusters and field representatives to the crop insurance industry, many of whom still work in it. His son, Paul Lassey, also works in the industry, traveling the same states as his father. Chuck is well known and highly respected for his expertise in specialty crops produced in the Northwest states. He was always willing to take on the most difficult tasks, including supervising and adjusting apples on a project in Mexico for an international reinsurer.

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Presenting the awards was Tim Weber (left), Chairman of the NCIS Board of Directors and Tom Zacharias (right), President of NCIS.

 

Tom Vetter Receives NCIS Industry Leadership Award

(SCOTTSDALE, ARIZ.) – Tom Vetter, ProAg Insurance, was presented with the 2014 National Crop Insurance Services (NCIS) Industry Leadership Award at the 2014 Crop Insurance Industry Annual Convention. This award is given to individuals who are directly involved in the crop insurance industry and who consistently serve the industry by providing outstanding leadership through NCIS committees. Tim Weber, Chairman of the National Crop Insurance Services (NCIS) Board of Directors, and Tom Zacharias, President of NCIS, presented the award at the 2014 Crop Insurance Industry Annual Convention.

Tom VetterMr. Vetter has been working tirelessly in the crop insurance industry for three decades. His knowledge on crop hail policy development, adjustment processes and risk management needs are well known and acknowledged across the industry. He participates extensively in NCIS committees, rarely missing meetings (if ever) and is always thinking of what is best for the industry and not just the company he’s representing.

Mr. Vetter first began serving on standing committees through CHIAA and NCIA (predecessors to NCIS), which included developing policies and loss procedures, analyzing loss costs, and helping with many aspects of agronomic research for the private crop-hail program. He was a member of the Arizona Regional/State Committee, serving as chairman in 1986-87 and again in 1990-91, and currently serves on the NCIS Southwest Regional/State Committee. He also served as a member of the Chairman’s Select Committee on Programs and Services in 1993 and 1994.

He was a member of the industry committee who worked with the Congressional delegates in developing and writing the legislation that introduced the private sector into the Federal Crop Insurance Program. He also helped develop many of the first MPCI loss procedures (re-writes of the original Federal handbooks) and conducted some of the first train-the-trainer sessions of these procedures for the industry.

Mr. Vetter has always been very involved in the NCIS research programs and writing hail loss procedures, including Chile Peppers and Cotton. His hard work and dedication to the crop insurance industry has always lead to better products for the industry and better protection for farmers.

Congratulations to Tom Vetter, recipient of the NCIS Industry Leadership Award.

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Photo (left to right): Tim Weber, Chairman of the NCIS Board of Directors, Tom Vetter, and Tom Zacharias, President, NCIS

2013: A Landmark Year for Farmers, Crop Insurance

(SCOTTSDALE, Ariz.) — On the heels of the 2012 drought, farmers turned to crop insurance in record numbers to protect their crops in 2013, according to data released today at a convention hosted by the National Crop Insurance Services (NCIS) and American Association of Crop Insurers.

Notable crop insurance statistics for 2013:

  • Farmers spent $4.5 billion to purchase insurance policies. That is up from $4.1 billion in 2012 and brings farmers’ total investment in crop insurance to $38 billion since 2000.
  • 52,000 more policies were sold in 2013 than 2012.
  • Crop insurance protected $123 billion of potential liabilities last year, as compared to $117 billion in 2012 and $114 billion in 2011.
  • A record 296 million acres, or 90 percent of insurable cropland, was covered by crop insurance in 2013. U.S. farmers protected 86 percent of eligible acres in 2012 and 84 percent of acres in 2011.
  • To date, 423,000 policies have been indemnified in 2013, a sharp fall from the record of 495,000 in 2012. As a result, taxpayer costs dropped considerably.

 

“The fact that farmers were able to bounce back from the worst drought in decades and plant bumper crops, all without a call for disaster assistance to Congress, underscores the value farmers place on crop insurance and why they are protecting a record number of acres,” said Tom Zacharias, president of NCIS.

“Crop insurance is the risk management tool of choice for farmers, ranchers, farm leaders, bankers and members of Congress for one reason: it works,” he said.

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Farm Bill Reduces the Deficit, Boosts Crop Insurance

What started off two and half years ago as an attempt to craft a Farm Bill with bold deficit reductions in mind became the new North star of U.S. agriculture policy last week when President Obama signed The Agriculture Act of 2014 into law at Michigan State University.

The law marks a dramatic turning point in American farm policy, with the sun setting of the 18-year old system direct payments – which cost more than $4.5 billion annually – accompanied by a renewed emphasis and commitment to crop insurance.

“This is not your father’s Farm Bill,” said Senate Agriculture Committee Chairman Debbie Stabenow. “From now on, farmers will protect themselves from disaster with risk management programs like crop insurance,” she said. “Instead of getting a government check even in good times, farmers will pay an insurance bill every year and will only receive support from that insurance in years when they take a loss.”

The bill won immediate praise from national farm groups as soon as it emerged from the conference committee in late January. National Association of Wheat Growers President Bing Von Bergen said the bill “ strengthens crop insurance and allows growers the necessary safety net to keep a secure, affordable and healthy food supply.

The sorghum industry issued a statement underscoring their strong support for the bill and applauded the $24 billion it would save taxpayers. “This legislation meets [National Sorghum Producer’s] goals in providing farmers with a number of risk management tools, strengthening and protecting crop insurance, and including strong conservation and energy titles,” said Chairman J.B. Stewart.

The crop insurance industry applauded the years of hard work by both chambers and noted that it was looking forward to working with the Risk Management Agency on implementation of the law. “With one bold stroke of the pen, the President charted a new course for U.S. farm policy, sun-setting the policies of yesterday and putting greater emphasis on farmers’ use of crop insurance,” the industry noted in a nationally-released written statement.

Agriculture Secretary Tom Vilsack noted the bill “will allow the proud men and women who feed millions around the world to invest confidently in the future,” adding, “this legislation is important to the entire nation.”

2014: A New Year, A Fresh Outlook…Spotlight on Crop Insurance

When Nebraska and Kansas farmers looked out their kitchen windows in the late summer of 2012, they saw withering fields that harkened back to the Dust Bowl years. The majority of both states were experiencing extreme or exceptional drought, a condition that would not change for most farmers through harvest in the High Plains.

And while many farmers cringed as they watched their hard work and investment wilt in the fields, the vast majority of them did not worry that this drought would put their farms on the auction block. That is because 86 percent of planted cropland was protected by crop insurance policies.

In the not-too-distant past, such agricultural calamities would have triggered widespread fear on the farms and in rural towns where bankruptcies and economic devastation was barreling down the tracks like an out of control train. With nowhere to turn, rural America had to plead with their congressional delegations for help, which would come in the form of an ad hoc disaster bill.

This is not a hypothetical scenario. Since 1989, the tab for 42 of these emergency disaster bills for agriculture cost U.S. taxpayers $70 billion. The financial aid from this legislation, while appreciated, often took years to reach the devastated farmers. After a string of these costly bills, Congress moved to incentivize farmers to purchase crop insurance. From that point on, when disaster struck, farmers would turn to their crop insurance agents, not taxpayers, for recovery.

Fast forward to the 2012 crop year. Nebraska and Kansas farmers together had spent over half a billion of their own dollars purchasing crop insurance premiums just in case disaster struck. And when it did, crop insurance indemnities were in the hands of the farmers who suffered losses in weeks, not months or years.

Nothing is quite as loud as success. And the decision to make crop insurance the primary risk management tool has been an unequivocal success for farmers, taxpayers and rural America.

For farmers, who will wave farewell to direct payments and other commodity support programs when this farm bill passes, it allows them to purchase a risk management policy tailored specifically for their needs and risk tolerance. Taxpayers benefit because they are no longer on the hook for the whole tab when disaster strikes.

In fact, since 2000, farmers have spent $38 billion nationally purchasing crop insurance policies, ensuring that they had “skin” in the risk management game. As Senate Agriculture Chairwoman Debbie Stabenow pointed out, when a farmer signs up for crop insurance, “the farmer gets a bill, not a check.”

As for the health of rural America, when farmers catch a cold, the rural economy catches pneumonia. That is because farmers are enormous consumers, investing huge amounts of capital directly into the communities where they live, purchasing fuel, machinery, feed, fertilizer and other durable goods, as well as hiring workers.

Anyone questioning the effectiveness of crop insurance need only look at how well farmers bounced back from the worst drought in decades. The 2013 growing season was one of the best ever, producing the largest corn crop the nation has ever seen. And all of this while total federal spending on farm programs has trended down.

Like other highly successful policies, crop insurance has its detractors. The very same groups who during the 2012 drought were saying that farmers were “praying for drought, not praying for rain,” are now calling for means testing.

Means testing would force many large or highly successful farmers – who also tend to be the least risky – out of the risk pool. And when the lower risk policyholders leave the risk pool, those left, the smaller, younger farmers who also tend to be the riskiest, will see their premiums go up. In short, means testing is the new poison pill being used by those wishing to kill any form of farm program or assistance to rural America.

While the popularity of crop insurance continues to grow, with 90 percent of planted cropland having the protection of crop insurance in 2013, this year is different. This summer when farmers looked over their crops and saw bountiful fields full of golden grains, they knew they would be selling an abundant harvest and not collecting an indemnity check, which brought a smile to many faces. The plentiful harvest and the satisfaction of feeding others is, after all, what farming is all about.

Tom ZachariasTom Zacharias, president of National Crop Insurance Services and is located in Overland Park, Kan.

This op-ed appeared in Midwest Producer Magazine on December 26, 2013.

Senator Stabenow Calls Farm Bill Turning Point for Crop Insurance

(SCOTTSDALE, Ariz.) — On the heels of the 2014 Farm Bill becoming law, Senate Agriculture Committee Chairwoman Debbie Stabenow (D-Mich.) addressed the crop insurance industry yesterday and noted that crop insurance is now the centerpiece of U.S. farm policy.

“Today, crop insurance is the foundation of this Farm Bill and the farm safety net,” Stabenow, one of the law’s architects, said at the crop insurance industry’s annual convention.

The Farm Bill – which was three years in the making – started out with deficit reduction in mind and kept that focus until the very end, she said. Key to taxpayer savings was the transition away from direct farmer payments to insurance policies that are purchased by farmers and serviced by the private sector.

“The farmer gets a bill, not a check with crop insurance…and they don’t get help unless they really need it,” Stabenow said referring to the premiums farmers pay and the indemnities that are only received after losses are verified.

Stabenow noted that during the debate, farmers stressed their support for crop insurance and asked Congress to strengthen it. And by making crop insurance more readily available to specialty crop growers, she said the policy’s coalition of support has been strengthened.

The crop insurance system won high praise from the chairwoman and other lawmakers for helping farmers through the worst drought in a generation in 2012. Despite widespread losses, crop insurers processed claims quickly and accurately, and unlike past disasters, there were no calls for costly ad hoc disaster bills.

Tom Zacharias, National Crop Insurance Services president, thanked Senator Stabenow for her outstanding leadership and noted that America’s farmers and consumers owe her a debt of gratitude for being a steadfast proponent of a smarter, less costly Farm Bill that embraces a larger role for crop insurance.

“Senator Stabenow learned first-hand from Michigan’s vital specialty crop sector that crop insurance is the best tool farmers have to manage the ups and downs of Mother Nature,” he said. “She has done a terrific job of shepherding through a Farm Bill that ensures farmers everywhere can purchase the risk protection they need,” he said.

Zacharias noted that for crop insurance to succeed in the future, Congress must help ensure that the system remains “affordable, available, and viable.” He also said that program integrity and consumer service must continue to be the industry’s top priorities.

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The bill also strengthens crop insurance, which is an essential cost-effective risk management tool. With crop insurance, farmers invest in their own risk management by purchasing insurance policies so they are protected in difficult times. Crop insurance also helps protect Americans from spikes in food prices. Without crop insurance farmers would have no way to recover from disaster unless the government steps in and provides unplanned disaster assistance.

Senate Passes Farm Bill 68-32

February 4, 2014

American Association of Crop Insurers, Crop Insurance and Reinsurance Bureau and National Crop Insurance Services released this statement about today’s passage of the Senate Farm Bill.

“We congratulate the Senate on its swift passage of the Farm Bill and know that America’s farmers appreciate the certainty it provides by ensuring a strong crop insurance policy.   We hope the President moves quickly to sign this bill into law.”

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Joint Statement on Farm Bill Conference Committee Report

Contact: Laurie Langstraat, NCIS – 913-685-2767

(January 28, 2014) – American Association of Crop Insurers, Crop Insurance and Reinsurance Bureau and National Crop Insurance Services, in response to the Farm Bill conference committee filing its conference report last night, released the following statement:

“We are pleased that Senate and House conferees have reached a bipartisan compromise and produced a legislative package that gives modern-day agriculture the tools it needs for success in today’s world. There is a strong consensus among lawmakers that crop insurance should be enhanced and serve as the centerpiece of the farm safety net moving forward, which underscores the success the policy has seen over the years and the popularity it enjoys among farmers.

“Since crop insurance’s rise to prominence, overall farm policy spending has gone down because farmers and private insurers help shoulder risk that was otherwise borne by taxpayers. In addition, rural economies have benefited because crop insurance makes sure farmers quickly and accurately receive the help then they need it the most.

“We also applaud conferees for rejecting multiple attempts to minimize crop insurance’s effectiveness by making it more difficult for all farmers to obtain a key risk management tool. The Farm Bill is now one step closer to completion and we urge the House and Senate to approve the farm bill expeditiously. Farmers need the peace of mind provided by a 5-year farm bill and a vibrant crop insurance infrastructure to ensure that this nation’s agriculture sector remains vibrant and productive.”

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Ten Considerations: The Role of Crop Insurance in the Farm Safety Net

More than a half-century ago, acclaimed historian Murray Benedict noted, “There are indications … that crop insurance is gradually emerging as one of the more settled features of American farm policy.” That prediction, perhaps a bit premature at the time, has certainly been borne out, as over the last decade crop insurance has grown from a little-known and underused program into the primary risk management tool for farmers and ranchers that protected 90 percent of planted cropland in 2013.

A newly released article in the third-quarter issue of Choices magazine offers a “within the industry perspective” on the status of crop insurance and key issues it faces as farmers’ quintessential risk management tool. Authors Tom Zacharias, National Crop Insurance Services president, and Keith Collins, former USDA chief economist note, “U.S. farm policy appears to be transitioning from direct income support to a risk-management-based system depending upon both public and private sector participation.” This rise, however, has triggered “significant criticism for its level of subsidization and other aspects,” they point out. “Such a tension, especially during the development of a new farm bill, seems natural and appropriate.”

Pointing out that there are many “key issues that remain in play,” the authors offer 10 considerations that the public and policy makers should be aware of when assessing the efficacy and future path of the crop insurance system. These considerations are intended to highlight and address the primary considerations from both the public and private sector in terms of the program’s current status, future regulation and information needs. These considerations are:

1. Is there a public interest in a resilient, financially sustainable and competitive industry that produces the nation’s food and is subject to natural disasters and other shocks?

2. Should there be taxpayer (government) support for a farm safety net?

3. What is the willingness and ability to spend on the farm safety net?

4. Should the safety net be ex ante or ex post?

5. Is the safety net income support or risk management?

6. Is current risk sharing optimal?

7. What is the role of area versus individual plans?

8. Should the safety net be incentivized?

9. Can the current incentive structure be improved?

10. Is crop insurance distortionary?

“It will be interesting to observe and participate in the direction of agricultural policy in light of the expected increasing prominence of crop insurance,” noted Zacharias and Collins, adding that the sway of the political pendulum will determine short-run directional shifts in policy. “Yet, as we outlined above, key issues remain in play, and particularly the level and use of taxpayer funds in determining a proper balance between the roles of the public and private sector in agricultural risk management,” they concluded.

CROP INSURANCE IN ACTION: Bing Von Bergen, Moccasin, Montana

Bing Von Bergen is not only the president of the National Association of Wheat Growers, he’s a third-generation Montana wheat farmer who has seen all kinds of weather over the years. “Last year, parts of the nation had the worst drought since the ‘Dirty 30s,” he said, recalling the name given the Dust Bowl years.

Von Bergen farms about 4,700 acres near Moccasin, Montana, close to the heart of the state. Growing up in agriculture, he knows hard times can be just around the corner.

But a lot has changed since the Dust Bowl years, including the tools farmers have to manage risk. At the top of that list is crop insurance. “Crop insurance is our principal safety net,” he said. “And farmers are fighting to preserve it.”

Von Bergen says that in the 34 years that he’s been farming, crop insurance has gone from being a program that few could afford or would consider purchasing to being the most important risk management tool available to farmers today. “It has taken 30 years for crop insurance to develop from a program that offered little protection into a program with real protection,” he said.

Read Bing Von Bergen’s story here.

Crop Insurance: The New Face of Farm Policy

From walking on soil baked into near-concrete during the worst drought in over 50 years in 2012, to dredging across flooded fields this soggy spring, farmers are wondering when an “average” year will occur. And that’s just weather. As a 26 year-old farmer, I’m starting to wonder what “average” or “normal” even means.

In my relatively short career, corn prices have been below $2.00 and over $8.00 per bushel, land prices have nearly tripled since I purchased my first field, proposed regulations point to increasing costs without offsetting revenues, and farm policy has evolved from focusing on price supports and direct payments to farmers towards a more market-oriented risk management tool called crop insurance, a public-private partnership whereby farmers purchase policies and only receive a payment if there is a documented loss.

In light of our new “normal” characterized by volatility — in weather, markets, and regulation —farmers would struggle without access to crop insurance. The Farm Bill, which will guide American agriculture for the next five years, is currently being debated in Congress. At its centerpiece is crop insurance, a vital component that is an economic and social development tool for rural America and the new face of farm policy.

The average American farmer is 58, the oldest at any time in our history. Assuming most of us retire at 65, that puts us seven years away from real problems if we don’t start transitioning to the next generation. Crop insurance helps young farmers because it serves as a “stop-loss” collateral source to back credit—a crucial transition tool given the high capital costs of farming. In this sense, crop insurance is a bridge to the future for America’s farmers, as well as a first-rate risk management tool.

Crop insurance is also a working capital tool. But why farmers and not other business sectors? Non farmers do not negotiate with the whims of Mother Nature, cater to consumers in foreign and domestic markets, AND compete with neighbors two miles up the road, farmers two states over and farmers outside our borders to produce a non-differentiated commodity.

Farmers in other countries need to stockpile a large share of their profits into cash reserves planning for a bad year – be it weather, price or market related – so that they have sufficient liquidity when disaster strikes. Because American farmers can purchase crop insurance, we don’t need enormous cash reserves and we can instead reinvest our profits. I have paid down debt faster and invested in newer and more sustainable technologies because I had crop insurance to cover big, volatile losses. Farmers put profits back into their communities and do so more quickly because of crop insurance.

Crop insurance saves taxpayers money. In the past, when disasters struck — and they struck often — the federal government was called upon. Recovery was paid for completely by taxpayers. Last year, when farmers here in Illinois were decimated by drought, we had crop insurance policies and didn’t need a disaster bill to help us plant this year.

Crop insurance is a vast improvement over the price support system and direct payments of the past. It puts emphasis on farmers having “skin in the game” to protect themselves from the risks they deem most likely to occur. It is not uncommon to hear a farmer complain about the money he has spent over the years purchasing crop insurance. It’s a major expense for us, but one we’re happy to pay for because it gives us something this new era rarely allows: peace of mind.

Crop insurance allows market forces to work; we can fail or succeed. Crop insurance is only a buffer, not a guarantee; it is based on historical yields and current prices. It protects “good” farmers — those that apply new technologies, manage risk, and preserve soil and resources — from circumstances beyond their control, like last year’s drought, this year’s flood and the volatile market we now accept as the new “normal.” In contrast, it allows “bad” farmers to fail because, over time, they will tend to have lower yields. The free market still works, just with a buffer that ensures long-term stability in an unstable environment.

Is crop insurance perfect? No. In my perfect world, I want the final 50 years of my farming career forged in a landscape with a stable dollar and interest rate, vastly reduced government regulations, increased free trade and an educated, appreciative consumer. But today, in the real world, crop insurance is the best risk management tool we have. It helps farmers survive the worst of times, reduces costs to taxpayers and allows market forces to work. It’s the new face of farm policy.

Andrew Bowman is a fifth generation farmer, Certified Crop Adviser, and full lines insurance agent, including crop insurance, from Oneida, Ilinois. This op-ed appeared in the Farm Bureau News Service on August 2, 2013.

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Crop insurance is a partnership between the farmer, the government and the insurance company. The farmer pays some and the government pays some and this benefits the entire economy and the entire country.

New NCIS Video: Crop Insurance By The Numbers

As we continue pressing forward in the 2013 Farm Bill debate, the success of the crop insurance program and the benefit that it has had to the American taxpayer is the subject of a recently released NCIS video.

“Over the last decade, overall taxpayer spending on farm policy as a whole has steadily declined,” notes Tom Zacharias, president of National Crop Insurance Services. “That’s no accident,” he adds, explaining that commodity prices have strengthened and the country began shifting to an insurance system that reduced the need for traditional subsides and limited taxpayer exposure.

From 1998 to 2012, insured acreage has increased by 100 million acres. “It has become such a success, that most farmers agreed in 2012 to get rid of direct payments during the Farm Bill debate,” Zacharias notes.

But in addition to eliminating the need for direct payments, the public-private partnership of crop insurance has also eliminated the need for costly ad hoc disaster bills. “Since 1989, 42 pieces of legislation, totaling $70 billion in unbudgeted dollars were passed to help farmers following a disaster, he explains. “Those days are over.”

With crop insurance in place, farmers and private insurance companies now share the risk, ensuring that the entire burden doesn’t fall solely on the laps of taxpayers. Each farmer must pay the premium for their individual policy, and when disaster occurs, the billions paid in premiums by farmers help offset the cost of the insurance. “Farmers have paid $30 billion of their own money on crop insurance protection to buy this coverage,” Zacharias notes. In addition to the premiums paid by farmers, the government has collected more than $4 billion in underwriting gains from 2001-2010, which helped offset losses in the bad years as well.

Zacharias points out that crop insurers have stood alone in offering up budget reductions in recent years, totaling $12 billion. Unfortunately, some in Congress are angling for more, says Zacharias. “The additional cuts they are proposing would result in lower crop insurance participation, ironically shifting risk away from farmers and crop insurance companies right back to taxpayers,” he said.

“As we go forward in the next farm Bill, we would say ‘Do No Harm” to crop insurance.”

For Farmers, Risk Comes in Many Forms

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

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

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

Agricultural Practices

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

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

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

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

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

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

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

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

Marketing Instruments

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

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

Financial Instruments

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

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

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

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

Financial Strategies

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

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

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

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

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

New NCIS Video: Crop Insurance By The Numbers

OVERLAND PARK, KAN. — As we continue pressing forward in the 2013 Farm Bill debate, the success of the crop insurance program and the benefit that it has had to the American taxpayer is the subject of a new NCIS video.

“Over the last decade, overall taxpayer spending on farm policy as a whole has steadily declined,” notes Tom Zacharias, president of National Crop Insurance Services.  “That’s no accident,” he adds, explaining that commodity prices have strengthened and the country began shifting to an insurance system that reduced the need for traditional subsides and limited taxpayer exposure.

From 1998 to 2012, insured acreage has increased by 100 million acres.  “It has become such a success, that most farmers agreed in 2012 to get rid of direct payments during the Farm Bill debate,” Zacharias notes.

But in addition to eliminating the need for direct payments, the public-private partnership of crop insurance has also eliminated the need for costly ad hoc disaster bills.   “Since 1989, 42 pieces of legislation, totaling $70 billion in unbudgeted dollars were passed to help farmers following a disaster, he explains.  “Those days are over.”

With crop insurance in place, farmers and private insurance companies now share the risk, ensuring that the entire burden doesn’t fall solely on the laps of taxpayers.  Each farmer must pay the premium for their individual policy, and when disaster occurs, the billions paid in premiums by farmers help offset the cost of the insurance.  “Farmers have paid $30 billion of their own money on crop insurance protection to buy this coverage,” Zacharias notes.  In addition to the premiums paid by farmers, the government has collected more than $4 billion in underwriting gains from 2001-2010, which helped offset losses in the bad years as well.

Zacharias points out that crop insurers have stood alone in offering up budget reductions in recent years, totaling $12 billion. Unfortunately, some in Congress are angling for more, says Zacharias. “The additional cuts they are proposing would result in lower crop insurance participation, ironically shifting risk away from farmers and crop insurance companies right back to taxpayers,” he said.

“As we go forward in the next farm Bill, we would say ‘Do No Harm” to crop insurance.”